Water Celebration Address

Welcome to the Second Annual Water Celebration. We have much to celebrate—there is no sulfide mine next to the Menominee River. If permitted, the proposed Back Forty sulfide mine would be a perpetual pollution machine discharging acid mine drainage to ground- and surface waters in perpetuity.1 So we have to continue with our opposition because the Gold Resource Corporation has taken over the permitting process after Aquila Resources was forced into bankruptcy.

The effort to protect the Menominee River has been going on for over 20 years. How did we get to this point? In July 2009, Aquila Resources President Tom Quigley told the Lake Township Board that his company expected to receive permits for the Back 40 mine in 2010 and begin production in 2012.2 Thanks to Ron and Carol Henriksen and the Front 40 Environmental Group, this never happened.

Now, ten years later, Aquila Resources has spent over $100 million and their mining permits have either been overturned or withdrawn thanks to the combined public education and legal challenges by the Coalition to SAVE the Menominee River, the Menominee Indian Tribe of Wisconsin, and Tom Boerner, a private landowner with property next to the mine site.

Aquila Resources is a bankrupt company. They conducted an unsuccessful public offering to raise funds for the project but had to withdraw the offering in March of 2021.3 Then Aquila tried to sell its assets to 30 other companies. Aquila provided investors with confidential financial records but there were no takers for this financially risky project. The only investor willing to assume the financial risks of the Back Forty project was the Gold Resource Corporation (GORO) of Denver, Colorado.

However, there is a serious question about whether GORO has disclosed the real financial risks of the project to their investors, as required by the Securities Exchange Act of 1934. In March of 2022, GORO’s public accounting firm, Plante and Moran, called it quits. The accountants concluded that “the GORO did not maintain, in all material respects, effective internal control over financial reporting as of December 31, 2021, because a material weakness in internal control over financial reporting related to the accounting for the Aquila Resources Inc. acquisition existed as of that date.”4 Accounting firms don’t suddenly quit representing a company unless they are concerned that they may be in violation of their own accounting standards. GORO’s most recent Securities and Exchange (SEC) Commission report concludes “that our disclosure controls and procedures were not effective as of June 30, 2022 as the material weakness has not yet been fully remediated.”5

GORO has asserted that they will have all the permits for the Back Forty project in hand by the end of 2023 and begin construction in 2024.6 Initial production is expected in 2025.7

This prediction is based upon the false narrative that GORO President Allen Palmiere presented to GORO shareholders on September 8, 2021. When Mr. Palmiere was asked about any risk factors that GORO might encounter from organized opposition in Michigan and Wisconsin, he said “The key takeaway on this particular project is that it has, in fact, been fully permitted before.”

In fact, the only permit that was fully permitted and effective was the NPDES (National Pollutant Discharge Elimination System) or mine waste discharge permit. The other permits, including the mine permit, the air permit, and the wetlands permit, were being contested by the Coalition, the Menominee Tribe, and Tom Boerner, and therefore not valid permits. Aquila had to withdraw its dam safety permit application twice because the Michigan Department of Environment, Great Lakes and Energy (EGLE) considered the applications incomplete.

Mr. Palmiere assured GORO investors that the Back Forty project “is going to be relatively easy to permit.” Palmiere dismissed the serious problems with the wetland permit saying that “it was the way with which the wetlands permit was worded, and it was viewed as a conditional permit rather than an unconditional permit.”8

However, Judge Daniel Pulter’s decision to overturn the wetland permit made it perfectly clear that this was not simply a problem of “wording.” He ruled that Aquila’s permit application failed to disclose the extent of wetland impacts. The scientific testimony in the contested case revealed a consistent pattern of Aquila’s manipulation of scientific data to conceal significant negative impacts to wetlands from the proposed mine.

During public hearings on the wetland permit, officials from Michigan’s Department of Environmental Quality (DEQ) consistently disrespected citizens who expressed their desire to maintain and protect clean water in the Menominee River. They were told that their opinions didn’t count because only scientific information and legal requirements would be considered in the decision-making process. Then the director of the DEQ overruled the agency’s own water quality scientists and approved the permit after being told that the permit did not meet the legal requirements of the Clean Water Act.

Had the Coalition, the Menominee Tribe and Tom Boerner not filed a contested case challenge against this blatant disregard for science and the law, there would be an open pit sulfide mine next to the Menominee River today. Never underestimate the power of citizen and tribal activism in protecting our clean water.

