Wednesday, February 12, 2014

Memo to Powertech and its proposed uranium mine in the Black Hills: Get lost. Find yourself another place to glow in the dark.

      The Canadian mining company Powertech and its proposal to collect uranium by messing with the groundwater in the southern Black Hills has so many technical and scientific aspects to it that a layman like me can't hope to get a handle on the safety issues. However,  I'm certain there's risk to consider, and consider it I will. More than that, in every other respect, I think the idea is for the birds.
     First off, Powertech itself is a company that doesn't inspire much confidence in investors, who value the company at around 7 cents a share.  What it does inspire is skepticism.  Consider that for years, Powertech had been touting some land in Colorado as one of its principal assets, worth around $15 million.  Then all of a sudden, out of the blue, it comes out with a quarterly report last November that writes down the value of that land by about 85%.  Shareholders who've watched their stock fall to just pennies a share have every reason to wonder why they didn't get some sort of heads up about the sudden devaluation of their company. It may not run afoul of securities regulations and accounting standards, but it certainly makes  for a bad track record when it comes to investor relations.   I generally pay no attention to a "penny stock" like this one, but its presence in the Black Hills and its persistence in pursuing a uranium mining venture in the Hills, with all the attendant controversy about the environmental prospects, are impossible to brush off, let alone ignore altogether.
     Beyond what seems to be the shaky nature of the company itself, there's the matter of how much risk there actually is in a project like this--risk that extends beyond the immediate environmental impact.  I think it's a bad deal for South Dakota to project an image of itself as a place where potentially environmentally hazardous mining acitivities are occurring in one of the crown jewels of America's natural treasures, the Black Hills themselves.  If something actually were to go wrong with the Powertech project, you can only imagine the public relations consequences.  I mean, would you like to visit Three Mile Island, Love Canal, or that town in West Virginia that just had its water supply contaminated by a chemical spill?  Yuk.  The shock to the residents of those ill-starred locales was probably intensified by the fact that their property values plummeted, only adding to their dismay and anger.  Considering that tourism is probably the leading industry in South Dakota's Black Hills region, even the limited prospect of environmental degradation and its subsequent airing out in the national media should give all of us in the area some pause. 
     As a businessman I live in a world that calculates risk in terms of its rewards, and this Powertech uranium mine's risks are just not commensurate with its rewards. Those rewards, as near as I can tell, will be the profits that accrue to the company and a relative handful of jobs limited to the immediate surroundings in the southern Hills.  The risks?  Way too high in relation to the gains.  As to the water supply,  I understand that Powertech's proposal was  recently given a green light by federal environmental regulators.  But I have no doubt that the same could be said of any number of ventures that have gone awry.  Beyond that, putting a smudge on the pristine reputation of the Black Hills is something that isn't worth the risk of this mining venture--no way, no how.  Powertech can take a hike.
    

11 comments:

  1. John, You hit the nail on the head! I agree with your comments and will add "amen".
    If only our legislatures had your insightful perspectives.

    ReplyDelete
  2. Thank you, Mary. I believe the implications of this venture go beyond the immediate environmental considerations. Elected officials that have some influence over this decision should carefully weigh all the elements of it, including the impact on the broader economy. Powertech and the China-based company that is poised to take control next Summer should also undergo some rigorous financial analysis. The fundamentals in Powertech's income statements and balance sheet are far short of anything that many prudent investors would want to put their money into. I certainly hope South Dakota officials are aware of the company's precarious financial condition. On reviewing the Powertech financial statement that I linked in my post, I noticed the following notation: "The Company’s focus is furthering its permitting applications at its Dewey-Burdock project. Therefore it will incur future losses which cast significant doubt as to the Company’s ability to continue as a going concern." The Chinese company may have come to the rescue, but it all looks to me like the outfit, whoever controls it, is betting everything on Dewey-Burdock. I think South Dakotans should be wary of getting connected to a company that has such shaky financial underpinnings and prospects.

    ReplyDelete
  3. Note to readers: Powertech's proposed uranium project in the Black Hills is known as "Dewey-Burdock." Should've made that clear in my post.

    ReplyDelete
  4. John, Thought that you might be interested in the post I put with this article when I put it on Facebook yesterday,

    Lanny Stricherz
    Only in rabidly pro business, anti environment, South Dakota, would State government consider allowing a foreign company to come into the pristine treasure that we have in the Black Hills, to mine uranium and potentially destroy the water supply for a couple of eons.

    ReplyDelete
  5. Appreciate the sentiment, Lanny. That's why I'm looking at it from a businessman's perspective. Protecting an invaluable asset like the Black Hills should be our first consideration when it comes advancing economic development. It may seem crass, but that's the vocabulary that resonates loudest in Pierre. I'm sure the business community is sensitive to this matter, so much so that the Rapid City council has even gone on record as being "gravely concerned" about the Dewey-Burdock project in a 9-1 vote last August. A lot of us out here in the Hills get the connection. Thanks for commenting--always enjoy reading your thoughts over at Madville, even when you're chastising me, lol.

    ReplyDelete
  6. One thing I didn't like was when Gov. DD decided the state didn't have any money and had to cut everything. One thing he got the legislature to cut was DENR authority to investigate uranium mining and turn it over to the Feds and accept whatever the Feds approved with no oversight from South Dakota.

    ReplyDelete
    Replies
    1. Very interesting, Dallis. We Republicans are generally very protective of our state's authority to take care of its own business--turning over matters of oversight like this goes against our nature. Can you steer me to some docs or news reports specific to this decision?

      Delete
    2. The bill was SB 158 of the 2011 session of the legislature. here is the link
      http://legis.sd.gov/Legislative_Session/Bills/Bill.aspx?Bill=158&Session=2011

      I am not smart enough to understand what toll means but the jest of the bill as I recall at the time was that SD DENR did not have the expertise to know about uranium mining so let the feds do it. maybe you can listen to the testimony and remember what happened.

      Delete
  7. Thanks Dallis. This is really a putdown of the Geology Department at the South Dakota School of Mines and Technology. We have some outstanding geologists in this state that were trained right here in South Dakota. Makes me wonder what the point of supporting SDSM&T is if we can't draw on the expertise and research that they do there. I think this handoff to federal regulators was ill-conceived.

    ReplyDelete
  8. We drilled a deep well ten years ago that taps into these same aquifers. This is something I have watched rather closely. I think the term ill-conceived is too mild a term for what was done. Our saving grace is that suck out of the other end of the aquifer. I would also add that not only the School of Mines was snubbed but also SDSU was cut and several professors have left. Why would they stay in a state that does not appreciate them? What I don't understand is how the GOP thinks we can lure companies to a state that does not value education or research. Just low wages and no regulation.

    ReplyDelete
  9. I appreciate that you've added a dimension to this discussion that I never considered Dallis. It needs to be aired out.

    ReplyDelete