Pegasus Settles Lawsuits Dispute Focused On Water Quality At Montana Mine

Spokane-based Pegasus Gold Inc. settled lawsuits on Monday filed by state and federal environmental regulators over water quality at its Zortman/Landusky mine complex in northcentral Montana.

The negotiations over the water-quality violations had progressed slowly since 1993, when Montana’s Department of Environmental Quality found that the company was discharging metals-laden water from the mines.

Two Indian tribes and the federal government joined the suit in 1995, which helped move the negotiations along, said Bob Thompson, an attorney for Montana’s DEQ.

Under the terms of the settlement, Pegasus will:

Pay a $2 million civil fine for discharging water without required permits.

Establish a $1 million trust fund for the Fort Belknap Tribes.

Pay for three environmental projects over the next three years in the Zortman area that Pegasus says will cost $1.5 million.

Montana DEQ officials called it the largest settlement on record for water quality violations.

The company will build a water treatment plant, costing $32 million to maintain and run in perpetuity, that the EPA considers part of the settlement.

John Pearson, head of investor relations for the company in Spokane, said the plant is part of the Zortman Extension project and would have been built regardless of the settlement.

“We think it’s good news for us,” Pearson said. The project is an important part of Pegasus’ growth plans, and the lawsuits delayed the project.

In March of this year, Montana’s Bureau of Land Management recommended that the mine be built. The final permitting must come from DEQ.

Pegasus will take a $500,000 charge against its second-quarter earnings as part of the settlement, and had previously taken charges to cover the remaining costs of the suits, Pearson said.

Thompson said the agreement was needed before Pegasus can receive final permission to build the Zortman Extension project, but said it doesn’t guarantee the state will allow the company to do more mining there.

The extension, once built, could add as many as 135,000 ounces of gold each year as Pegasus increases its annual gold production to 700,000 ounces from the half-million it now produces.

The Zortman mines have operated for 15 years using a heap-leach system to extract gold from crushed rock, but the diluted cyanide and water mixture doesn’t leave the mine.

, DataTimes