On April 7, 2022, five years to the day of the founding meeting of the Coalition to SAVE the Menominee River, three of us— Dale Burie, Lea Jane Burie, and myself—met with Allen Palmiere, the President of GORO, and Kim Perry, GORO’s chief financial WATER CELEBRATION ADDRESS Dr. Al Gedicks, Executive Secretary of the Wisconsin Resources Protection Council; adapted from remarks at the Water Celebration sponsored by the Coalition to SAVE the Menominee River; July 23, 2022, Marinette, Wisconsin 6 • UPEnvironment • Summer 2022 officer, at the AmericInn in Menominee, Michigan. It’s not very often that the CEO of a mining corporation is willing to engage in face-to-face dialogue with the organized opposition to their project. This certainly never happened when Aquila Resources was promoting the Back Forty project.

GORO wanted to size up their opposition and open up a line of communication that had never happened with Aquila. Also, as a former CEO of Hudbay Minerals, a large Canadian mining company, Mr. Palmiere was well aware of the importance of a social license for mining projects. According to industry consultants, a social license “will soon be akin to a mining licence, without which mining companies will find it impossible to operate.”9

My first question to Mr. Palmiere concerned his dishonest statement to GORO shareholders that the Back Forty project had been “fully permitted before.” I explained that some of the permits were being contested while the dam safety permit was never granted. Mr. Palmiere immediately became agitated and denied that he lied to investors. He also said that the dam safety permit was not required as part of the mine permitting process. As I tried to explain that EGLE was very clear that the dam safety permit was essential, Mr. Palmiere interrupted me as he grew more defensive at my insistence about his ignorance of the permit process. At that point, Kim Perry intervened and said that we need to calm down if we are going to have a dialogue about the project.

After denying that GORO needed a dam safety permit, Mr. Palmiere told us that GORO was not going to have a tailings dam. Instead of a tailings dam, they are planning to do a “dry stack,” sometimes called “filtered tailings.” Tailings are the waste material left over from the crushing and chemical processing of the gold and zinc ores. Over the life of the mine, the Back Forty project would generate approximately 15 million tons of tailings that will be stored in a dam built using crushed mine-waste rock and soils.10 The dam is essentially a lake of thick, semi-hardened mud, consisting of water and the solid wastes from the milling process.11 If GORO does a “dry stack,” the tailings will have a reduced water content (“filtered”) after mill processing. The resulting tailings are like a moist soil and can be stacked in piles and compacted. This would be a much safer alternative to a conventional tailings dam. However, filtered tailings can cost five to ten times more than a conventional dam.12

Was GORO serious about a dry stack or were they just trying to counter the strong local opposition to a tailings dam next to the Menominee River? The economics of the Back Forty project suggest that the dry stack is a highly unlikely investment. The capital cost estimate for the low-cost tailings dam and waste rock facility is $42.6 million. It is the second-most expensive item of the entire $250 million project.13 Five times $42.6 million is $213 million; ten times $42.6 million is $426 million, far more than the entire cost of the existing Back Forty project. GORO already has been unable to raise the necessary capital for the project. According to a widely respected investment newsletter, “investors should avoid the Gold Resource’s stock until the funding package takes shape.”14 In light of GORO’s lack of sufficient funding, we should not be fooled by GORO’s claim to invest in a safer tailings design.

Whether dry stacking waste is a workable solution is debatable. Lindsay Newland Bowker, an environmental risk manager who studies accidents at mining dams, thinks the technical hurdles are significant because of the low grades of ore that companies are digging up. Meanwhile, “dried material could still become saturated with water, or become eroded over time. I call it the dry stack myth,” Ms. Bowker said. “And I am trying, as a community environmentalist, to get people to stop demanding it.”15 According to Priscilla Nelson, a geotechnical engineer at the Colorado School of Mines, “the best tailings dam is no dam at all.”16

When the proposed Back Forty tailings dam is at its final stage (the dam is not constructed at one time, but is built up as new tailings are deposited in the dam), the facility will cover a total area of 124 acres. The maximum height of the facility at the end of operation will be 138 feet, or 13 stories high.17 The taller the dam, the greater the catastrophe if it fails. The upstream dam design that was proposed by Aquila in its latest dam safety permit application is the lowest-cost option but the most prone to failure, according to experts. About 76% of failures worldwide are related to upstream dam construction methods.18 Dams are extremely vulnerable to liquefaction when the tailings behind the dam are saturated with water and “seemingly solid materials suddenly behave like liquids.”19 The liquid mixture erodes the structure of the dam and increases the potential for a rupture. Wet tailings travel farther and faster if they escape, causing more destruction.20 A 2021 study in Nature, the world’s most prestigious scientific journal, reported that “active upstream facilities report a higher incidence of stability issues (18.3%) than other facility types, and that this elevated risk persists even when these facilities are built in high governance settings.”21 In other words, having regulatory agencies like EGLE, even with adequate staffing and resources, does not guarantee public safety.

