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CEA Foundation Questions: Economic Impact Report

CEA Foundation submitted comments and questions about the County's Economic Impact Report for the proposed Idaho-Maryland Mine project in advance of the County's public webinar on December 15, 2022.

 

CEA Foundation

December 13, 2022




Comments and Questions on the Robert D. Niehaus Inc. Report (RDN Report) “Economic Impact of the Proposed Idaho-Maryland Mine Project”


We applaud the Nevada County Board of Supervisors for seeking an independent analysis of the Mine Project by funding this report rather than relying on the private report produced by the project applicant, Rise Gold Inc. (dba Rise Grass Valley Inc.) The RDN Report provides useful information about the proposed mine project.


It is important to note that most of the Report is “...based on the assumption that it would operate as proposed by the applicant and as documented in the project description in the Draft EIR.” (RDN p1)


Similarly, apparently Rise Gold did not provide an estimate of the costs of facilities construction, the costs of developing the operational equipment, dewatering, creating a new access shaft and rehabilitating the old mine works.


Similar concerns arise regarding the use of the Draft EIR, which had not been fully reviewed by the project consultant Raney Planning and Management, nor Nevada County Planning Department.


Whereas, in a normal situation, the publication of the project description and a Draft EIR would provide an adequate bases for conducting a study, in this case significant defects and omissions were identified. CEA Foundation, Northern Sierra Air Quality Management District, the Central Valley Regional Water Quality Control Board, the City of Grass Valley, Nevada Irrigation District, over 18 regional non-profits, and the public at large, pointed to significant inadequacies in the Draft and/or called for the Draft to be re-circulated.


Given that a major portion of the information that would be necessary to produce a reliable economic analysis was likely to change, what confidence level would RDN assign to the findings?


High-end and Low-end Scenarios

The Report focuses almost entirely upon a “high-end” scenario.


For the “low-end” scenario, the Report notes that the Mine operations lifespan may be only 8 years, ending with only $22,000/yr net revenue to the County after 11 years (RDN p 58).


“RGV does not have any “proved” reserves because they are currently in the process of performing the exploration work to quantify these resources. Therefore, this analysis provides the potential tax impact for a range of proved reserves by providing a high-end and low-end estimate.” (RDN, p52) “The Emgold Mining Corporation produced the last reported measured reserves for the Idaho-Maryland Mine in November 2002, which they estimated as 212,000 ounces of gold. Therefore, the low-end estimate assumes the mine produces 26,500 ounces of gold per year over approximately eight years.

  • Under this scenario, the proved reserves would be depleted by 26,500 ounces per year until none are remaining.” (pg 55, RDN)

  • Why does the report focus almost entirely on the high end scenario?

  • Why was an equally detailed assessment under the low-end not provided?

  • Are the low and high end equally probable? What probability is assigned and what is the basis?

  • Has RDN done any work to validate production or reserves beyond outlining high-end and low-end estimates?

  • The most likely production scenario is somewhere in between. Why was that not considered?

The economic benefits to the Community /County are based on assumptions and projections provided by Rise Gold regarding the source of employment (local existing, in migration, or weekly commuters), the ounces of gold extracted per year, and the percent of those economic benefits spent in Nevada County.


Did the study perform any verification of these Rise Gold estimates?


Construction

Estimate of construction costs is apparently based upon the number of employees which is generally not considered to be a reliable method. The project applicant, Rise Gold, should be challenged for not providing construction costs estimates for the project, which would provide a more realistic viewpoint. At the least, a breakout of project elements and schedule should have been provided.

  • Was any analysis done on the feasibility of the remarkably short proposed 18-month construction schedule provided by Rise Gold?

  • Does RDN feel the construction costs and 18-month time frame are credible?

End of life impacts

Even though the low-end scenario indicates only 8 years of operations, the report fails to consider the cost and other impacts of shutting down the mine. Having developed the project adjacent to Grass Valley rather than allowing normal more sustainable development to take place, the impacts of the shutdown will create a local depression. This is generally what happens to mining communities.


  • Why was this analysis omitted?

  • Does the Economic Plan include any assessment of risk and potential related costs?

  • Has any analysis been done regarding the accuracy of data provided by Rise Gold for “Improvements (new facilities)”? (RDN p55, Table 5-7)

Miscellaneous

Fact check: “The proposed project would construct and operate above-ground mineral processing and water treatment facilities at the Brunswick Industrial Site and place engineered fill at both industrial sites for the first five years of the project.”( RDN p3)

Answer: Per the application documents and the DEIR, the local mine waste dumping operations (“engineered fill”) will be for 11 years, with approximately 6 years at the Brunswick site directly adjacent to numerous residences.

Fact check: “According to the Draft EIR, the proposed project would increase water supplies by depositing an additional 1,000 acre-feet of treated water into the Wolf Creek System, resulting in a net positive impact to water supply.”


Answer: The initial dewatering is not usable as treated water because it will blend with existing flow and is not connected to any service lines. Furthermore, the short-term increased flow’s possible benefit to irrigation downstream is not established, and it would be seasonally dependent.


