By Mark Doremus*
Posted Sept. 20, 2021, on Back Forty Film
Reprinted here with permission
Gold Resource Corp. (GORO) announced on Sept. 7 that it plans to take ownership of Aquila Resources, Inc., and its proposed Back Forty mine near the Menominee River.**
The deal, however, is not final. As of now, GORO and Aquila have agreed to negotiate a purchase of Aquila, but the transaction is not yet complete.
GORO proposes to acquire all outstanding shares of Aquila for C$30.9 million worth of GORO stock. Current Aquila shareholders will own 14.9 percent of GORO if the deal goes through, according to a letter agreement between the companies dated Sept. 7.
Why Does GORO Want Aquila?
GORO is at a disadvantage in the stock market because it has only one operating mine, in Mexico, which is considered to be a somewhat difficult jurisdiction for mining investors due to corruption, security concerns and other risks. GORO’s stock value would increase, according to the Sept. 7 letter agreement, if it is re-rated "from a one-mine company to a two-mine company with jurisdictional diversification." It would also be in a better position to borrow money to set up the Back Forty mine and possibly expand its operations elsewhere.
Of course, Aquila is an asset only if GORO can get the proposed Back Forty mine up and running, despite widespread public opposition to the project.
GORO confident it will get permits needed for Back Forty mine
"There exists a perception of permitting risk around the [Back Forty] project," said Allen Palmiere, GORO president and chief executive officer, during a Sept. 8 on-line discussion with investment analysts. "[However,] our due diligence gives us comfort that Michigan is a good jurisdiction for mining and that the permitting issues are all eminently resolvable."
Aquila Resources has spent 17 years and over $100 million trying to develop the Back Forty mine. It received a mining permit from Michigan regulators in late 2016 and a wetlands permit in 2018 but abandoned both permits earlier this year in the face of persistent legal opposition from the Coalition to SAVE the Menominee River and the Menominee Indian Tribe of Wisconsin. The proposed Back Forty mine would be located on the Menominee River west of Stephenson, Michigan, where the Menominee Tribe lived for thousands of years before they were removed to a reservation in Wisconsin.***
Palmiere downplayed public opposition to the mine, and Aquila’s past permitting difficulties, in his Sept. 8 conference call with investment analysts. He called the denial of Aquila’s wetlands permit "a very administrative matter."
"The issue that arose was … the way the wetlands permit was worded, and it was viewed as being a conditional permit rather than an unconditional permit," he said.
In truth, the permit was overturned by an administrative law judge primarily because Aquila failed to submit the minimum information needed for its permit application to be evaluated by the public, and by the permitting agency, the Michigan Dept. of Environment, Great Lakes and Energy (EGLE).
A Michigan court sent Aquila’s amended mining permit back to that same administrative law judge for further review, based on new evidence that emerged after the judge originally upheld the revised permit.
In the end, Aquila gave up both permits on May 11, 2021, and went back to the drawing board to design a new project with a reduced environmental impact and, presumably, a greater chance of permitting success.
Glossing over local opposition to the Back Forty mine, Palmiere told analysts that Michigan is a favorable jurisdiction for mining projects.
"The Upper Peninsula [where the Back Forty mine would be located] is very supportive of mining," he said. "It is an area that is looking for economic development, and resources development is pretty low-hanging fruit for them."
Mine opponents, however, say they will continue to fight the Back Forty project.
"Although Aquila Resources has decided to take this opportunity to offer themselves to Gold Resources, this does not change the complexion of the threat to the Menominee River," said Dale Burie of the Coalition to SAVE the Menominee River. "Be assured that this battle has gone on for 20 years and will continue to go on until these speculative mining organizations give up on ever getting close to the Menominee River."
GORO’s exclusive right to acquire Aquila Resources expires on Oct. 22, unless the parties reach a final agreement, or terminate negotiations, before that date.
Al Gedicks: GORO has NOT conducted "due diligence" regarding Aquila’s false, misleading claims about Back 40
By Al Gedicks
Inset photo: Al Gedicks speaking about Aquila's Dam Safety permit in 2019. (Keweenaw Now screenshot photo)
During a September 8 conference call about GORO’s acquisition of Aquila Resources, Inc., Mr. Allen Palmiere, the President and CEO of GORO stated: "The key takeaway on this particular project [referring to the Back Forty Project] is that it has, in fact, been fully permitted before. The issue that arose was a very technical -- it’s really a very administrative matter, but it was the way with which the wetlands permit was worded and it was viewed as being a conditional permit rather than an unconditional permit. And that was really the way -- the reason that that particular permit was pulled."
