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Archive for May, 2010

by J. Pelton

On May 27, 2010, the Nevada County Planning Commission voted unanimously to reject an application from Blue Lead Mine LLC for a “vested” right to mine. The meeting was streamed live, and will be re-shown on NCTV.

With approval of a vested right, the mine owner would not be required to obtain a County mining permit. A vested right to mine is applicable only to mines that were in active, continuous, legal operation in 1954 when the County began requiring permits, and that have continued to operate legally.  Daydreaming about mining some day doesn’t count.

Staff Recommendation Initially Ignored

Previously, during a poorly noticed and poorly attended hearing on March 25th, the Commissioners had signaled their intention to approve the application, based primarily on a presentation by Blue Lead’s attorney which glossed over the complete lack of verifiable evidence to support initial vesting in 1954, as well as the long periods of no mining activity, or illegal activity, from 1954 to the present.  The Commissioners’ decision on March 25th was all the more surprising in light of the thorough research by County planning staff, and staff’s recommendation against vesting.

Public Hearing Re-opened

Two more hearings were held in April and May at which many members of the public, including a local historian with first-hand knowledge of the area, rose to speak in opposition.

The unanimous vote to reject Blue Lead’s application represents the triumph of truth over flim-flam.  The Commissioners listened carefully, again, to the lengthy presentation by Blue Lead’s attorney, during which he repeatedly asserted a vested right without actual evidence, while trying to persuade the Commissioners that unsupported theories about the history of mining in the vicinity of the Blue Lead property, some old photos, and vague declarations were sufficient “proof”.  Commissioners also heard compelling presentations and comments from the public, and ultimately decided that Blue Lead had not provided credible evidence for its vesting claim.

Integrity Of The Process

The State Attorney General has cautioned that the vested rights exemption should be strictly construed, and that substantial doubts should be resolved against granting exemptions. If Nevada County enforcement of mining regulations is lacking, the State Office of Mine Reclamation can, and will, step in. The proper way to protect the County’s status as lead agency, and to support legitimate vested rights, is to protect the integrity of the process by requiring actual, verifiable, proof of vesting.  It is expected that, henceforth, the Planning Commission will hold future applicants for vested rights to a much higher standard of evidence than was provided by Blue Lead.

Buyer Beware

In the meantime, YubaNet has reported that the geologist working with Blue Lead (Charles P. Watson, President and Chief Geologist of Advanced Geologic Exploration) is advertising patented placer mining claims in the You-Bet Red Dog Mining District in Nevada County which “may have vested mining rights”.  Caveat emptor (let the buyer beware).

Blue Lead Must Obtain County Mining Permit

Although the application for a vested right to mine was not approved, the owner of Blue Lead LLC can still mine his property when he obtains the appropriate County permits.

Violations

Nevada County, the Bureau of Land Management, the Office of Mine Reclamation, the Regional Water Quality Control Board, and the Forest Service, all have case files on Tucker White, the owner of the Blue Lead Mine, for SMARA-related violations and trespass.  It has been reported that Mr. White also has a record of mining violations, including water pollution, in Plumas and Lassen Counties.

Report Suspected Illegal Mining

Illegal mines are those mines that are not in compliance with the Surface Mining and Reclamation Act of 1975 (SMARA). You can notify the Department of Conservation’s Office of Mine Reclamation (OMR) by telephone (916) 323-9198, or by e-mail omrcal@conservation.ca.gov, with a description of the type of mining activities observed,  where the mining operation is located, when you observed it, and any other pertinent information.  

