Montezuma County has juridiction over the Red Arrow Gold Corporation’s illegal milling operation

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From the Cortez Journal (Jim Mimiaga):

The site was recently ordered to cease and desist by the Colorado Division of Reclamation, Mining and Safety, who fined Liukko $337,167 for operating a mill without a license and five other mining violations.

Inspectors found dangerous levels of mercury inside the building and arsenic pollution in tailing piles outside the site and at the mine site in the nearby La Plata mountains. The Environmental Protection Agency is evaluating the sites for cleanup and remediation.

“We did not know it was there, and did not receive any plans from the operator that it was going on,” said county planning director Susan Carver. “It is a violation of the land use code because it is an industrial use that requires a high-impact permit and hearings before the county planning board and commission.”

Carver said Red Arrow Gold Corporation could face penalties for non-compliance but the decision would be up to the county commissioners.

“Operations there have ceased at this point,” she said. “It is a concern because of the health hazards for neighbors and for employees. Safeguards would have been required and evaluated under our permit system.”

Commissioner Larry Don Suckla, who represents the Mancos area, was angered by the illegal mill site.

“It is very upsetting because (the mill) broke the rules and created a risk to the safety of county residents and the town of Mancos as well,” he said. “This type of operation is far different than panning for gold.”

The commissioners are considering holding a community meeting with mine regulators to inform the public of the situation. Whether the county will levy penalties of its own, Suckla said, “Everything is on the table at this point. I feel like we were misled.”[…]

Decontaminating the milling site and mine have been handed over to the EPA and are in the planning stages. State mine regulators are expecting a cleanup to be completed by the end of the year.

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More coverage from Nancy Lofholm writing for The Denver Post:

While the town of Mancos worries over what a rogue gold mill might have put into its air, water and soil, Colorado mining authorities have called on the federal government to deal with what is being described as one of the most serious cases of pollution from illegal gold milling in the state.

The Colorado Division of Reclamation, Mining and Safety is asking the U.S. Environmental Protection Agency to determine just how bad contamination is from a mill that had been using mercury to remove gold from ore at an under-the-radar, unlicensed mill on the edge of the southwestern Colorado town.

The EPA also will decide whether the mill should be designated for a Superfund cleanup. The Superfund program was created in 1980 to clean up the worst uncontrolled hazardous waste sites in the country.

The Red Arrow Gold Corp. mill contamination was discovered in June, and the mill was shut down by the state that same month. Mercury was found in two metal and cinder-block buildings just west of town when the company, which also owns the historically rich Red Arrow Mine, was placed in receivership. The division has fenced off and locked the site.

An initial investigation of the mill buildings turned up mercury contamination throughout the operation. Mercury was found in plastic buckets of sludge and in an overturned washtub that served as a vent hood. Inspectors’ photographs show droplets of mercury on drains, a jug marked “21.5 lbs Mercury” and stock tanks filled with sediment. Piles of processed material outside the building were covered with plastic tarps held down by old tires.

“This is one of the most serious cases we’ve come across of illegal milling,” said Tony Waldron, who is with the Division of Reclamation, Mining and Safety. Testing thus far has shown the entire mill is probably contaminated with mercury. On some pieces of equipment, it is concentrated as much as 744 times the allowable level. The highest concentrations were measured at 32,000 parts per million. The standard considered safe for industrial operations is 43 parts per million.

Mercury can cause nerve damage in humans, and its use in separating gold from ore would not have been approved, Waldron said.

Tailings outside the mill buildings and also piled outside a nearby lumber operation were found to be contaminated with arsenic, but Waldron said the arsenic-laced tailings don’t pose a health hazard where they now sit.

“Obviously, we are concerned about the potential spread of mercury,” said Mancos town administrator Andrea Phillips. “We don’t know enough yet to know exactly what our concerns are.” Phillips has asked the EPA and state mining regulators to hold a public information meeting so that concerned Mancos residents who have been calling town hall can get some answers.

Red Arrow Gold Corp. president Craig Liukko might be able to provide some of those answers, but he did not show up at a Mined Land Reclamation Board hearing in Denver on Aug. 14, and he has not been seen lately around Mancos, Phillips said. In his absence, the board cited Liukko for the contamination and for operating a mill without a permit. The board fined him $285,000 for the 57 days the mill was believed to have operated in violation of state laws. All but $100,000 of that will be suspended if Liukko complies with corrective actions the division orders. Red Arrow was also ordered to reimburse the division $52,167 for the cost of its response to the mill discovery.

Liukko did not return a call asking for comment. In a conversation a month ago, he said his company had gone to great lengths to be cautious with the small amount of mercury he said was used in the gold-separating process. He said he did not think the mill needed approval to operate because it was a “pilot project.”

Liukko, whose family acquired the Red Arrow Mine nearly 30 years ago, also blamed an out-of-state hedge fund for Red Arrow’s troubles.

In a tangled financing agreement, Maximillian Investors of Delaware sued American Patriot Gold, He-Man LLC and Red Arrow Gold Corp., resulting in the receivership and the revelation that Red Arrow, which had promised investors large returns, had only $2,043 left in a bank account.

The Red Arrow Mine had delivered riches in another era. The mine’s ore body discovered in 1933 produced 4,114 ounces of gold between 1933 and 1937. In those days, ore from the mine was shipped to Leadville for smelting and then sent to the Denver Mint. The gold from Red Arrow included a legendary 5.5-pound nugget.

Marcie Jeager, who is handling the receivership through Jeager Kottmeier Associates of Denver, said she is focusing her asset-recovery efforts on the mine. It is permitted to operate by the state and is not contaminated like the mill. “We want to preserve the mine permit so someone else can buy that as a permitted mine that has value,” she said.

The mine

The Red Arrow Mine’s ore body discovered in 1933 produced 4,114 ounces of gold between 1933 and 1937. The gold mine and mill had operated off and on since 1988. It had most recently resumed operations in 2006.

State authorities took emergency actions in June to shut down the mine over mercury contamination. 43 parts per million of mercury is the standard measure considered safe for industrial operations 32,000 parts per million of mercury measured on equipment at the Red Arrow Mine, the highest concentration found there.

From The Durango Herald (Joe Hanel):

It’s “one of the uglier cases of using hazardous chemicals and illegal milling” that state mining regulators have seen, said Julie Murphy, a lawyer for the state Division of Reclamation, Mining and Safety…

On Wednesday [August 14], the state Mined Land Reclamation Board slapped fines totaling $337,167 on the mill’s operator, Red Arrow Gold Corp. If Red Arrow cooperates with the cleanup and increases its bond with the state, $185,000 of the fine will be suspended. The facility has been shut down since April because of a bankruptcy dispute. The state got involved in June and issued a cease-and-desist order on the mill. The state contracted with Walter Environmental to test for contamination inside and outside the two buildings on the site, and the results came back last week…

Inspectors painted an alarming picture of what they found at the two small buildings, which sit across Grand Avenue to the north of the Western Excelsior aspen mill. They showed pictures of a series of machines that use mercury to separate tiny gold particles from rock taken from Red Arrow’s mine about 10 miles northwest of Mancos. The mercury-gold mixture was heated to separate the gold and attempt to recycle the mercury through a scrubber. A galvanized steel washtub was flipped upside down and used as a hood to catch mercury near the scrubber.

More Mancos River Watershed coverage here and here.

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