Mr. Palmiere’s statement reveals GORO’s failure to perform "due diligence" regarding Aquila’s false and misleading claims about the Back Forty Project. In its March 31, 2020, quarterly financial report Aquila falsely claimed that it had received the four key permits required to begin construction and operation at the Back Forty Project. In fact, Aquila never received a Dam Safety Permit. According to Michigan’s Department of Environment, Great Lakes and Energy (EGLE), "Aquila is not authorized to begin construction of the mine and will not be able to proceed until all permits, including the Dam Safety Permit, have been approved by EGLE." (EGLE Media Office, December 12, 2019).
At the time Aquila claimed to have received the four key permits for the Back Forty Project, only one of five required permits had been both "issued" and deemed "effective," and that was the NPDES Permit (National Pollution Discharge Elimination System permit, involving water discharge to the Menominee River). An "issued" permit is not considered "effective" until all pre-mine construction conditions have been met. Furthermore, no permit exists until the entire process, including any contested cases, have been decided. Even then, an Environmental Review Panel can review any contested case decision.
Mr. Palmiere promotes a false narrative of the Wetland Permit denial when he describes [Administrative Law Judge Daniel] Pulter’s ruling as "a very technical…very administrative matter" that was simply "the way with which the wetlands permit was worded."
However, the evidence presented by scientists from the Water Resources Division (WRD) of EGLE make it perfectly clear that Aquila Resources failed to provide critical information requested by the agency regarding pit dewatering and its effect on wetlands. This is not simply an issue of how the wetlands permit was worded. The surface and subsurface drainage of wetlands is regulated under Part 303 [Wetlands Protection], and this activity is prohibited without a permit from EGLE.
During her testimony in the contested wetland permit case, Ms. Kristina Wilson, an environmental quality specialist for the WRD, testified that the pit dewatering to keep the pit dry for mining excavation would drain groundwater from the wetlands but was not disclosed in the permit application as a potential impact. "Draining surface waters from a wetland under Part [303] is a direct impact, but those impacts are not addressed in this application." (Final Decision and Order, January 4, 2021, p. 18).
Mr. Eric Chatterson, a geology specialist with the WRD, testified that Aquila not only withheld wetland impact data but also manipulated the computer model to minimize significant negative impacts to wetlands. He testified that the model "wasn’t really built to answer as far as I could tell any questions about the wetland." He further testified that Aquila "predetermined what was going to happen and it just manipulated the mathematics to make that happen." (p. 28 of Final Decision).
"Based on the evidence in this case," said Judge Pulter, "I find as a Matter of Fact, that Aquila’s computer groundwater model does not provide a reliable identification of wetland impacts, particularly those related to groundwater drawdown due to pit dewatering…Therefore, based on the evidence in this case, I find, as a Matter of Fact, that the revised application for a permit filed by Aquila in the contested case is not administratively complete…Because it was not administratively complete, the Application must be denied, and this contested case must be dismissed." (p. 32, Final Decision and Order).
Contrary to Mr. Palmiere’s false narrative, Aquila’s Wetland Permit cannot be dismissed as "an administrative matter" or "the wording of the permit." Judge Pulter made a decision based on the facts and determined that Aquila failed to demonstrate the ability to protect the area and not harm the resources in and around the Menominee and Shakey River watersheds.****
Editor's Notes:
* Guest writer Mark Doremus is a Wisconsin filmmaker who posts articles, photos and videos on the Facebook page Back 40 Film. Gold Resource Corp. did not immediately respond to his request for comment on this article and Al Gedicks’ response.
** See the Sept. 7, 2021 press release from GORO here. The proposed Back 40 mining project is intended to produce gold, zinc and other metals.
*** See Keweenaw Now's May 14, 2021, article, "Opponents of Back 40 mining project welcome Aquila's withdrawal from two contested permits but remain vigilant as company announces new plans."
**** See also Keweenaw Now's Jan. 11, 2021, article, "Water protectors celebrate judge's denial of Back 40 sulfide mine Wetlands Permit."
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