March 18, 2010 / 5:10 AM / in 8 years

UPDATE 2-U.S. EPA says Red Dog cleared for mine extension

* EPA clears most aspects of contentious Red Dog permit

* Provisions cleared should allow for mine extension

(Adds background, detail

By Yereth Rosen and Euan Rocha

ANCHORAGE/TORONTO, March 17 (Reuters) - The U.S. Environmental Protection Agency has cleared crucial aspects of a contentious permit that should allow Canadian miner Teck Resources TCKb.TO to continue operations at its Red Dog zinc mine in Alaska, an EPA official said on Wednesday.

Last month, Teck said it may be forced to curtail operations at Red Dog, the world’s largest zinc mine, after environmental and native groups appealed against a wastewater discharge permit, issued by the EPA.

At the time, Teck said that until the EPA issues a notice clarifying which provisions of the permit are subject to appeal, the entire permit remained suspended.

Teck argues that the permit is crucial for extending mining into a new ore deposit called Aqqaluk and preventing a shutdown after the original Red Dog deposit is depleted next year. [ID:nN17111233]

However, the EPA has determined that the appeal affects only a portion of the permit, issued Jan. 8, and that the rest of the document will be in effect in two weeks, said Patty McGrath, the agency’s regional mining coordinator who has been serving as the Red Dog project manager.

“It’s our position that as of March 31 they (Teck) will have a permit that we have written that will allow them to continue operations at Red Dog Mine, including development of the Aqqaluk deposit,” McGrath told Reuters, adding that the EPA notified Teck of its decision in a letter sent on Feb. 26.

A spokesman for Teck said the company was in talks with the EPA, but he was unable to comment on Teck’s plans for the zinc mine at this time.

ZINC DEMAND

Global demand for zinc, which is primarily used to galvanize steel, has begun to improve recently mainly due to increased demand in emerging economies.

However, pricing for the commodity has been somewhat weighed down by oversupply concerns, caused by a wave of production restarts in the second half of 2009. [ID:nLDE60S1HG]

In January, analysts polled by Reuters forecast a roughly 210,000-tonne surplus in the world zinc markets in 2010, 17 times higher than the 12,000-tonne surplus they had predicted in a Reuters poll six months earlier.

Moreover, this follows a 445,000-tonne surplus in the world zinc markets in 2009, according to the International Lead and Zinc Study Group. [ID:nLDE61G0Y7]

Any tightening in zinc supply this year, is likely to help strengthen zinc pricing. The London Metal Exchange (LME) three-months price MZN3 was last indicated at $2,330 a tonne.

AQQALUK DEPOSIT

Vancouver-based Teck has said it plans to operate the main deposit at Red Dog under existing permits until 2011, but to maintain efficient production rates, ore from the main deposit would need to be supplemented by ore from Aqqaluk.

Teck contends that if issues regarding the permit drag on beyond May, its transition plan will be affected and production at Red Dog will likely be curtailed in October.

The EPA in a two-page letter obtained by Reuters, specifies that the only part of the permit contested was the part that set effluent limits for total dissolved solids (TDS), along with lead, selenium, zinc and cyanide levels. Until the appeal is resolved, effluent limits for these five compounds will stay at levels set in a prior wastewater permit, issued in 1998.

Jim Kulas, environmental and public affairs manager for the Red Dog Mine, said the limits in the 1998 permit are too restrictive to allow Teck to move into the Aqqaluk deposit.

“Right now, we will have a permit that will have conditions we can’t comply with,” he said. “Going back to the 1998 permit, that leaves us with permit conditions we can’t meet.”

McGrath said the major problem for Teck is the limit placed on its TDS discharges as the mine has never been able to meet the limit set in the 1998 permit.

Red Dog has operated since then under a series of compliance orders that allow larger discharges, but require improvements over time, she said.

The new permit raised allowable discharges of dissolved solids from the 200 milligrams-per-liter limit set in 1998 to a 1,500 milligram-per-liter. The new limit is a major target of the appeal, filed Feb. 16.

Meanwhile, the U.S. Army Corps of Engineers on Tuesday issued a wetlands-fill permit -- the only remaining permit for the mine expansion that had not yet been issued. (Reporting by Yereth Rosen in Anchorage and Euan Rocha in Toronto; Editing by Ed Lane)

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