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Board of Minerals and Environment

523 East Capitol Avenue Pierre, South Dakota 57501-3182

(605)773-3151 Fax: (605)773-4068

Live audio of the meeting is available at http://www.sd.net

AGENDA

Board of Minerals and Environment Telephone Conference Call

August 20, 2020 10:00 a.m. Central Time

10:00 a.m. Call to order and roll call

Approval of minutes from July 16, 2020, meeting

Mining Issues

Exchange of Surety for Wharf Resources (USA), Inc.’s Reclamation Bond for Permits 356, 434, 435, 464, and 476 – Eric Holm

Update on Increase to Reclamation Bond and Postclosure Financial Assurance Amounts for Wharf Resources (USA), Inc. Permits 356, 434, 435, 464, and 476 – Eric Holm

Release of Liability for Goldstake Explorations (SD) Inc., Exploration Notice of Intent 422 - Roberta Hudson

Update on Brohm EPA Superfund Site – Roberta Hudson

Update on Pete Lien Permit 57 – Eric Holm

Board member biographies

Dennis Landguth John Scheetz

Next meeting

Public comment period in accordance with SDCL 1-25-1

Adjourn Interested parties who wish to participate in the telephone conference call should contact DENR at (605) 773-3886 no later than 3:00 p.m. Central Time on Wednesday, August 19, 2020. The board packet is available at https://boardsandcommissions.sd.gov/Meetings.aspx?BoardID=67

http://www.sd.net/

https://boardsandcommissions.sd.gov/Meetings.aspx?BoardID=67

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The audio recording for this meeting is available on the South Dakota Boards and Commissions Portal at http://boardsandcommissions.sd.gov/Meetings.aspx?BoardID=67

Minutes of the

Board of Minerals and Environment Telephone Conference Call Meeting

July 16, 2020

10:00 a.m. Central Time CALL TO ORDER: The meeting was called to order by Chairman Rex Hagg. The roll was called, and a quorum was present. Chairman Hagg announced that the meeting was streaming live on SD.net, a service of South Dakota Public Broadcasting. BOARD MEMBERS PRESENT: Rex Hagg, Gregg Greenfield, Glenn Blumhardt, Dennis Landguth, Doyle Karpen, Daryl Englund, Jessica Peterson, Bob Morris, and John Scheetz. BOARD MEMBERS ABSENT: None. OTHERS: Mike Lees and Tom Cline, Minerals and Mining Program. ELECTION OF OFFICERS: Motion by Morris, seconded by Karpen, that the current slate of officers serve for another year – Rex Hagg, chairman, Glenn Blumhardt, vice chairman, and Gregg Greenfield, secretary. A roll call vote was taken, and the motion carried unanimously. APPROVAL OF MINUTES FROM MAY 21, 2020: Mr. Englund pointed out that in the 7th paragraph on page 2, the word “where” should be “were.” Motion by Blumhardt, seconded by Morris, to change “where” to “were” in the 7th paragraph on page 2 and to approve the minutes from the June 18, 2020, Board of Minerals and Environment meeting, as amended. A roll call vote was taken, and the motion carried unanimously. DEPARTMENT UPDATE Spyglass Oil & Gas Wells: Mike Lees, administrator of the Minerals and Mining Program, provided an update on the progress of plugging Spyglass wells in Harding County. A special appropriation from the 2020 legislature (S.B. 17) is being used to plug the 40 wells. On June 18, 2020, the department published the Request for Proposals (RFP). The department has received responses from six plugging companies. Mr. Lees stated that he and Jeff Kenner, Minerals and Mining Program field geologist, will be present at the Spyglass site on July 21, 2020, for a site visit for perspective bidders. The proposal submission deadline is August 25, 2020, and it is anticipated that a decision will be made by September 14, 2020. H.B. 1025 involved revisions to plugging and performance bonds for oil and gas wells. The new increased bonding requirement went into effect July 1, 2020. The department sent letters to all oil