Also, after the initial dewatering, the predicted reduction in base flow is 0.75 cfs for Wolf Creek and 0.1cfs for South Fork Wolf Creek. [see DEIR Appendix K.2, p72] This will persist 24/7 for the life of the project, totaling 615 acre-feet/year. Maintenance dewatering for 70 years would reduce the flow by 43,000 acre feet total.


And finally, at the end of the operations, the mine will reduce the flow into Wolf Creek System by 1,000 acre feet during the time in which the mine refills. This is another net loss in water supplies.


Rise Gold’s Production Numbers

Full employment likely won’t happen until full production, years from now.

If the project is approved and not challenged legally next year, at least 1 year will be needed for near surface structure repairs and agency permitting before start of construction. It would likely be more than 4 years after Use Permit approval for start of mining operations. Full production will be years after that.


Why was it assumed that full production would take place immediately upon start of operations? This is virtually impossible. Full production usually takes years to achieve and is seldom maintained continuously.


Many expenses would not be reduced in proportion to reduction of gold output.

The RDN “low-end estimate” assumes expenses would go down proportional to lower gold production. Table 5.5. This fails to consider fixed labor expenses and fixed operational costs such as pumping, ventilation, in addition to depreciations, etc.. These factors would further reduce the benefits to the county.

  • Why were these factors not considered?

  • What are the changes to economic benefits when allowing for those factors?

Local Businesses

High-tech industries, especially in the Whispering Pines Business Park, may move out, and it will be harder to attract new ones.


  • Did RDN interview businesses in Whispering Pines Business Park, which sits over the mineral rights?

  • What were the results of interviewing businesses within close proximity to the Mineral Rights area?

Local Hires

How were the numbers of non-local hires determined?

Prior economic studies indicated that most of the jobs would go to out of towners and that they would rent, impacting the rental market. Also, general knowledge of the mining labor force indicates that most of the mining jobs will be filled by miners from out of town.

For example, as reported by Jim Steinmann, who has expertise on mine employment demographics, the typical mine worker will take temporary housing and work a 12hr shift 7 days straight and then go home for a week.


In addition, the Economic study on the same mine conducted in 2008 estimated that 52% of the workforce would be from out of the area. [Emgold Idaho-Maryland Mine DEIR 2008, Appendix H, Economic and Fiscal Analysis, pg 10, Table 2] Of the workers from out of the area, the study determined that the non-local hires would mostly be weekly commuters, and that 75% of those commuting would rent shared housing in Grass Valley. [Ibid, Table 6, p11 ] Of those 48% who would relocate, 54% would move without their families. [Ibid, p11] And only 10% of those relocating would choose to purchase. It is true that the 2008 mine project was different in several ways, but neither the demographics of Nevada County nor the mining industry have significantly changed in 14 years.

  • Was this study taken into account?

  • If so, why were the findings not included?

Employee Sources

Most of the construction will be done by out-of-town contractors who have experience and the capacity to build large metal structures. Also, installation or construction of gold processing equipment would likely be done by specialists.

  • What findings did RDN discover on industrial construction resources in Nevada County for this specific industry?

  • Assuming that there will be 213 local hires as reported, has the cost of depleting local labor force been analyzed?

It seems likely that the 213 local hires will come from existing local businesses. E.g., existing contractors, existing lumber yards, virtually any business which does not pay $94,000/year. As noted in the Report (RDN, p17) “Local businesses are already competing for talent and labor; introducing additional high-paying jobs would likely make it harder for local businesses to meet their hiring needs.”

  • Has the impact of this turnover in local employees been assessed?

  • What will be the impact on the businesses that loses employment to the Mine project?

  • What is the period of time for a new unexperienced employee to become a journeyman Miner? Assuming these 213 local hires are replaced, was the number of non-local replacement hires estimated?

Local Expenditures

Income to community from expenditures does not include many of the “benefits” paid to employees.

  • Do the disposable income numbers used include the employee payroll withholdings?

  • Can you identify how the payroll adjustments were assigned to determine gross wages vs the disposable income spent locally: mortgages, rent, large non-local purchases (e.g. cars, appliances), workers comp, Social Security, Social Security match, income taxes, Medicare, 401K, health, health savings, unemployment insurance, liability insurance, administration, 401K match, dental, etc.? (please list all)

Environmental Impacts

The costs due to environmental impacts were generally ignored.


The Draft EIR elicited hundreds of comments from scientific experts, government agencies, and the public on the environmental impacts and associated costs of the proposed mine.

Did RDN assess the local costs of health impacts attributable to increased noise, air pollution, increased temperatures from woodland and riparian habitat removal?

The Economic report identifies specific benefits to the County based on a number of unverified assumptions relative to wages, costs, local expenditures, and income from the mining of gold.


Did the analysis estimate or even identify the potential future costs to the County or property owners due to loss of well capacity, costs of environmental mitigation. and costs of site cleanup in the event of bankruptcy or early mine closure?


Real Estate Impacts

The conclusions of the study largely disregard the input from local realtors and instead relies upon 3 “comparison mines” However, the comparisons do not appear valid.

