A New Zealand environmental group says it warned Coeur d’Alene Mines Corp. about serious geologic problems with the Golden Cross gold mine tailings dam before the company bought the mine.
Coromandel Watchdog Group said it faxed Coeur’s President and Chief Executive, Dennis Wheeler, a letter on April 27, 1993 - six days before the sale was announced.
“We would recommend before you purchase, that an independent assessment is made of the tailings dam … you may find that this purchase could be a huge liability to your company,” the letter read.
Wheeler replied that Coeur had reviewed the mine and found it acceptable, the environmental group said.
According to Coromandel Watchdog, Wheeler said the mine’s owner, Cyprus Minerals Co., assured Coeur the tailings dam was sound, and Coeur’s own investigation had confirmed this.
Coromandel refers to the mountains and region where the mine lies in northern New Zealand.
Water pressure continues to shift the ground underneath the tailings dam at Golden Cross, creating a multimillion-dollar environmental problem. Last week, Coeur took a $53 million writedown to take the mine off its books because fixing the shifting tailings dam will prevent the company from recovering its investment.
The write-down represents 9 percent of Coeur’s assets.
Coeur filed suit against Cyprus Amax Minerals Company of Englewood, Colo., Tuesday in U.S. District Court in Coeur d’Alene. The suit contends that Cyprus didn’t tell Coeur about the problems with the tailings dam.
Had Coeur known about them, the suit said, it would not have bought Golden Cross. Coeur wants its $53 million back plus damages to be proven in court.
Coeur spokesman Tony Ebersole said he could not comment on company litigation or the letter from the environmental group.
Cyprus spokesman Mike Rounds calls Coeur’s suit “outrageous and totally without merit.” Cyprus sued Coeur d’Alene Mines last Friday before Coeur filed its suit this week. When Coeur announced the write-down, it had planned to make “claims” against Cyprus.
Cyprus’ suit contends that Coeur has violated the stock purchase agreement made between the two companies. That agreement, according to Cyprus, limits Cyprus’ liability in the purchase of the Golden Cross Mine. Cyprus wants “declaratory relief” from Coeur through the Colorado courts, Rounds said.
Fixing the shifting dam has so far cost Coeur about $9 million New Zealand dollars, or about $6.2 million, said Paul Gregory, a reporter for the New Zealand Herald in Auckland. Gregory said that Coeur officials in New Zealand have said it will likely cost double that to fix the problem. Coeur officials here have not had exact estimates of the cost.
Coeur’s stock, which traded around $19 a share before the writedown announcement, closed Thursday up 13 cents at $15.88.