http://boardsandcommissions.sd.gov/Meetings.aspx?BoardID=67

Board of Minerals and Environment July 16, 2020, Meeting Minutes

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and gas operators in May 2020 explaining the new requirements. Operators have until September 1, 2020, to post the increased bonds. The department also informed two operators that they need to post additional idle well bonds of $20,000 per well. COVID-19: Mr. Lees stated that most DENR staff worked remotely between mid-March and early June. Almost all staff has been back in the office since June 14, 2020. Staff are following protective protocols during field work. No more than two people travel together in a vehicle. Travel is limited primarily to day trips for the inspectors, who are using DOT fueling stations and taking a sack lunch with them rather than dining in restaurants. Future board meetings: Mr. Lees stated that the Water Management Board met in the Matthew Training Center in the Foss Building for the July 8-9, 2020, meeting. The board held three contested case hearings with five of the board members and all of the parties present in the training center. One board member participated remotely. CDC guidelines were followed to ensure the safety of the board and participants. Since the last time the Board of Minerals and Environment met in person, the Matthew Training Center has been renovated. There are now two large screens in the room and electronics, which allow Digital Dakota Network (DDN) and other remote means of participation in meetings. Some boards have been utilizing those capabilities for remote meetings. The Water Management Board was the first to meet in person in the Foss Building since March. The various parties for the three hearings were required to let the department know who would be attending, and an area was available in the building for the parties to wait until their respective hearing began, so no more than 10 people plus the board members were in the room at the same time. The set up of the room allowed for six-foot social distancing. The department had a COVID-19 screening area set up at the entrance of the building with a thermometer, masks, and hand sanitizer available. Department staff signed people in rather than having each person sign in separately. Mr. Lees noted that the Water Management Board meeting seemed to go well. He said it was on the verge of being a bit crowded in the Training Center with 15 people present in the room, so with the nine BME members plus anyone else attending, the room would be a bit more crowded. Future BME agenda items: Mr. Lees noted that the Minerals and Mining Program does not anticipate any contested case hearings in the near future. Future items for the board are the Wharf Resources bond increase, the annual large-scale gold mine updates, and the Pete Lien & Sons Permit 57 update the board requested last year. That update involves a transfer between a mine permit and mine license. Mr. Lees stated that addressing these items at an in-person meeting would bepreferable, but the items could also be effectively presented to the board during a telephonic meeting. Mr. Morris stated that North Dakota was supposedly using COVID-19 federal funds for addressing abandoned wells. He asked if South Dakota could use federal funds to plug the Spyglass wells. Mr. Lees said the department did explore that, and the department is working within the guidelines it has to spend the money that is available. It does not appear that there is an easy avenue for the department to spend the COVID-19 money on shovel-ready projects at this point in time, but the department is watching to see how that works for North Dakota.


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Chairman Hagg asked, other than the Spyglass wells, how many wells have been abandoned in South Dakota. Mr. Lees said the department is not aware of any wells that are in the same situation that Spyglass was. There is another shallow natural gas field in Harding County that has been out of production for several years, but that operator is still viable and is working with the department. The company is actively plugging wells and planning to plug additional wells. Mr. Lees said this is one of the companies that the $20,000 per idle well applies to. The other company that has been asked to pay the $20,000 idle well bond is a very small operation with a handful of shallow wells just across the border from Fall River County in Custer County, but that is also a viable operator working with the department to bring the wells into compliance. Chairman Hagg asked if the Matthew Training Center was expanded during the renovation. Mr. Lees said the size of the meeting room did not change. Chairman Hagg said the board will meet via telephone conference call for the next couple months. If a contested case hearing is required in the near future, the board will explore making the Matthew Training Center work for a hearing. MINING ISSUES Consent Calendar: Prior to the meeting, the board received a table listing the department recommendations for release of surety, release of liability and surety, transfers of liability, and releases of liability. (see attachment). Tom Cline, Minerals and Mining Program, presented the consent calendar. Responding to a question from Chairman Hagg, Mr. Cline stated that for the Mine Licenses listed on pages 2 and 3, all of those sites have been reclaimed and are eligible for release of liability. Motion by Landguth, seconded by Peterson, to accept the department recommendations for release of surety, release of liability and surety, transfers of liability, and releases of liability, as shown on the consent calendar. A roll call vote was taken, and the motion carried unanimously. NEXT MEETING: The next meeting is scheduled for August 20, 2020. Chairman Hagg asked that, since the meeting will be held telephonically, the board be provided with copies of presentation material for agenda items. Mr. Scheetz requested that staff provide a Brohm Superfund site update at the next meeting. Mr. Lees said he will coordinate with the Groundwater Quality Program to provide an update in August. PUBLIC COMMENT PERIOD: No one from the public commented. Chairman Hagg commented that the board has not had much time to interact on more of a personal level to get to know each other. He asked if the board members would be open to providing a personal biography so other board members can learn more about them.


