Rio Tinto donates Pebble shares
April 11th, 2014 | Carey Restino
Bristol Bay Times-Dutch Harbor Fisherman
The proposed Pebble mine took a blow Monday as another of the project's major backers pulled out, donating its shares to two Alaska nonprofits.
Rio Tinto, an international mining giant, announced this week it would divest its 19.1 percent stake in Northern Dynasty, owner of the Pebble Project, to the Bristol Bay Native Corporation Education Foundation and the Alaska Community Foundation.
"By giving our shares to two respected Alaskan charities, we are ensuring that Alaskans will have a say in Pebble's future development and that any economic benefit supports Alaska's ability to attract investment that creates jobs," said the company's Chief Executive Jean-Sebastien Jacques in a written statement.
But at least one of the foundation — the Bristol Bay Native Corporation Education Foundation — is an endowment fund of the Bristol Bay Native Corporation, which has opposed the controversial mine on the grounds that it would pose a risk to the world-class Bristol Bay salmon run. The Native corporation, along with many stakeholders in the region, supported recent action by the Environmental Protection Agency to complete an assessment study of potential impacts of large-scale mining the region, followed by recent regulatory action that may result in a federal block the proposed large-scale gold, copper and molybdenum open-pit mine.
In a written statement, the Native corporation President and CEO Jason Metrokin applauded Rio Tinto for reconsidering its position in the Pebble Project.
"This gift provides an example of what open discussion and relationship building between stakeholders with differing views can accomplish," Metrokin continued. "However, BBNC's opposition to the proposed Pebble mine has not changed."
A lobbying effort had been directed at Rio Tinto in recent months urging it to follow Anglo American's lead and withdraw its support for the project. Anglo American pulled out of the Pebble Partnership in December, taking a $300 million impairment charge hit when it did, on top of walking away from a $541 million investment. The company had provided funding for the mine's exploration and development and Northern Dynasty has since been seeking another mining major.
The Alaska Community Foundation is a statewide philanthropic organization that administered The Pebble Fund, a multi-million-dollar Pebble Partnership fund aimed at supporting "community-led initiatives that enhance the health of Bristol Bay fisheries and contribute to a sustainable economic future in southwest Alaska."
The statewide foundation plans to create a new vocational fund to support programs that provide vocational training and skills development needed in the mining and extractive industries, according to a release from Rio Tinto.
The Bristol Bay Native Corporation Education Foundation said it will use its half of the 19.1 percent stake to support educational opportunities for corporation shareholders.
The value of the 18 million shares to be split between the two foundations dropped about 7.5 percent at the news that Rio Tinto was pulling out. Shares that were a year ago selling for close to $3 were now valued at $0.87. That puts the total worth of the shares at $15.6 million, though in early 2011, those same stocks were worth $360 million. Rio Tinto affiliate Kennecott Canada Explorations Inc. reportedly purchased 8.7 million shares of Northern Dynasty in July of 2006 when share prices were valued at about $8 each. In 2007, it increased its share percentage another 10 percent with stock prices at about $7.40 a share. In 2011 stocks peaked at over $20 a share.
The announcement wasn't completely unexpected. In December, Rio Tinto reportedly took Northern Dynasty by surprise by announcing it was reviewing its investment in the Pebble prospect, and several of its major U.S. investors publicly asked the company to divest its stocks in the controversial project.
In a statement Monday, Alaska Gov. Sean Parnell said Rio Tinto's decision was "disheartening" and an indicator of the current federal regulatory environment.
"Mining provides thousands of jobs for Alaskans and is a critical sector of our state's economy," Parnell said. "Looking ahead, for Alaska to compete globally for investment dollars, it will require a fairer and more stable regulatory process than what the federal government currently pursues."
Parnell and others, such as Sen. Lisa Murkowski, have been vocal critics of the EPA's action in Bristol Bay, saying they amounted to a preemptive veto of a project that had not yet submitted its state and federal permit applications. Sen. Mark Begich, however, recently came out in opposition to the proposed mine, saying it was too great a risk to the valuable salmon runs in the region.
Northern Dynasty said in a statement that it looked forward to meeting with the leadership of the Alaska Community Foundation and the Bristol Bay Native Corporation Education Foundation to better understand the organizations' long-term goals.
The Alaska Community Foundation said it planned to be a "passive investor" in the project and plans to manage the shares like it does any other noncash donation to the foundation until such time as they can be converted to cash.
The Pebble Partnership said this week that its goals remain the same following Rio Tinto's announcement — its first area of focus was the EPA's possible attempt to stop the project through the Clean Water Act section 404 action. Next, the developers aimed to seek a new major mining partner.
But some speculate that part of the reason Rio Tinto gave the shares away was that interest in investing in the controversial and expensive project is low.
Rio Tinto spokesperson David Outhwaite refused to comment on whether or not Rio Tinto had tried to sell the shares instead of gifting them. In December, when the company started its strategic review of its Pebble involvement, it said it would consider all forms of divestment, including a traditional sale.
The company looked at all different options and decided the donation was the best course of action, Outhwaite said from London on Monday.
Pebble Partnership spokesperson Mike Heatwole said if the organizations decide to keep their shares, they will be welcomed as stakeholders. Heatwole said Pebble has worked with ACF before, when the partnership invested $5 million in projects for the region in areas such as education and workforce development. That only ended in 2013 when Anglo-American pulled its support and left the partnership reassessing its finances.
The relationship with Bristol Bay Native Corporation could be more complicated. The organization has long been an outspoken critic of the proposed project, something the Pebble Partnership is keenly aware of.
"Even though they have a publicly-stated position opposing the project, we like to keep lines of communication open," Heatwole said. "Obviously the appropriate folks will be sitting down with the right folks over there sometime in the near future to figure out what this really means."
Some critics of the proposed Pebble mine reacted to the news of the gifted shares by calling for both Alaska foundations to sell the shares immediately, however.
Longtime critic of the Pebble prospect Larry Smith said the Bristol Bay Native Corporation should shy way from the shares — perhaps regift them to an Alaska conservation group, or decline the gift outright.
"The conflict between the fiduciary responsibility to make profits from stocks owned by BBNC and the strong and potent opposition by BBNC to Pebble is a problem," he wrote.
The Alaska Dispatch and reporter Dave Bendinger contributed to this story.