A World of His Own

I am of the opinion that the comment function on a blog is vital in order to keep the blogger grounded in reality. Obviously, this does not include sites that are specifically set up to indulge the blogger’s penchant for raving, but it does include all sites that aspire to be even remotely reasonable, let alone intellectual.

Without the comment function (or with it heavily moderated) bloggers tend to drift off into a fantasy land. A prime example of the first is Idiot/Savant of No Right Turn (Bomber at Tumeke! is a good example of the overly-moderated comment). My fellow blogger, Scrubone, does a fine job of fisking I/S in lieu of comments and I would normally leave such matters to him. However, I/S has commented on the matter of gold mining in the Coromandel, and I thought I would comment on this post myself as I have some expertise in this field. I practiced in the South of Johannesburg for a number of years and there is a great deal of gold extraction going on from the mine dumps, so one has to have some familiarity with the processes involved in case of industrial accidents. I have also worked in a coal mine (as a doctor, not digging coal!) and have some familiarity with the diamond and nickel mines in Botswana, having written their first aid manual.

Be that as it may, I am mostly interested in using the post to illustrate my point about comments. I/S begins:

“The government has granted a mining permit to Heritage Gold to mine on DoC land in the Karangahake Gorge, near Paeroa. The company wants to extract more gold from the historic Talisman Mine, and believes it can extract around 1.4 tons (worth US$40 million) a year. But to get that, they’ll have to dig out 200,000 tons of rock a year, crush it, put it in a pile, and pour cyanide all over it, with all the horrific environmental consequences that entails.”

Heritage Gold, of course, does not have permission to extract gold from the Historic mine (which is a heritage site) but from the area. This is a typical error of sloppy blogging. I do it too, from time to time. But I rarely get away with it.

The process for extracting gold from gold-bearing ore is not “put it in a pile, and pour cyanide all over it”. You don’t really need my expertise to see that splashing cyanide around would kill every living thing in a wide radius, including the miners. The extraction process is, of course, done in sealed drums and then the cyanide is neutralised to cyanate. Sometimes a worker is killed if they get sloppy handling the cyanide because only a tiny leak is enough to be fatal. Large cyanide spills can be rapidly neutralised and do not effect the environment. The extraction process in Johannesburg takes place on the outskirts of the city, so environmental risk is not a concern. Note that the famous Baia Mare cyanide spill was caused by the collapse of a tailings dam filled with cyanide that had not been neutralised. This process was abandoned years ago (it was already largely abandoned in 2000 when the disaster happened).

“The good news is that this is only a mining permit, and that they do not yet have permission from DoC to effectively privatise and contaminate public land, or resource consent for the blasting, digging, crushing, and cyanidation (and resulting effects on air, land and waterways) necessary to restart mining. But under this government, the former is probably a mere formality. Which means it will likely all come down to the resource consent applications.”

Bizarrely, I/S seems to think that DOC or the RMA will hold up the mining rights granted to Heritage Gold. There seems little point in granting mineral rights to a company and then blocking them from using it. If this is how Labour used to do business, it is not surprising that there was little interest in things like oil prospecting until National were voted in. The RMA was originally designed to ensure that development of land took place on an environmentally sound basis. It has morphed over the years into a bludgeon to stamp out any development at all. This is absurd.

When then Manapouri Power station was built, a road had to be carved out of virgin rainforest much to the environmentalists horror. That same road is used to transport thousands of children to Doubtful Sound every year where they spend a few days at Deep Cove, learning about the Sounds and Fiordland. Not all development of natural areas is bad. One does not even need to mention the sustainable power that Manapouri supplies, removing the need to burn thousands of tons of coal and oil a year.

Yet to I/S there can be nothing good coming from a mining venture. Mining = bad. No doubt he will be one of those attempting to delay the process by invoking the RMA as a bludgeon again.

“Meanwhile, I’m again astounded at the wealth transfer here. That gold belongs to the people of New Zealand. But under prevailing royalty rates, the government is giving it away for around one percent of its value (less, if the mining company hires some sharp accountants – and what are the odds of that?) So not only do we get to see our environment destroyed in the name of greed – we also get ripped off into the bargain. It’s a lose-lose situation, unless of course you’re a foreign-owned mining company.”

The gold belongs to New Zealand??? What kind of logic is that? Does he propose to dig it out himself (apparently, in the next paragraph he proposes that the government digs it out)? If that Gold remains in the ground it is worthless.

1% is a fairly standard royalty. Arizona charges 1.25% and 2% for Gold mining but US federal land charges no royalty at all. Most of Africa charges flat land rates (way, way under 1%) except for Botswana which actually went into a 50% partnership with De Beers. There is no reason why the Cullen fund could not use some of its capital to do the same thing here, on a smaller scale. That they don’t use the Cullen fund for this sort of speculation is because mining is inherently very risky. Unexpectedly poor yields or a poor market price has sunk many a mine. This is precisely why the royalty rate is low. Many mines run on a shoestring budget for most of their lives. Note that our current Royalty rate was set by Labour in 2003.

“Which tells us that instead of giving our mineral wealth away to foreigners essentially for free, we should be having the government run the mines (assuming we want them at all), and invest the profits for the future benefit of all New Zealanders, as Norway does for its oil revenues, rather than effectively privatising them at corruptly deep discounts for the exclusive benefit of a wealthy few.”

Norway (and Botswana) took large risks that paid off. Good for them. It is questionable whether New Zealand wants to embark on a state ownership program in mines. The real secret of both Norway and Botswana is that the oilfields/mines they participated in were huge. The actual risk was fairly low (for a mining venture – still a high risk overall). For New Zealand to participate in a small scale gold mining venture such as this is far more risky.

I would like to read I/S counter arguments to my fisk of his post. But we will never know because he does not do comments. Instead he prefers to live in a world of his own.

And I seriously doubt he reads MacDoctor…  :-)

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