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Mr. Morris noted that the board had received a copy of an article written by Linda Hilde for the Madison newspaper about her experiences while serving on the Board of Minerals and Environment. He said a lot of institutional knowledge was lost when Ms. Hilde, Mr. Sweetman, and Mr. McCahren left the board. Mr. Morris said he believes building relationships among the board members is important. He suggested that perhaps the board could hold a retreat. He said he is aware that there may be quorum issues, but it would be nice to get to know all of the board members on a more personal level. Mr. Blumhardt stated that the board used to have contested case hearings that would last two or three days, and the board members were together quite a bit, so he was able to get to know them on a more personal level. Chairman Hagg said the board is stymied because of the COVID-19 pandemic for the next several months. Chairman Hagg and Doyle Karpen provided personal biographies. Chairman Hagg asked the board members to let Ms. Binegar know if they would like to provide a personal biography at a future meeting. ADJOURN: Motion by Karpen, seconded by Landguth, that the meeting be adjourned. A Roll call vote was taken, and the motion carried unanimously. __________________________________ _________________________________ Secretary Date Witness Date

Consent Calendar South Dakota Board of Minerals & Environment

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July 16, 2020

License Holder License No. Site No. Surety Amount Surety Company or Bank DENR Recommendation

Release of Surety:

Jerome Lohr Garretson, SD

11-924 $9,000 Bank of the West, Clark Release $9,000.

Release of Liability & Surety: Dan’s Excavating Castlewood, SD

98-677 $500 First Premier Bank, Sioux Falls Release liability and $500.

677002 NE1/4 Section 3; T114N-R52W, Hamlin County

Transfer of Liability:

LG Everist Inc. & Subsidiaries Sioux Falls, SD

83-37 $20,000 The Aetna Casualty & Surety Company

Transfer liability.

37011 Section 12; T94N-R54W, Yankton County Transfer to:

J Hazen, LLC Vermillion, SD

20-1076 $20,000 Lexon Insurance Company


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July 16, 2020


Transfer of Liability:

Obenauer Sand & Gravel Eureka, SD

84-282 $20,000 Great Plains Bank, Eureka Great Plains Bank, Aberdeen

Transfer liability.

282009 NE1/4 & S1/2 Section 13; T125N-R73W, McPherson County

Transfer to:

BDM Gravel LLC Roscoe, SD

20-1071 $20,000 Plains Commerce Bank, Aberdeen

Release of Liability: Bob Bak Construction Pierre, SD

83-61 $20,000 American State Bank, Pierre First National Bank, Pierre Wells Fargo Bank, White River American Bank & Trust, Pierre

Release liability.

61034 NE1/4 Section 6; T3N-R29E, Stanley County

Crusher Investment Company Sioux Falls, SD

83-24 $20,000 North American Specialty Insurance Company

Release liability.

24008 SW1/4 except Lot H-2 of the SW1/4 except Lot H-2 of the S1/2 SW1/4 & except Bruns Tract 1 of Section 15; T101N-R50W, Minnehaha County


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July 16, 2020


Release of Liability:

R & J Gravel & Trucking Chamberlain, SD

07-841 $20,000 Sun Surety Insurance Company

Release liability.

841005 S1/2 Section 29; T105N-R65W, Aurora County

Webster Scale Inc. Webster, SD

03-766 $20,000 AMCO Insurance Company Release liability.

766006 NW1/4 Section 26; T122N-R53W, Day County

Sully County Highway Department Onida, SD

83-132 EXEMPT NA Release liability.

132012 N1/2 Section 3; T116N-R74W, Sully County

Walworth County Highway Department Selby, SD

83-7 EXEMPT NA Release liability.

7030 NW1/4 Section 8; T122N-R76W, Walworth County

South Dakota Board of Minerals & Environment

August 2020.doc 1

August 20, 2020 Permit Holder Permit No.

Surety Amount Surety Company or Bank DENR Recommendation

Exchange of Surety for Wharf Resources (USA) Inc.’s Reclamation Bond: Wharf Resources (USA) Inc. Lead, SD

356, 434, 435, 464, &

476

$5,786,000 Westchester Fire Insurance Company

Exchange Westchester Fire Insurance Company, Bond No. K09047803, for Everest Reinsurance Company, Bond No. ES00006611, in the amount of $5,786,000.

