Imperial Metal's $15-million property and business interruption insurance coverage is likely to fall short of the cleanup cost of the collapse of its mine waste dam at Mount Polley last week.
The company also has $10 million in third-party liability insurance, triggered if a party other than the company is responsible for damage.
While Imperial Metals says it is too early to provide a cleanup cost, the collapse of the mine waste dam in 1998 of the Los Frailes lead-zinc mine near Seville, Spain, cost hundreds of millions of dollars.
Imperial Metals vice-president of corporate affairs Steve Robertson said Saturday he would be guessing at a cleanup at cost at Mount Polley. The company has, however, vowed to do all it could to "make right" the effects of the dam collapse.
"I don't know if it's nowhere near (enough insurance) — it would we way too early to tell," Robertson said in an interview.
A BMO Nesbitt Burns Inc. analysis pegged the cost to the company at $200 million. That does not include legal damages that could double that amount.
Notice of a class-action lawsuit was filed against Imperial Metals Thursday on behalf of investors who bought shares in the corporation after Aug. 15, 2011.
"We were retained by an investor who suffered a significant loss in her portfolio," said Michael Robb, a partner at Siskinds LLP, the Ontario firm that filed the action.
"There was a report that raised some questions about that tailings pond and there were some government reports that raised questions as well. The company has to advise its investors about all of its material risks. It needs to disclose those to investors," Robb said. "There are other cases where mining companies that have been sued by investors where environmental events have happened at their properties."
The Mount Polley mine is Imperial Metals main cash contributor, accounting for 83 per cent of the company's 2014 earnings per share.
Richard Holmes — a 38-year Likely resident and consultant fisheries biologist who does work for the Soda Creek Indian Band — is worried the cost of the cleanup could overwhelm the company.
Holmes said a full cleanup should include removing the sludge deposited in Quesnel Lake, and fully restoring Hazeltine Creek and Polley Lake, something he believes could cost hundreds of millions of dollars.
The cleanup is important because the creek is home to rainbow trout and coho salmon that spawn there, said Holmes. The mouth of the creek is also a rearing area for sockeye and chinook salmon, he said.
"I think mining companies should be concerned all over the world that this does get cleaned up properly. It's a black eye on the mining industry everywhere, especially in a western country like Canada where they tout the highest standards possible," said Holmes. "Today, we are looking like a third-world country."
Environment Minister Mary Polak has stressed that British Columbia has a polluter-pay model.
"(Imperial Metals) have significant assets and I, as yet, have not heard any concern from them with respect to affording the long-term costs of this," said Polak.
Responding to the release last Friday of a warning letter from the engineering firm that designed Mount Polley's dam and storage facility, Imperial Metals said there was nothing unusual about the letter.
At the end of its contract in 2011, Knight Piesold sent a letter to Imperial Mines and the B.C. Inspector of Mines that stated the dam and storage area was getting large and it was "extremely important" they be monitored and constructed properly.
Robertson said Saturday there was no disagreement about the dam when Knight Piesold left the project.
"I don't think that's anything out of the ordinary that they would make sure they establish (they) were only responsible for things up to this point — now it's somebody else's issue and provide lots of caveats and warnings in there," said Robertson.
He said he could not explain why Knight Piesold decided to issue a new release and release the letter publicly.
The letter's release by Knight Piesold last Friday came just days after a former mine foreman, Gerald MacBurney, said the company was not safely increasing the size of the dam. Larry Chambers, who was dismissed from Mount Polley at the end of 2013, has said he had also raised safety and environmental concerns.
Imperial Metals president Brian Kynoch has been adamant the company has followed the advice of their engineers.
Once Knight Piesold left the project, AMEC was hired to provide advice on raising the height of the dam to contain growing amounts of ground-up waste rock and water.
Robertson said the company followed both the advice of Knight Piesold and AMEC.
"We did monitor construction and operate properly," said Robertson.
Mines Minister Bill Bennett said he also does not view the letter from Knight Piesold as unusual or that it was a warning.
The collapse of a 300-metre section of the rock and earth dam spewed 10 million cubic metres of water and finely ground rock containing potentially toxic metals and chemicals into Polley Lake, Hazeltine Creek and Quesnel Lake.
The force of the mixture of water and mine waste from the storage facility scoured a large channel along Hazeltine Creek, also depositing trees and other debris in Quesnel Lake.
On Saturday, the province gave the go-ahead for Imperial Metals to begin to pump water out of Polley Lake into Hazeltine Creek.
The lake has risen about two metres after debris carried by the collapse plugged the lake's outlet.
Residents are unhappy about dumping more mine water into Quesnel Lake, but the company has argued the water and the mine waste is relatively benign. The company also says a debris plug is at risk of letting go if it rains, which could send another rush of millions of cubic metres of water down Hazeltine Creek.
The province released its latest series of water test results from Quesnel Lake and Quesnel River — including one sample near the mouth of Hazeltine Creek — which all passed drinking water guidelines.
First Nations have also increasingly cited concerns.
The Xaxli'p, Sek'wel'was and Tsk'way'lasw in the Lilloet and Lytton areas — 300 kilometres south of the spill — followed the lead of other First Nations in central B.C. that have shut down all fishing activities.
In a notice posted during the weekend, the three First Nations said fish are being found very sickly, with the skin peeling off the fish.
The Pacific Salmon Commission, a joint Canada-U.S. agency to conserve and manage salmon, said Friday a lag between the timing of the spill and the return suggests substantial impacts on returning adult sockeye this year are unlikely.
Any impacts on salmon rearing in the area are more complex and will require longer to evaluate, said the commission
With files from Postmedia and Denise Ryan, Vancouver Sun
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