Given Freeport-McMoRan’s deteriorating financial situation and failure to pass the Mining Act Financial Soundness Test, the Mining and Minerals Division (MMD) has requested that Freeport reduce its third-party guarantee to cover the company’s financial assurance obligations at the Chino mine.
In a letter dated August 12, MMD requested a “Certificate of Face Amount Adjustment to the Third-party Guarantee” in the amount of $45.3 million, a reduction from $102.3 million. Interest earned in the Chino Cash Trust will be used to cover the reduction.
GRIP is pleased that the state of New Mexico has forced the company to reduce its dependence on a relatively insecure third-party guarantee.
The amount of the third-party guarantee for the Chino mine has been cut from nearly 70% to 27% of the more than $166 million required in financial assurance. This is good news.
However, taxpayers won’t be fully protected until the third-party guarantee is eliminated and Freeport covers the cost of its environmental liabilities with cash or other liquid assets rather than an I.O.U.
More than a decade ago, GRIP advocated strongly that a cash trust be established as part of the financial assurance package for Grant County mines. Ready cash was needed on hand to cover water management, treatment and other clean-up costs should Phelps Dodge (now Freeport-McMoRan) go bankrupt. We note that it is that trust that is now providing the wherewithal for Freeport to meet its financial assurance obligations.
With Freeport’s worsening financial situation, we need to be sure that the taxpayer doesn’t get stuck with the hundreds of millions of dollars it will take to clean up the thousands of acre-feet of contaminated groundwater and reclaim the mine sites.