Increase to Wharf Resources (USA), Inc.’s Reclamation Bond: Wharf Resources (USA) Inc. Lead, SD

356, 434, 435, 464, &

476

$37,379,300 Recommend Wharf’s reclamation bond be increased from $37,379,300 to $56,693,500.

Increase to Wharf Resources (USA), Inc.’s Postclosure Financial Assurance Bond:

Wharf Resources (USA) Inc. Lead, SD

356, 434, 435, 464, &

476

$26,800,000 Recommend Wharf’s postclosure financial assurance bond be increased from $26,800,000 to $38,396,200.

South Dakota Board of Minerals & Environment

August 2020.doc 2

August 20, 2020 Permit Holder Permit No.

Surety Amount Surety Company or Bank DENR Recommendation

Release of Reclamation Liability & Surety: Goldstake Explorations (SD) Inc. Spearfish, SD

EXNI-422 $2,500 Pioneer Bank & Trust, Spearfish Release liability and CD No. 23163342, Pioneer Bank & Trust, in the amount of $2,500.

Portions of Sections 4, 17, 19, 20, 21, & 22; T7N-R5E, Meade County Portions of Sections 26, 33, 34, & 35; T8N-R5E, Butte County

South Dakota Department of

Environment and Natural Resources

Wharf Resources

Updated Reclamation Surety and

Postclosure Financial Assurance

August 20, 2020

Reclamation Surety

Updated Surety $56,693,500

Current Surety $37,379,300

Additional Surety $19,314,200

Reclamation Surety

Reasons for Increase

• Inflation

– Increased equipment, labor, water treatment,

seeding, & road maintenance costs

• New Facilities

– Flossie Pit, Flossie and Ruby Waste Rock Dumps

• New Costs

– Pipeline removal, increased support staff, sales tax

• Associated Increase in Indirect Costs

Reclamation Surety – Assumptions

• Based on projected site conditions at the end of

2020

• Assume a 5-year reclamation period

Year 1: Site maintenance and water treatment

Years 2 through 5: Earthwork and water

treatment

Year 6 and beyond: Postclosure care and

maintenance covered under a postclosure bond

Reclamation Surety

Earthwork and Revegetation

“Traditional” Reclamation

• Pit backfill

• Slope reduction/grading

• Topsoil placement (4 inches

typical)

• Revegetation

• Mulching and Fertilizing

• Erosion Control

• Building demolition - no salvage value assumed

Liberty Pit

Harmony Pit

Reclamation Surety

Earthwork and RevegetationLeach Pads/Process Ponds $12,664,452

Upper Ross Valley Depository $ 514,664

Trojan/Green Mountain Pit $ 3,279,193

Flossie Pit $ 4,662,176

Denitrification Pads $ 1,236,496

Reliance Depository $ 326,712

Golden Reward Pits $ 538,276

Road Maintenance/Snow Removal $ 2,848,556

Pipeline Removal $ 168,161

Building Demolition $ 657,337

Other $ 3,720,377

Total Base Reclamation Cost $30,616,400

Reclamation Surety – Earthwork and

Revegetation Indirect Costs

Base Reclamation Cost $30,616,400

3% Mobilization $ 918,492

8% Contractor Overhead $ 2,449,312

2% State Excise Tax $ 612,328

10% Contractor Profit $ 3,061,640

5% Contingency $ 1,530,820

5% Administration $ 1,530,820

2% Engineering/Consulting $ 612,328

5% Scope and Bid $ 1,530,820

Total Earthmoving/Revegetation $42,862,960

Reclamation Surety – Water Treatment

• Cyanide neutralization

– Heap leach pads, process ponds

• Nitrate treatment

– Heap leach pads, process area, Denitrification Pad, Ross Valley and Reliance Depositories

