The state Board of Minerals and Environment gave unanimous approval Friday to an expansion permit for Wharf Resources.
The Wharf mine is near the base of Terry Peak a few miles outside Lead in the northern Black Hills.
Wharf, owned by Canadian-based Goldcorp, however, will need to post financial assurances totaling more than $63.6 million before being allowed to proceed.
That is nearly $40 million more than the bonding that has been posted for Wharf’s present operations.
The expansion permit contains numerous new conditions aimed at further protecting the environment.
Four of the spots where Wharf wants to mine next have been designated as special-handling areas by state regulators because of the rock types’ potential for generating sulfuric acid when exposed to water and air.
Mike Lees, a hydrologist for the state minerals and mining program, said Wharf hasn’t had any significant acid-rock drainage problems during more than two decades at its current site.
Lees told the state board Wharf’s new proposal isn’t likely to lead to acid generation. “In my opinion, this issue has sort of been blown out of proportion,” he said.
Wharf expects to exhaust its store of good ore at its American Eagle pit in 2012 or 2013. The board’s approval sets the stage for Wharf to continue operating at least seven more years.
The company’s four-phase plan calls for taking ore from three areas within or adjacent to Wharf’s current operations and re-mining a portion of the old West Liberty pit next door at the closed Golden Reward site.
The West Liberty pit has acid-generation problems. One step in Wharf’s plan there calls for taking down a high wall where water is leaking beneath a liner and cap that the previous operator had installed over a disposal site where sulfide-bearing rock was placed.
Wharf had a long history of environmental violations until 2008 and hasn’t had any since then.
The new management team has conducted research into persistent water-quality problems and installed treatment systems that state regulator Eric Holm described as “cutting edge.”
“They are in compliance,” Holm said.
Lee McCahren of Vermillion, a state board member since the early 1970s, openly recommended that the company retain environment manager Ron Waterland, a former Homestake employee who was hired by Wharf three years ago.
McCahren said “there’s been no real harm” from the past environmental violations and noted the clean record since 2008. “That bespeaks good work,” he said.
McCahren was the only board member to comment prior to the 9-0 vote. “It is beneficial to all,” he said.
The expansion permit requires that state regulators give clearance before Wharf can proceed to each new phase of the plan. Wharf plans to reclaim each affected area after mining is finished there.
The financial assurance requirements also will be recalculated after each phase, Holm said.
Wharf under its existing permit had posted financial assurances through letters of credit from the New York City branch of Scotia Bank.
Those amounts were $15,553,002 for reclamation and $8,154,500 for post-closure work such as continuing water treatment.
The purpose of the bonds is to provide the state Department of Environment and Natural Resources with sufficient cash to perform the work in returning the site to natural-like conditions and taking care of it for the next 50 years.
The new amounts are $32,873,000 for reclamation and $30,783,000 for post-closure needs.
The biggest single item in the reclamation amount is $9.5 million for reclamation of the mine’s leach pads and processing ponds that are used for recovering gold from the ore.
In the post-closure bond the biggest group of costs total $8.3 million for water treatment, sampling and analysis, including $1.2 million as a contingency in case the new treatment systems don’t prove up.
“Our goal,” Holm said, “is to make sure we have the adequate amount of money at the beginning.”