The 2019 Brazilian tailings dam failure released 3 billion gallons of sludgy mine waste that killed over 270 people in Brazil’s deadliest-ever mining accident. According to the Wall Street Journal, “A wall of mining waste crashed into Vale’s crowded lunchroom, below the dam, and engulfed a nearby hotel and homes, traveling as fast as 50 miles an hour.”22 The contaminated waste polluted 200 miles of the Paraopeba River, making it useless as a water supply for the state and unsuitable for aquatic life.23 Brazilian prosecutors said that the dam had shown a critical structural weakness since at least 2017 and that Vale, the dam’s owner, had been fully aware of its safety problems.24

The upstream tailings dam design has been banned in Brazil, Chile, Peru and Ecuador.25 Furthermore, the American International Group, a major insurance company in the mining UPEnvironment • Summer 2022 • 7 liability business, has cut back the vast majority of its insurance for tailings dams.26 EGLE has received over 600 letters opposing the upstream dam design thanks to the Coalition’s “Call to Action” on its website.27

Imagine such a gigantic pile of toxic tailings a few hundred feet from the banks of the Menominee River. Any kind of extreme weather event (heavy rainfall, tornado, hurricane) could easily destroy the dam and send a river of toxic sludge directly into the Menominee River and eventually into Lake Michigan, affecting the drinking water for 10 million people.28 Let me remind you that on June 15, 2022, 13 tornadoes hit Wisconsin. Two of the most serious tornadoes touched down in Marinette County. One of them had winds estimated at 112 miles per hour and destroyed the Silver Cliff Volunteer Fire Department firehouse. The tornado was on the ground for 1.9 miles and had a damage path that was 275 yards wide. In addition to damaging buildings, the tornado flattened or uprooted hundreds of trees in a forest.29 If such a tornado struck a tailings dam next to the Menominee River, all the toxic waste would flow directly into the river, contaminating the drinking water for millions of people. In the event of widespread flooding with heavy, sandy mud that destroys everything in its path, Michigan’s Dam Safety Program would be “hard pressed to act adequately.”30 Permitting a tailings dam next to the Menominee River is INSANE!

As the United Nations Environmental Program has noted, “Despite good intentions … large storage facilities, built to contain mine tailings, can leak or collapse. These incidents are even more probable due to climate change effects. When they occur, they can destroy entire communities and livelihoods and remain the biggest environmental disaster threat related to mining.”31 A recent review of tailings dam failures concludes that “keeping the tailings pond safe and stable is the most challenging task in the entire mining process.”32

As the richest ore deposits are exhausted, mining companies must extract larger deposits with ever-declining grades of ore by digging larger and deeper pits, creating record volumes of waste.33 To contain larger volumes of waste requires the construction of gigantic earthen tailings dams with increasing risks of failure. The rock-to-metal ratio indicates how much ore and waste rock must be mined, moved, and processed to produce a refined unit of a mineral commodity. According to this new measurement, “gold was found to have the highest ratio of about 3,000,000-to-1, which means for every three metric tons of ore and waste rock moved and processed, only one gram of gold is produced.”34 We also know that gold mines released nearly 1 ton of CO2 (carbon dioxide) equivalent for every ounce of gold that was produced in 2019.35 Increasing CO2 releases from gold mining exacerbates extreme weather events that pose a growing threat to tailings dam safety. Heavy rain has been implicated in 25% of global and 35% of European tailings dam failures.36

If GORO proceeds with the Back Forty permitting process, it will be up to citizens and tribal members like those gathered here today to expose these inconvenient facts and mobilize a broad coalition to protect the Menominee River and Menominee Nation sacred sites from an ecologically destructive mining project. Thank you.