• Water Sampling and Analysis


Pad Neutralization/Denitrification $1,136,675

Pond Neutralization/Denitrification $ 189,947

Denitrification Pad $1,357,625

Ross Valley Water Treatment Complex $3,568,572

Plant Operators $ 777,779

Other $ 224,200

Total Base Water Treatment Cost $7,254,798


Indirect Costs

Base Water Treatment Cost $ 7,254,798

5% Mobilization* $ 160,869

8% Contractor Overhead $ 580,384


10% Contractor Profit $ 725,481

15% Contingency $ 1,088,220

5% Administration $ 362,739

2% Engineering/Consulting* $ 64,348

5% Scope and Bid* $ 160,869

Total Water Treatment $10,542,805

*Applied in Year 1

Reclamation Surety – Monitoring

Water Quality Sampling Equipment $ 65,622

Aquatic/Biological Monitoring $340,500

Total Base Monitoring Cost $406,122

Reclamation Surety – Monitoring

Indirect Costs

Base Monitoring Cost $ 406,122




3% Contingency $ 12,184

5% Scope and Bid $ 20,306

Total Monitoring $ 519,836

WQ Sample Analysis $ 695,231

RV Plant Assay Analysis $ 297,600

Total Monitoring & Analysis $1,512,667

Reclamation Surety – Miscellaneous

Costs and Indirect Costs

Miscellaneous $ 60,500

Utilities $ 51,000

Subtotal Miscellaneous $111,500



Total Miscellaneous Cost $123,765

Reclamation Surety – Inflation

Adjustment and Total

Total Earthmoving, Water Treat. & Misc. $55,042,198 Inflation Cost Adjustment:

3% of total cost per year for 1 Year $ 1,651,266

Total Reclamation Bond $56,693,464

Round to: $56,693,500

Reclamation Surety

• Reclamation surety will be re-evaluated at the end of 2021

• Flossie Pit and Trojan Waste Rock Facility will be complete

• Substantial changes to Green Mountain Pit backfill

• Remaining Golden Reward sloping, topsoil placement, and seeding will be complete

Reclamation Surety

DENR Recommendation:

• Approve increase in Wharf’s reclamation bond from $37,379,300 to $56,693,500

Postclosure

• All affected lands under Mine Permit Nos. 356,

434, 435, 464, and 476 to be included under the

postclosure plan

• Wharf to submit updated postclosure plan at

mine closure

• Board previously approved 50 year postclosure

period


Updated Financial Assurance $38,396,200

Current Financial Assurance $26,800,000

Additional Financial Assurance $11,596,200


Reasons for Increase

• Inflation

– Increased labor, water treatment, water sampling and

analysis, monitoring well plugging costs, and Year 50

site closure costs

• New Costs

– Pipeline removal, increased support staff, sales tax

• Associated Increase in Indirect Costs


Assumptions

• Based on perpetual water treatment calculations developed by other state and federal agencies

• Present worth analysis of annual costs adjusted for inflation

• Postclosure bond is sum of present worths

• 50-year postclosure period based on Wharf models

• Postclosure year 1 begins at end of reclamation year 5

• Does not include portion of Golden Reward Mine outside expansion area


Annual Operation and Maintenance

Costs

Road Maintenance/Snow Removal $78,744Vegetation Maintenance (Yrs 1-15) $ 5,000Erosion Control (Yrs 1-15) $ 1,000Erosion Control (Yrs 16-50) $ 500 Weed Control (Yrs 1-15) $20,000Weed Control (Yrs 16-50) $10,000Two Vehicles (Every 10 years) $64,000Vehicle Fuel & Maintenance (Yrs 1-50) $16,600Caretaker/Water Sampler (Yrs 1-50) $55,577Partial Fence Removal (Year 3) $44,460


Operation and Maintenance Annual

Indirect Costs

Mobilization* 5%

Contractor Overhead 8%

State Excise Tax 2%

Contractor Profit 10%

Contingency 5%

Administration 5%

Scope and Bid* 5%

*Applied every 10 years beginning in year 6 and for fence removal in year 3


Annual Water Treatment Costs

Ross Valley Water Treatment Plant Complex

Plant Chemicals and Nutrients $ 85,848 Electricity $ 73,392Natural Gas $ 123,504 Plant Operation & Maintenance $ 21,600 Assay Analysis Lab Supplies $ 3,588 Boiler Replacement (Every 10 years) $ 89,000Two Plant Operators $ 129,630Project Manager $ 127,400Long Term Liner & Plant Replacement $1,378,350(Year 25)


