THE BLOG
04/09/2014 03:40 pm ET | Updated Jun 09, 2014

Rio Tinto Backs out of Pebble Mine Project

At the head of the Kvichak River, Bristol Bay, 2012.

In another blow to the already beleaguered Pebble Mine, Anglo-Australian mining giant Rio Tinto announced Monday that it was ending its involvement with the controversial project and gifting its 19.1 percent stake in Pebble prospect owner Northern Dynasty Minerals to two Alaskan charities, the Alaska Community Foundation and the Bristol Bay Native Corporation Education Foundation. This leaves Canadian mining company Northern Dynasty without a partner for development of the mine, a process it cannot afford to undertake on its own.

There were hints that Rio was headed towards this decision -- in December they announced a strategic review of their investment in Pebble, and then in February, the Rio representative on Northern Dynasty's board resigned -- but the announcement triggered another fall in Northern Dynasty stock prices nonetheless. This comes on the heels of a tough six months for Pebble's prospects: In September, Anglo-American, which owned 50 percent of Pebble, pulled out of the project, taking a loss of $300 million; soon after, layoffs began for Pebble's Alaska staff; then in January Alaskan Sen. Mark Begich came out in opposition to the mine; in early February, the Pebble Partnership replaced its long-time CEO; and then the bombshell in March, when the EPA, which had been studying the potential effects of a large-scale mine on Bristol Bay's salmon run, announced that it was invoking its power under section 404(c) of the Clean Water Act and initiating a process that could lead to a "veto" of mine permits, and which effectively blocks the mining companies from applying for permits for the foreseeable future.

According to Rio's press release, their divestment is the result of the strategic review's conclusion that "the Pebble Project does not fit with Rio Tinto's strategy", and its decision to give away the shares was an effort to insure that Alaskan stakeholders have a voice in the process. But the more likely explanation is that they simply could not find a buyer.

Pebble opponents were jubilant -- "Thank You, Rio Tinto" ran the headline of a post by the NRDC's Joel Reynolds on HuffPost -- and even optimistic. "Rio Tinto's divestment from Pebble may not be the final nail in the coffin," Bonnie Gestring, Northwest program director of Pebble critic Earthworks, told The Washington Post, "but it's surely one of the last."

Of course, not everyone's so happy, and Alaska Governor Sean Parnell took the opportunity to once again hammer the EPA for what he sees as an unprecedented encroachment on Alaskan sovereignty, which he blames for scaring off companies like Rio. "It's disheartening to see a company like Rio Tinto take its business elsewhere as a result of the current federal regulatory environment," said Gov. Parnell in a statement released by his office. "Even more troubling is the EPA's efforts to preemptively veto a project before any proposal has been submitted and before a public permitting process has even commenced."

The oddest part of Rio's move, though, may be how they have chosen to dispose of their shares, currently valued at about $16 million. "By giving our shares to two respected Alaskan charities," said Rio Tinto Copper CEO Jena-Sebastien Jacques in the company's release, "we are ensuring that Alaskans will have a say in Pebble's future development and that any economic benefit supports Alaska's ability to attract investment that creates jobs."

Having local stakeholders more involved will be a good thing, but there are two salient, though unspoken, ironies here: First, Northern Dynasty's share prices tumbled after the announcement and have dropped nearly ten percent from close of trading Friday through today, eroding the value of the gifted stock by $1.5 million; and second, and more interestingly, the Bristol Bay Native Corporation (BBNC), whose Educational Foundation will receive half of Rio's stake, has been a powerful and vocal critic of Pebble, which could make them particularly interesting as an owner.

"This gift provides an example of what open discussion and relationship building between stakeholders with differing views can accomplish," said BBNC President Jason Metrokin, according to the Anchorage Daily News. "However, BBNC's opposition to the proposed Pebble mine has not changed."

For their part, Northern Dynasty remained stonefaced as ever. "We look forward to meeting with the leadership of the Alaska Community Foundation and Bristol Bay Native Corporation Education Foundation in the days ahead," said Northern Dynasty President and CEO Ron Thiessen in the company's statement, "to better understand their long-term goals and aspirations, and how their ownership interest in Northern Dynasty and the Pebble Project can make the greatest possible contribution to the people and communities they serve."

Is it just me, or does that not sound entirely enthusiastic? Watch this space for more on this story.

(A version of this post appeared originally on timsohn.com.)