The big miners generally get pretty poor coverage in the media. The moment things go sour the headlines scream of lost jobs, townships extinct, and irreparable environmental damage left behind. Sometimes these allegations are fair and justified, sometimes not. Energy Resources of Australia Limited (ASX: ERA) has been on the receiving end of this equation recently with its radioactive tailings leak in the Northern Territory – but you won't hear a word spoken in the media for the industry generated pre-environmental catastrophe.
Rio Tinto Limited (ASX: RIO) however did something wonderful late last week that I think will be very hard to spin to a negative – it donated $17.4 million Canadian dollars to community charities. This is the approximate value of the miner's 19.1% stake in Northern Dynasty Minerals (TSX: NDM), the 100% owner of the Pebble Project in Alaska.
The Pebble Project in Bristol Bay, Alaska, has been touted as one of the world's largest untouched resource nodes; with an estimated 107 million ounces of gold, 81 billion pounds of copper, and 5.6 billion pounds of molybdenum.
However the project was blocked by the US Environmental Protection Agency (EPA), over the mine's potential to cause irreversible harm to 150 kilometres of salmon fishery and 5,350 acres of wetlands in the area surrounding the mine. Community opposition to the project is also reportedly very high, which led Rio Tinto to gift its stake in the mine to two local charities.
It's a generous gift – beyond value in fact – if one considers the potential ores to be extracted from the region, although Rio states that the mine is not crucial to its strategy going forwards. Rio joins fellow miner BHP Billiton Limited (ASX: BHP) in divesting non-critical or underperforming assets in order to pay down debt and focus on the performance of its key operations. Both miners are aiming to improve returns to shareholders after years of lacklustre performance, with divestment forming just one part of their restructures.
Foolish takeaway
I say well done to Rio Tinto for making such a selfless gift. Although I can hear the cynics saying that they only donated the mine because EPA approval was denied, Rio could just have easily held onto its stake for the future. Mining companies are very good at using the potential economic benefits of a project to outweigh environmental risks, and if Bristol Bay ever went through tough economic times or saw its salmon fishery collapse, I wouldn't be surprised if the Pebble Bay project gets trotted out for inspection again. Most curiously, the local charities now have a vested interest in seeing the project proceed (their stake is only valuable on paper as the mine is not producing or paying a dividend) which could create some interesting dynamics in the future. Until then it's a win for environmental sensibilities and the community of Bristol Bay.