Water Treatment Annual Indirect Costs

Mobilization* 5%


State Excise Tax 2%


Contingency 15%

Administration 5%

Engineering/Consulting* 2%

Scope and Bid* 5%

*Applied every 10 years beginning in year 6


Annual Monitoring Costs

Water Sample Analysis Aquatic/Biological Monitoring

Years 1 – 10 $98,664 Years 1 - 5 $68,100

Years 11 – 25 $83,065 Years 6 - 25 $30,000

Years 26 – 30 $82,256 Years 26 -50 $15,000

Years 31 – 40 $81,986

Years 41 – 50 $79,452

Plant Assay Analysis Water Sampling Equipment

$59,520 annually Varies from $4,341 to $12,797


Monitoring Annual Indirect Costs


State Excise Tax 2%


Contingency 5%

Scope and Bid 5%

Not applied to analysis costs


Year 50 Final Closure Costs Water Treatment Complex $ 469,349

Building Demolition $ 98,787

Ponds $ 94,312

Access Road/Topsoil Stockpile $ 57,189

Plug Monitoring Wells $ 223,854

Pipeline Removal/Plugging $ 112,281

Labor $ 158,576

Total Base Closure Cost $1,214,348


Year 50 Final Closure Indirect Costs

Base Closure Cost $1,214,348

5% Mobilization $ 60,717






2% Engineering/Consulting $ 24,287

5% Scope and Bid $ 60,717

Total Closure Cost $1,785,091


Year 55 - 60 Monitoring Period Inspection/Monitoring (5 years) $25,000

Fence Removal $55,810

Total Base Closure Cost $80,810


Year 55 - 60 Monitoring Indirect Costs


State Excise Tax 2%


Contingency 10%

Administration 5%

Scope and Bid* 5%

*Applied in year 56


Annual Miscellaneous and Indirect

Costs

Computer $1,500 (every 10 years)

Office Supplies $1,800

Insurance $10,000

Office Utilities $10,200

Contingency 10%

Administration 1%


Well SM-01B Passive Treatment

Contingency Cost

• In 2015, Wharf constructed a compacted clay capping

system over backfill in West Liberty Pit to reduce

elevated sulfate in well SM-01B

• Sulfate levels are decreasing after cap completion, but

still above 500 mg/l ground water standard

• Sulfate projected to meet groundwater standard in

postclosure year 13

• A contingency cost of $280,000 in year 13 of the

postclosure bond for passive treatment system in event

sulfate stays above groundwater standard


Present Worth Analysis

• Discussed with State Investment Council proper

inflation & discount rates

• Historically 2 percent difference between the two

rates

• Historic inflation rate 3 percent

• 5 percent discount rate

– Wharf’s current discount rate 4.3%

• Applied to all large scale gold postclosure bonds


Inflation Adjustment

• Each total annual cost (direct + indirect) is first

adjusted for inflation

• Future value of each annual cost calculated

using 3% inflation factor

• FV = (1+i)t x Annual Cost where:

• i = 0.03 (3% / 100)

• t = year



• The present worth brings the future value

(inflated value) back to today’s dollars

• The present worth of each inflated value is

calculated using a discount rate of 5%

• PV = 1/(1+i)t x Inflated Value where:

• i = 0.05 (5% / 100)

• t = year



• Year 1 of postclosure period is year 6 of the

project period

• Project period includes five year closure period

(Years 1 through 5)

• Escalation and present worth factors begin at

year 6, or first year of postclosure period


Present Worth Analysis Example

• Total Postclosure Year 1 Cost $1,308,232

• Escalation Factor (1+0.03)6 1.1941

• Escalated Amount $1,562,097

• Present Worth Factor 1/(1+0.05)6 0.7462

• Present Worth Amount $1,165,661

• Total postclosure financial assurance of

$38,396,200 is sum of all present worths for 50

year postclosure period


DENR Recommendation:

• Approve increase in Wharf’s postclosure financial assurance from $26,800,000 to $38,396,200