The impacts of the comp mines opening did not account for the fact that much of the negative impact had already affected the market value before the "Before Opening" data was gathered.


In addition, the validity of the “Comparison Mines” for real estate market value change is questionable for these reasons:

  1. The real estate comparisons fail to consider the actual physical characteristics of the mines with respect to geography, neighboring land use, and recent history prior to opening. None of the comps had comparable residential neighborhoods in close proximity to the mine The impacts on property values depends upon the actual environmental impacts, not simply a straight- line "distance" from the mine. In particular, dwellings that are directly over the mine or within a short distance would be greatly impacted. Yet in two of the examples, there were almost no dwellings within 1/2 mile, compared to over 2000 dwellings in the case of Idaho-Maryland Mine mineral rights area. These homes would be subject to noise, dust, truck traffic, aesthetic impacts from the creation of 2 huge tailings piles for at least 11 years, and for over 300 well owners, there is a widely recognized potential impact to their wells. These are much greater impacts.

  2. Comparison of residential values before and after the mine opens is not meaningful unless it is adjusted to allow for overall changes in the real estate market. The comps failed to assess changes in market value in a control population. To identify the impacts on real estate for a particular project, changes in the values of comparable housing in a similar market that is not impacted by the mine must be used. For example, real estate in CA more than doubled in value (868/426 = 204%) between Q2-2013 and Q1-2022. [see https://fred.stlouisfed.org/series/CASTHPI ] The increase in value for homes in the region of the Sutter Mine went up about 18% in the comparison provided (RDN Table 4-4). Granted, the averages in the periods "Before Opening" and "After Opening" are a different numeric value than the end points of the two periods, and the statistics for the entire state are not necessarily applicable to Sutter Creek, but this provides some insight into how misleading the number RDN provided can be. 18% is a paltry increase compared to the general trends in CA, showing that there was a strong negative impact on the Sutter property values. A more representative control population for comparisons would give a meaningful result. Why was this standard practice for Real Estate appraisals using comparable housing not utilized?

  3. There is strong evidence that the mine would have a negative impact on housing. Common sense would conclude that having a 90-foot-high tailings pile built next to one's home, replacing an oak woodlands, would hurt the property values. Numerous local professional realtors with years of experience have stated that the mine would have a negative impact on housing. Direct evidence of real estate sales falling out of escrow when the buyer learned about the mine proposal have been reported. Some residents have already moved out. Given that the perception is a valid and significant market factor, why was the reported negative views of a preponderance of Realtors not given more credence? The risk for the 300+ property owners with wells is extreme. Their property values would quickly drop in value if their wells have reduced capacity, become polluted, or go dry. The assessment of potential impact to area wells is a serious deficiency in the Draft EIR. The potential harm in this case is a good example of why the Idaho-Maryland Mine 2022 Draft EIR does not provide adequate information about the economic costs of the Mine.

  • How is lack of available housing taken into account in the report, especially our lack of rental housing?

  • Was the cost of displacing current residents in the community with lower incomes evaluated?

County Revenue

The high-end scenario for the mine would provide a 2.1% increase in General Fund revenue ($742K towards $35.19M), and would be a 0.2% increase of the $330M County Budget. The low end scenario would provide a peak of 0.4% increase in year 4 (163K towards 35.19) and drop steadily to a 0.06% increase (22K towards 36.19M) after year 11.


Rise is claiming expenses that calculate out to about $630/oz for gold production, but the industry standard is closer to $1200, and because of all the needed mitigations and strict CA laws, if anything it will probably be much higher for this project. ( See https://bunker-group.com/en/blog/gold-s-cost-of- production-analysis and https://www.gold.org/about-gold/gold-supply/responsible-gold/all-in-costs.

In addition, Rise will not receive market price for the gold. The facility will output “gold concentrate” which requires costly processing, probably at a cyanide processing facility out of California. This will reduce the Mineral Reserves tax.

  • What is the cost of refining the gold-concentrate per ounce?

  • Why was this cost not used to reduce the estimated “sales price” of the gold produced.

  • What would be the decrease in County tax revenues from Mineral Property taxes if the Proven Reserves are determined based upon a more realistic $1200/oz expenses and a lower sales price due to the need for gold concentrate processing?

  • RDN estimates $4.96M in local expenditures under the most optimistic scenario.

  • Were the listed $170,000/year in Mine related expenses for the City of Grass Valley included in the totals for the County?

Conclusion

The RDN Report has provided some useful data. Unfortunately, the dependency of the report almost entirely upon the production numbers from Rise Gold and the Draft EIR has led to conclusions which carry little prospect of providing a reliable economic assessment.

In addition, the evaluation of real estate impacts seems to place too much focus on three mines which do not seem to be accurate comparisons.


Our Nevada County Board of Supervisors commissioned this report to get a reliable independent analysis of the broader impacts of the proposed mine on our local economy. While the report did provide a lot of useful information, we urge RDN to revise the report by reconsidering a number of the identified issues and concerns.


Thank you,

Ralph Silberstein, President CEA Foundation



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