Related Articles:

County Planning Commission Denies Vested Rights To Blue Lead” – May 27, 2010

Planning Commission: Insufficient Evidence to Grant Vested Mining Rights to Blue Lead” – May 28, 2010

Blue Lead Mine Reopening Denied For Now” – May 28, 2010

County Set To Rule On Reopening of Blue Lead Mine” – May 27, 2010

Third Hearing for Blue Lead Mine’s Vested Rights Claim on Thursday”  – May 26, 2010

Graphic History of Events Pertaining to Blue Lead Property” – May 24, 2010

Blue Lead Mine Owner Sells Claims, Equipment As Eureka Mining Company” – May 19, 2010

Blue Lead Decision Postponed until May by Nevada County Planning Commission” – April 26, 2010

Future of Operations at Blue Lead Mine Still Uncertain” – April 23, 2010

Blue Lead’s Geologist Dabbles in Selling Mining Claims” – April 21, 2010

“Vested Rights for Blue Lead Mine Up for Approval by Planning Commission Today” – April 20, 2010

Blue Lead Mine Dazzles Planning Commission – ‘Vested Right to Mine’ May Be Granted” – March 30, 2010

Owners of Blue Lead Mine Can Keep Mining” – March 27, 2010

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“Gold mine cash costs were $516/oz in Q4, 2009, $9/oz higher than in Q3, 2009, setting a new record.” (From “Report shows gold mine cash costs rising with price“).

Of course, it would be significantly higher for a non-producing junior like Emgold, since the $516 figure does not include the costs of cleaning up an old mine, installing NID for neighbors with failing wells, building a brand new mine from scratch, and hiring an exploratory drilling company to do the test drilling.

Fortis Bank Nederland -- Gold Mine Cost Report (Q4 - 2009)

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In the April 30, 2010 filing of Emgold’s Audited Annual Financial Statement, prepared by Price Waterhouse Coopers and posted to http://sedar.com[1], these remarkable comments appear:

“At December 31, 2009, the Company was not in compliance with the terms of its option agreement on the Idaho-Maryland Property … The Company is currently in negotiations with the optionors to try and extend the option terms. In the event that the Company is not successful in such renegotiations, the Company may not be able to develop or otherwise dispose of its historical investment in the Idaho Maryland Property.”

” … The Company’s ability to continue as a going concern is contingent on its ability to obtain additional financing … There is no assurance that the Company will be successful with any financing ventures. It is dependent upon the continuing financial support of related parties and shareholders or obtaining financing to continue exploration and/or development of its mineral property interests and to meet its administrative overhead costs. While the Company is expending its best efforts to achieve its plans by examining various financing alternatives including reorganizations, mergers, sales of assets, or other forms of equity financing, there is no assurance that any such activity will generate funds that will be available for operations. There is no assurance that any such activity will be successful.”

Moreover, in its “Interim Financial Consolidated Financial Statements” filed on August 31, 2009 at http://sedar.com, Emgold states that it “has not yet determined whether its mineral property interests contain mineral reserves that are economically recoverable.”

If any of the major mining companies believed there was a real opportunity here, with proven reserves, they would probably have  bought up the project by now. That’s clearly not happening. Emgold, in its twenty years of existence, has never actually mined gold.

It’s time for the City of Grass Valley to require Emgold to pay for an update of the 2005 Economic Viability Study of the Idaho-Maryland project.

The city should then pull the plug on the project if it is found to be unviable or, say, six months have elapsed, whichever is sooner.

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1. See page 8 of  “Audited annual financial statements, English” for Emgold. (At http://sedar.com, select “English,” “Search Database,” “Search for Public Company Documents,” then enter “Emgold.”)

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Dear Commissioners:

Thank you for continuing until your next meeting the consideration of the application of Blue Lead Mine for the vested right to mine, thus allowing further opportunity for public comment. Like most people attending the April 22nd meeting of the Planning Commission, I appreciate and sympathize with the difficult task before you, and the diligence with which you are undertaking that task. I suspect you are all feeling that classic dilemma, “Damned if I do, damned if I don’t.”

I’d like to suggest two useful ideas that could help you resolve that dilemma, if not to everyone’s satisfaction, then at least in such a manner that everyone understands this has been a fair process.

The first idea has to do with facts and the law, the second idea with the precedent you will be setting.

Consideration of the facts must precede consideration of the law.

You concluded your April 22nd meeting with a request to the County Counsel’s office to develop a further clarification of the legal aspects of “abandonment.” By ending the meeting in this way, you left the impression that the 1954 vesting question has been settled, and that the issue of abandonment can only be resolved by lawyers.