August 6, 2020 Board of Minerals and Environment South Dakota DENR Minerals and Mining Program Joe Foss Building, 523 East Capitol Pierre, SD 57501 RE: Implementation Timeline for Wharf Resources (USA), Inc. Bond Increase Members of the Board: As will be presented in the August 20, 2020 Board of Minerals and Environment (BME) monthly meeting, the DENR has just completed a review/update to Wharf Resources (USA), Inc. (Coeur Wharf) sitewide reclamation and post closure bonds. In addition to expected increases in the overall bond amount due to inflationary effects and some new mine disturbances, there are notable increases also included for indirect cost multipliers, additional manpower/oversight, and enhanced site maintenance and monitoring. Pursuant to the above, the combined reclamation and post‐closure bond amount is projected to increase by approximately 52% from the present $64.2 million to $95.1 million, of which indirect cost multipliers represent over 40% of the total amount. Coeur Wharf prides itself on being a responsible owner/operator and continues to employ both detailed environmental monitoring as well as concurrent reclamation and long‐term closure mitigation practices as part of its normal operations. For example, over 400 acres of surface disturbance associated with the Golden Reward gold mine were reclaimed and achieved post mining reclamation performance criteria, as well as post closure monitoring obligations. While this bond increase is very significant, Coeur Wharf appreciates the inclusive approach the DENR undertook in determining the amount. Wharf’s parent company Coeur Mining, Inc. has initiated the process of arranging for the increased bond coverage from multiple surety providers, and has also retained Marsh JLT to oversee surety market bonding efforts and to help strengthen Coeur’s overall portfolio, market position and risk exposure, as well as to provide greater assurance to related regulatory agencies such as the SD DENR, through the practice of detailed reviews and screening/selection of surety providers. That being said, COVID‐19 has created market uncertainty and macro‐economic pressures that have affected surety bonding appetite and capacity offerings across all industries, which transcends even broader natural resource extraction obligations. There have been significant delays in surety bonding underwriter response times; requirements for a more stringent process of reviewing all of their bonded client balance sheets before consideration of additional capacity. For most corporations that use surety bond solutions, their surety credit underwriters have also been temporarily delaying commitments for bond support until review of future financial reporting, for example Q3 or Q4 2020 results. Given this current reality, Coeur Mining is requesting the Board to extend the period for acquiring Wharf’s increased bond amount until the December 17, 2020 scheduled BME meeting, upon which the bonding will be presented to the BME for approval. Wharf’s current $64.2 million reclamation and post closure bonds would remain fully in place during this time, as well as the additional current cyanide bond of $710,000.

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Coeur appreciates the continued constructive relationship with both the BME and DENR, and looks forward to continuing that relationship well into the future. Best Regards,

Jay Gear Vice President, Environment, Health & Safety cc: Matt Zietlow – Coeur Wharf Ken Nelson – Coeur Wharf

Gilt Edge Mine Superfund Site2019 Annual Update

1

Agencies InvolvedUS Environmental Protection Agency (EPA)

US Army Corps of Engineers (USACE)EPA’s construction contract manager for the Gilt Edge Superfund Site

SD Department of Environment and Natural Resources (DENR)

2

http://denr.sd.gov/

Currently, EPA pays 90% and the State pays 10% of remediation costs

Once Superfund cleanup is completed, the State will be responsible for 100% of the water collection, treatment and site maintenance costs

Remediation Costs

3

State Gilt Edge FundsJanuary 2020

Forfeited bond plus interest $ 8,550,300Settlement payments*

plus interest $10,297,500Agnico Lease Payment $ 1,280

_______________

Total $18,849,080

January 2019 total $18,465,000*From Potential Responsible Parties (PRP)

4

2017-18 OU1 Phase 1 Work

Summer 2017-Spring 2018Backfill of Sunday Pit

Summer 2018 – 2019 Backfill Dakota Maid Pit

6

Heap Leach Pad Material Sorting2018-2019

7

Future Earthwork Complete backfilling Sunday and Dakota

Maid Pits followed by capping Backfill and cap Anchor and Langley Pits Finish converting leach pad into water and

sludge storage cells

8

Future OU1 Work

Cleanup will proceed in phases as EPA has federal Superfund money available.

Work completed from 2017-2019 done with settlement funds.

Future work phases will require 10% State match.

9

Gilt Edge Mine Superfund SiteSurface Features of EPA’s Final Site Remedy

Remove Acidic Fill and Treat Parent Ground w/ Lime Amendments

Plastic Cap and Soil Cover

Earthen Cover

Lined ARD and Sludge Ponds

10

2019 Acid Water Treatment Update – OU2

HydroGeoLogic, Inc. (HGL) Site contractor HGL has 6 employees on site

Manager, Mechanic, 4 Plant Operators

11

2019 Acid Water Treatment

Volume Treated 126 million gallons

Water in storage on 12/31/19 69.4 million gallons

12

2019 Weather Events

Exceptionally wet year From January-July recorded 27.33 inches

precipitation 19.87 inches from May-July Overall precipitation for year was 39.67 inches

2 major storm events Several minor storm events

13

May 22-23 Snow Storm

14

May 22-23 Snow Storm (5 days later)

15

July 4 Storm Event

8.80 inches precipitation in July Evening of July 4, site received 3.53

inches of rain between 6-9 pm. Runoff impacts from heavy rains peaked

during the day on July 5 HGL stayed on top of the flows and

prevented any unauthorized discharge from the site.

