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Formation Metals Inc.

Formation Metals Inc.

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 November 11, 2005
Canadian company hires on extra firepower to lift Idaho mine proposal

 NOTE: This is not an official Company Release. It is an Associated Press article that was published in Times-News Online: Twin Falls Idaho, on November 11, 2005. As per the Company's News Release dated October 3, 2005, there has been no change, to the best of the Company's knowledge, to the date of the Record of Decision (mine permit) schedule in May of 2006 as received by the United States Department of Agriculture Forest Service. The reference to August of 2006 for a finalized permit takes into account a public comment period that may or may not be followed by an appeal.

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Nov 11, 2:30 AM EST
By JOHN MILLER
Associated Press Writer

BOISE, Idaho (AP) -- As the U.S. Forest Service prepares its final review of what would be the largest U.S. cobalt mine, the Canadian company behind the central Idaho project has hired a mining lobbyist and a public relations firm to sway lawmakers, agencies and the public on its economic benefits.

Vancouver, British Columbia-based Formation Capital Corp. has worked since 1993 on the project 21 miles east of Salmon. It hopes to mine cobalt worth $46 million annually, based on estimated production and today's prices.

The metal is needed to make hybrid cars, fighter jets and gas turbines.

The Gallatin Group, whose consultants include former Idaho governor and U.S. Interior Secretary Cecil Andrus, and Peter Skamser, a longtime Boise-based business and mining industry lobbyist, have been hired to help.

Formation would extract 800 tons of rock daily from beneath public land, calling it an environmentally safe way to cut U.S. dependence on relatively unstable countries. America currently imports about 79 percent of its cobalt from restive regions, including Africa and Russia.

Still, conservation groups, including Western Watersheds Project and the Idaho Conservation League, are wary, in part for historical reasons: On land adjacent to Formation's proposal sits a 100-year-old cobalt claim that since 1995 has cost Noranda Mining Inc., another Canadian mining outfit, and three other firms $60 million to clean contamination that killed thousands of salmon in nearby creeks.

"Cobalt is on the list of U.S. strategic metals - it's very important," said Batric Pesic, a professor of metallurgical engineering at the University of Idaho. But "mining in the U.S. is very tricky," Pesic said. "You're always going against public perception. Mining companies can't do it by themselves."

That's why The Gallatin Group and Skamser were hired.

"It's looking at the process of educating the public," Skamser told The Associated Press. "We'll talk to the congressional offices, the (Idaho) Department of Commerce, the governor and legislative leadership, to keep them up to date on what's going on. Nobody likes to be surprised."

Even before they hired Gallatin Group and Skamser, Formation officials did their homework: They secured letters of support from Gov. Dirk Kempthorne, all four members of Idaho's Republican congressional delegation and Lemhi County's three commissioners as early as 2000.

Later this month, federal and state agencies, including the U.S. Environmental Protection Agency and the Idaho Department of Environmental Quality, are to begin reviewing an analysis of the project by the U.S. Forest Service.

The public will likely be able to weigh in starting in January, but the agency won't make a final decision on the mine until next August at the earliest, said Ray Henderson, a Forest Service minerals specialist.

"It's a complex thing," Henderson said.

Compounding that complexity is the site's location: Next door is the defunct Blackbird Mine, where polluted water trickling from 10 billion pounds of waste rock killed the salmon run in Panther Creek, a tributary to the Salmon River, in the 1970s. According to a February 2002 report from the Idaho Department of Environmental Quality, "aquatic life has virtually been extirpated from Bucktail Creek. It is unlikely that in the foreseeable future that copper concentrations will decline to the point of meeting aquatic life criteria."

After the state of Idaho sued in the early 1990s, Toronto-based Noranda, which bought the Blackbird claim in 1980, agreed to help finance cleanup operations that are still under way.

Formation officials said they're committed to avoiding the mistakes of the past.

The new mine, if permitted, would disturb only 150 acres, said Jerry Hamilton, its environmental coordinator. Its shaft would spiral downwards, preventing wastewater from spilling out. A reclamation bond for the project could top $15 million, Forest Service officials said.

"We're aware of our neighbor (the Blackbird Mine)," said Rick Honsinger, a spokesman at Formation's Vancouver offices. "But the neighbor's mine and our mine are two completely different operations. The most toxic thing on that hill is going to be diesel fuel."

A conveyor would transport ore to a mill to be built atop a nearby mountain. Twice daily, semi-trucks would transport cobalt-laden rock north to Kellogg, via U.S. Interstate 90, to a processing plant. Formation bought that from the bankrupt Sunshine Mine in 2002, in anticipation of its cobalt operation coming on line.

On at least one occasion, Formation ran out of money and had to delay its cobalt project until it could raise another $10 million from investors. Since 1988, Formation has posted net losses of more than $12 million, including $2.6 million last year, according to its financial statements.

Still, if its mine wins approval, the company is promising more than $11 million in annual wages for more than 180 workers, in an economically depressed region of the state where unemployment was about double Idaho's 3.6 percent October rate.

(c) 2005 The Associated Press. All rights reserved
 
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