Pegasus Says Lawsuit Won’t Impede Mining Projects

Pegasus Gold Corp. said Wednesday that a suit filed by the Environmental Protection Agency and the Department of Justice against its Montana subsidiary won’t affect its large gold mining projects there.

The EPA filed suit last week against Zortman Mining Co., which controls the Zortman and Landusky gold mines in Montana. The suit is nearly identical to a suit the state filed against Pegasus two years ago.

Negotiations between the mining company and Montana state regulators broke off last month. At issue was interpretation of Montana law regarding the need for water permits for “historical” mines, said Phil Baker, chief financial officer for Pegasus in Spokane.

Also at issue in the previous negotiations were the penalties Spokane-based Pegasus would have to pay for water quality violations, he said.

The latest suit would ask Pegasus to pay $25,000 for each day of water discharge violations. Baker said the discharges would be difficult to prove since the mines’ water discharges are frozen much of the year.

Montana officials asked the federal agencies to file suit after the negotiations had failed.

The unpredictable nature of Montana’s environmental policies frustrated Pegasus to the point where it at one time considered pulling some of its operations from the state. Pegasus owns four mines and employs about 600 people in Montana.

The Gros Ventre and Assinibione tribes of the Fort Belknap Reservation also filed suit last week against Pegasus. The tribes’ suit claims the mines violated the Clean Water Act and Superfund statute. The tribes are downstream from the mines.

The Zortman mines and adjoining Zortman Extension project are important current and long-term producers for Pegasus. The mines provided about 110,000 ounces of the about 500,000 ounces of gold Pegasus produced last year.

The suit will not affect production at those mines, Baker emphasized. The suit most likely will slow the permit process for the Zortman Extension project, however, pushing that project’s timetable back. A draft environmental impact statement on the project, once expected this month, now is estimated to be out at year’s end.

Pegasus has built a water treatment plant downstream from the mines and took a $16.2 million charge for environmental remediation last year. That charge will cover any penalty or further remediation costs that might arise from the suit, Baker said.

Both Pegasus and the EPA want to resume negotiations to try to settle the case, Baker said, but no talks have been scheduled.

Pegasus’ stock price closed up 50 cents at $11 Wednesday. The stock had been hovering around $11 before the suits were filed.

, DataTimes