TORONTO Aug 11 Canada's Imperial Metals Corp
faces huge cleanup costs after a major spill at its
Mount Polley mine that may force the miner to sell part of a
prized new asset unless its biggest shareholder steps in to
help, bankers and industry executives said.
Imperial is on the hook for cleanup costs related to the
spill, which sent billions of gallons of sludge containing
metals and minerals coursing into waterways last week.
Analysts said costs could range from C$50 million to C$500
million, once a proper assessment is made on the impact of one
of Canada's worst mine spills in decades.
The mine, which produced 38.5 million pounds of copper and
45,800 ounces of gold last year, has been shut indefinitely.
Debt rating agency Moody's warned on Friday it was concerned
the miner may not have the liquidity to absorb the financial
impact of the spill.
Imperial had C$1.5 million in cash versus C$464 million in
debt, and a working capital deficit of C$21.7 million as of the
end of March, according to its financial statements.
"The shutdown of Mount Polley will stretch thin an already
tight balance sheet," Raymond James analyst Adam Low said in a
note to clients.
Imperial Metals declined multiple requests for comment.
One source close to Imperial Metals said it was not clear
how much insurance the miner could count on to meet the tab.
In the boilerplate risks section of its annual report in
March, Imperial said its property and liability insurance may
not provide enough coverage for losses related to environmental
pollution and other hazards. It said it may elect not to insure
against certain things such as environmental pollution when
coverage is not available at economically feasible premiums. It
was not known whether Imperial had acted on that.
LOANS OR ASSET SALE
A second source close to the matter said Imperial had other
options to cover the costs.
Help could come from N. Murray Edwards, the billionaire
chair of Canadian Natural Resources Ltd, Canada's No. 2
oil and gas company. He owns about 36 percent of Imperial and
his closely held Edco Capital is one of its creditors.
Last year, when the Imperial was lining up financing for
its Red Chris copper-gold mine, Edwards guaranteed half of a
$150 million bank credit facility, and Edco provided more
Edwards did not respond to a request for comment.
A more likely outcome is the sale of royalties from nearly
finished Red Chris in British Columbia or off-loading a stake in
the asset itself. A royalty deal would give Imperial an instant
cash injection and in exchange give the purchaser a set
percentage of future profits or revenue from Red Chris.
Industry players said companies ranging from diversified
miner Glencore Plc to more specialized mine financing
firms such as Franco-Nevada Corp and Silver Wheaton
Corp are all likely to consider funding any royalty
An outright sale of a stake in Red Chris may also be on the
table. With opposition likely from some environmental and First
Nations groups in the area, mining industry insiders say the
company may well be forced into selling a majority stake in Red
Chris and ceding its position as operator of the mine.
"This type of significant negative event can also impact a
company's social license," Derek Macpherson, an analyst with M
Partners said, referring to the local support needed for a mine
(1 US dollar = $1.10 Canadian)
(Additional reporting by Julie Gordon in Vancouver)