Settlement Clears Way For Pegasus

Spokane-based Pegasus Gold Inc. moved a step closer Monday to having a major mine extension project approved in Montana.

The company recently settled lawsuits filed by the federal Environmental Protection Agency and the Montana Department of Environmental Quality.

The consent decree that settled the suits over alleged water quality violations at the Zortman/Landusky mining complex was officially entered Monday.

The decree states that the litigation is dismissed when Pegasus pays a $2 million civil fine, establishes a $1 million trust fund, and pays for $1.5 million of environmental projects around the mine for several Indian tribes that joined the lawsuits against the company.

With the decrees filed, the company expects the Montana DEQ to enter its record of decision on the Zortman Extension project, an important contributor to the company’s growth plans.

Once constructed, the extension project could add as many as 135,000 ounces of gold each year. The company, which produces about $500,000 ounces currently, wants to produce 1 million.

As part of the settlement with the government, Pegasus also agreed to spend $32 million on a water quality treatment plan and to keep it running indefinitely to treat water even after the mine closes. Pegasus said it would have built the treatment plant regardless of the litigation’s outcome, but environmentalists have claimed the amount as a major concession on the part of the company.

The water quality issue dealt with the acidity of water coming from the mining operations as it flowed onto the Fort Belknap Indian Reservation, which affected the Assiniboine and Gros Ventre Tribes. The suit maintains that acidic drainage from the mine workings and seepage from the heap leach pits, which use diluted cyanide to separate the gold from the mined rock, affected the water quality for the tribes.

Pegasus’ stock closed down 13 cents to $10.25 a share Monday.

, DataTimes