Hope Brook suspends mining to avoid violation

For the second time in as many years, Hope Brook Gold Mines (TSE) is temporarily suspending operations at its 3,000-ton-per-day Newfoundland gold mine in a bid to solve nagging environmental control problems.

John Auston, senior vice-president of BP Canada (TSE), which owns 75.5% of Hope Brook, says about 275 unionized employees will be laid off this week as part of what he called an orderly shutdown process.

If gold prices remain at recent levels, US$356 per oz., it seems likely that Newfoundland’s only producing gold mine will remain permanently closed.

Auston said the future of the remote mine, which has produced 281,300 oz. gold since operations began in 1987, will be determined over the next six months as contaminated material in the mine’s holding ponds is retreated.

Soon to become a wholly owned BP Canada subsidiary, Hope Brook is saddled with debts of $89.6 million after suffering recurring problems with its effluent treatment system. Production costs in 1990 were $495 per oz.

According to Auston, the environment control problem is the costly legacy of a hydrogen peroxide treatment system installed to treat slurry as it exited from the mill and was transported to a small tailings pond. Despite guarantees from the supplier, the system never worked on slurry.

Although Hope Brook has since converted to a sulphur dioxide air treatment system and built a much larger tailings pond, effluent transferred from the old pond has raised the level of contaminants in the expanded tailing area. As a result, effluent from the bigger pond can’t be discharged until the amount of contaminants is reduced to permitted levels.

When asked about the mine’s future, Auston replied: “Our first challenge is to treat the effluent and get rid of the legacy from the earlier system. Then we will determine if it is advisable to reopen the mine.”

He said the suspension should have no effect on a reorganization plan under which Hope Brook Gold shareholders are being offered one redeemable preferred share of BP, redeemable at $1.20, in exchange for each of their own shares.

Recently approved by an independent committee of Hope Brook directors, the planned reorganization would make Hope Brook a unit of BP Canada and give BP access to tax pools which the parent can’t touch under Canadian laws.

If the reorganization plan is approved by Hope Brook shareholders at a special meeting, June 25, the redeemable preferred shares can be redeemed the following day.