On the contrary, the 1954 vesting claim remains very much in doubt, and therefore the question of abandonment is probably irrelevant.

Much like the work of a jury drawn from a local community, your job is first to be “judges of the facts.” And for that job you don’t need to have a deep understanding of the law. There are good and important reasons why juries and Planning Commissions aren’t composed entirely of attorneys, but rather are drawn from the community at large. It was after all an ordinary child, uncluttered with legal knowledge, and not the King’s attorney, who saw that His Majesty was entirely naked! You can analyze the evidence for vesting in 1954 – or in this case, the lack of it – for yourselves.

As your staff pointed out in its analysis, the evidence is too weak to support a conclusion of an ongoing legal mining operation on the Blue Lead site in 1954. I’d go further. The evidence is absurdly weak, and in at least one instance it actually undermines the applicant’s own case: a photo submitted by the applicant depicts a scene at Missouri Creek, which is not even on the Blue Lead site.

It’s not surprising, considering the weakness of this claim of initial vesting in 1954, that the applicant’s attorney focuses so little attention on it in his summary, and so much more attention on the decades after 1954, where questions of abandonment are obfuscated and surrounded by arcane commentary on the Hansen case, and tortuous legal arguments are advanced to gloss over the long periods of inactivity on the site during those years.

Only after your judgment is rendered on the question of the initial vesting in 1954 should you even hypothetically consider the finer legal nuances of the issue of abandonment in later decades.

If the property wasn’t vested in 1954, then every other consideration, legal or otherwise, is irrelevant.

You have all the facts and all the skills you need, without further legal opinion, to render a correct decision on the issue of initial vesting in 1954.

Your decision in this case will set a precedent, possibly opening a Pandora’s Box of further vested rights applications.

You should be aware that Charles P. Watson, President and Chief Geologist of Advanced Geologic Exploration, one of whose clients is Blue Lead Mine, has been advertising the sale of mining claims in Plumas and Nevada County with the suggestion that the “properties are private lands and may have vested mining rights.”

This, along with the now worldwide news of the nine-pound gold nugget found on Jim Sanders’ property in Nevada County, is sure to keep the gold fever simmering, and your agenda full.

Whether or not Mr. Watson’s parcels each have vested mining rights will, of course, be for you to determine.

Since I’m sure you don’t want Nevada County to get the reputation for being an easy sell, or pushover, when it comes to vested rights applications, I suggest you use the opportunity to learn from this current case and immediately set some strict and explicit Nevada County Planning Department standards and guidelines for the future cases that are surely coming your way.

First, why not define some minimum standards for concrete evidence of a legal mining operation, similar to those prescribed in SMARA (Surface Mining and Reclamation Act), such as business records (examples: production records, receipts, invoices for mining products, mineral leases, etc.), and/or county files (environmental reports, assessor and tax records, etc.), and/or witness testimony (reports, articles, diaries or other contemporary reports by neighbors, colleagues, etc), and/or historical photographs (precisely dated photos which are clearly and unequivocally of the subject site, etc) … all of which could be pre-screened by staff before an application is even considered in front of the full Commission. Authorize staff to reject an application for insufficient evidence, with some procedure for appeal to the full Commission.

Why not require every applicant for vested rights to be current with all fees and penalties in Nevada County and other California counties before even reviewing his application in front of the full Commission?

Why not require the applicant to be free of any unresolved legal judgments in any California county before even reviewing his application in front of the full Commission?

Why not require every applicant to be current and in good standing with the Office of Mine Reclamation and in conformance with all regulations and current with all assessments and penalties under SMARA before even reviewing his application in front of the full Commission?

Such strict regulations and guidelines would serve to support, not inhibit, legitimate mining activity in Nevada County, in a manner consistent with the interests of the whole community.

Such guidelines would also give you, as Commissioners, a good foundation for rationally and impartially evaluating such claims, with maximum community support for your final decisions, and minimal risk of costly protracted appeals.

Don Pelton
Grass Valley

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