Endnotes 1. U.S. Department of Agriculture, Forest Service, Acid Drainage from Mines on the National Forests: A Management Challenge, Program Aid 1505, March 1993. p. 3. 2. “Aquila Claims Ability to Open Gold-Zinc Mine by 2012; Local Residents Skeptical,” Lake Superior Mining News, July 14, 2009. 3. “Aquila Resources Announces Withdrawal of Preliminary Prospectus,” Aquila Press Release, March 25, 2021. 4. U.S. Securities and Exchange Commission (SEC), Form 8-K, March 14, 2022. 5. SEC Form 10-Q, July 27, 2022. 6. Allen Palmiere, President and CEO, Gold Resource Corporation, transcript of conference call on Aquila Resources, Inc. acquisition, September 8, 2021. 7. Allen Palmiere, transcript of conference call on March 11, 2022. 8. Allen Palmiere, transcript of September 8, 2021, pp. 5–6. 9. “Social License to Operate in Mining,” BDO Global, May 5, 2020. 10. Preliminary Economic Assessment (PEA) of the Back Forty Project, P & E Mining Consultants, Report 329, September 16, 2020, p. 394. 11. “Why Did the Dam in Brazil Collapse? Here’s a Brief Look,” The New York Times, February 9, 2019. 12. Warren Cornwall, “A Dam Big Problem,” Science, Vol. 369, Issue 6506, August 21, 2020, p. 909. 13. PEA, p. 31. 14. “Gold Resource: Back Forty Looks Good on Paper, But I Have Funding Concerns,” seekingalpha.com, May 16, 2022. 15. Rhiannon Hoyle, “After Deadly Dam Spills, Miners Seek a Better Way—It Isn’t Working Out,” The Wall Street Journal, December 22, 2019. 16. Warren Cornwall, “A Dam Big Problem.” 17. PEA, p. 397. 18. International Commission on Large Dams, 1966, Bulletin 104, “Monitoring of Tailings Dams, Review and Recommendations”. 19. Hoyle, The Wall Street Journal, December 22, 2019. 20. Paul Kiernan, “Mining Dams Grow to Colossal Heights, and So Do the Risks,” The Wall Street Journal, April 5, 2016. 21. Daniel M. Franks et al., “Tailings facility disclosures reveal stability risks,” Nature Scientific Reports, Vol. 11, No. 5353, March 2021. 22. Patricia Kowsmann, et al. “Behind Vale’s Deadly Dam Collapse: Multiple Warnings That Went Unheeded,” The Wall Street Journal, February 24, 2019. 23. Manuela Andreoni and Leticia Casado, “Vale Mining Company to Pay $7 Billion in Compensation for Brazil Dam Collapse,” The New York Times, February 4, 2021. 24. Samantha Pearson and Jeffrey T. Lewis, “Vale to Pay $7 Billion Over Dam Collapse,” The Wall Street Journal, February 5, 2021. 25. Jan Morrill, et al. Safety First: Guidelines for Responsible Mine Tailings Management, Earthworks, Mining Watch Canada and London Mining Network, Vol. 2.0 , May 2022, p. 22. 26. Gavin Bradshaw, “Tailings Dam Failures Drive AIG Mining Liability Exit,” Inside FAC, June 3, 2019. 27. Coalition to SAVE the Menominee River, July 2022. 28. Terry Gibb, “Lakes Appreciation Month: The Great Lakes Facts and Figures,” Michigan State University Extension, July 20, 2015. 29. Joe Taschler, “Category 1 and 2 Tornadoes Struck Wisconsin on June 15,” Milwaukee Journal Sentinel, July 16, 2022. 30. Association of State Dam Safety Officials (ASDSO) Peer Review Report, September 2020. 31. Mine Tailings Storage: Safety Is No Accident, UN Environment Program, 2017, p. 4. 32. Zongjie Lyu et al. “A Comprehensive Review on Reasons for Tailings Dan Failures Based on Case History,” Advances in Civil Engineering, Volume 2019, June 20, 2019. p. 2. 33. Alistair MacDonald, “Gold Is Flying High, but Getting Harder to Mine,” The Wall Street Journal, August 16, 2020. 34. Jason Burton, “USGS, Apple Develop New Metric to Understand Global Mining Impacts of Minerals and their Future Supply,” U.S. Geological Survey, May 4, 2022. 35. “Greenhouse Gas and Gold Mines: Nearly 1 Ton of CO2 Emitted Per Ounce of Gold Produced in 2019,” S&P Global Market Intelligence, October 7, 2020. 36. M. Rico et al., “Reported tailings dam failures: a review of the European incidents in the worldwide context,” Journal of Hazardous Materials, 152, 2008.