16

July 4 Storm Event Storm damage found around site. Roads washed out or had extensive

erosion rills Significant flows through ponds

Flow estimated to have peaked at 4,000 gpmbetween Pond D and Pond E on July 5

All back-up pumps were utilized to prevent ponds from discharging to Strawberry Creek.

17

July 4 Storm Event

18

2018 vs 2019 Water Storage

All numbers in table are in Mgal Heavy rains in June 2018 but no single

significant event noted

Month 2018 2019 Month 2018 2019January 27.0 31.5 July 83.7 99.5February 27.3 28.3 August 71.3 100.3March 31.7 31.8 September 59.5 90.4April 46.8 42.1 October 51.2 80.8May 56.0 73.0 November 42.2 73.0June 85.3 81.8 December 37.5 69.4

19

On February 12, 2018, EPA, the State of South Dakota and Agnico Eagle Mines Ltd. entered into an agreement and order on consent (AOC) for Agnico to perform certain remedial investigative activities at the Gilt Edge Mine Superfund site.

Administrative Settlement Agreement and Order on Consent

20

AOC Agreement Agnico will conduct environmental investigation work

focusing on identifying contaminant sources, specifically cadmium, entering Strawberry Creek The work will include:

• Drilling boreholes and collecting samples and information on fracture zones and groundwater flow

• Collecting surface soil and sediment samples The work will also include some facility upgrades to

support the investigation work, such as telecommunications improvements Agnico may utilize information from the work to

determine if a viable mineral resource still remains at the Site

21

AOC Agreement DENR is continually looking for ways to reduce

site operation and reclamation costs, which ultimately reduce federal and state taxpayer costs Agnico’s investigation will provide geologic and

mineral information that can be used by EPA and DENR to develop future cleanup and reclamation plans Agnico will also be able to analyze the geologic

information to assess the site’s mineral potential for a redevelopment project that could also decrease reclamation and operation costs

22

Agnico Project Update Drilling defined under AOC nearly

complete. Currently assessing the need to complete remaining holes.

Strawberry Creek surface contamination assessment complete. - No significantcontaminant source identified

Facility upgrades to Office Building complete.

Telecommunication upgrades to be made in 2020.

23

Questions?

Heap Leach Pad August 2017

24

Rapid City Quarry Mine Permit No. 057

Benchmarks & Action Plan

Pete Lien & Sons, Inc.

Mine Permit No. 57 (Current Reclamation Status)

Mine Permit No. 57 Transfer Request

Site FacilitiesLime & Hydrate PlantsShop Buildings

Ready Mix PlantSupport Offices

Processing Plant Area

12M WashPlant

Proposed Benchmarks

Continue reclamation commitments with final seeding by December 31st of 2020

Request release of previously reclaimed land by August 31st of 2020

Submit NOI & public notices for Mine License by October 31st of 2020 if approved

Ready Mix Plant

Crushing & Processing Area

Inventory Control & Equipment Storage Yard

Wash Pond Area

Water RetentionStormwater BMP

Stockpile Area

Support Offices

North Scale

Lime Plant

Hydrate Plant

Lime Storage

N. Maint. Shop

Main Scale House

Ready Mix Plant(Ancillary Use Area)

Precast Shop & Block Storage

Overland Conveyor & Access Road

Wash Plant

Settling Ponds

Access Roads

S. Maint. Shop & Employee Parking

Rapid City-Pennington County GIS Division

/

Location: Pennington County

Background: World Imagery/ PLS Aerial

Last Revised: 7/7/2020Drawn by: CBeckVerified by: MGolliher

LegendMP No. 57 Boundary (Proposed Site100002 Boundary Expansion): 419.9ac

Mine License 83-100 Site: 100002

Permit No. 57 Remaining Reclamation(2020): 11.8 ac

Permit No. 57 Reclamation (ReleaseRequested): 166.9 ac

Existing License 83-100 Reclamation

0 300 600150 Feet

Rapid City ComplexMining Permit to Mining LicenseTransfer Request

Text

board of minerals and environment · board of minerals and environment 523 east capitol avenue...

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