Uranium Mining – The Virginia Battleground – Environmental Concerns vs. Corporate Interests

The Virginia General Assembly is expected to vote next year on whether to lift a 30-year moratorium on uranium mining in the state.

The issue has prompted an expensive lobbying campaign by the company that wants to mine a huge deposit known as Coles Hill in Pittsylvania County and an intense fight by environmentalists who want to stop it. The battle has pitted neighbor against neighbor in the county, in south central Virginia, an area known as Southside.

Two Virginians, each offered money to allow uranium mining on their land, personify the debate that is raging through the state. One accepted. The other declined.

Connie Crider, a housewife, lives with her husband in Pittsylvania County, close to 119 million pounds of uranium ore, the largest deposit in the country and one of the largest in the world. Its worth has been estimated at $10 billion.

She is a neighbor of Walter Coles Sr., president of Virginia Uranium, Inc., which wants to mine the deposit. Crider and her husband have agreed to allow the company to mine on their property and plan to sell their home to it. They have already bought a new house a couple of miles away.

Crider says she took college classes in Richmond “that explained a lot of stuff about uranium.” She is not worried about pollution or health risks and is convinced that mining can be done safely. Considering the depressed economy in Pittsylvania County, she says she is heartened by the jobs the mine will offer. The average pay will be $65,000 a year, according to the company, and annual pay will range from $39,000 to $163,000.

“I think it’s going to be a good impact because it will mean jobs for this part of the country. We’re in bad need of jobs around here,” Crider says. “I have 10 grandchildren and they all live in this area. I just think it’s a good thing for them.”

Crider says she trusts that Coles will take care of the land because this is his home and community. She is not concerned, she says, that almost 50 percent of the company is owned by Canadian interests. She refers to Coles by his nickname “Red.”

“I know Red,” she says. “I know he wants to protect the land and the places here.”

Crider dismisses arguments from environmentalists that the tons and tons of toxic radioactive waste produced by mining could contaminate their water, air and land. “I just don’t think they know,” she says. “They won’t listen. They have just set their minds that this is a bad thing and they won’t listen.”

Coles Hill
Coles Hill
Bill Speiden, a legislative director for the Orange County Farm Bureau, ran a dairy farm on his land for forty years. He was approached in 1979 by the now defunct Marline Uranium Corp., the Canadian company that lobbied the General Assembly for uranium mining approval in the early to mid 1980s. Marline was primarily interested in Coles Hill but explored uranium deposits throughout the state.

Speiden says the company offered him and his wife a signing bonus and royalties on the uranium his land produced. When he did not say yes, Marline offered him a partnership in the company, he says. He did not understand the intense interest until he saw a map of uranium hot spots in Northern Virginia. Each was marked with one to four bars.

“There was only one four-bar radioactive hot spot in Northern Virginia and that was on my land,” Speiden says. “That explained why they were putting pressure on.”

Speiden says he found the money tempting and he and his wife took a trip to Colorado and Utah, hoping to find some success stories. They talked to ranchers and mill and mine supervisors from a half dozen western states.

“We found a litany of environmental disasters,” he says.

Speiden says they heard about ranchers throughout the West whose water wells had been contaminated and cattle poisoned by radioactive mine waste. Some of the cows lost their hair.

He says he is unimpressed by assurances that the proposed mine is being designed with the latest technology and that stricter regulation will protect Pittsylvania County residents. Newspapers out West touted a “new era in dam design” when describing facilities at United Nuclear Corp.’s uranium mine in Church Rock, New Mexico, he says.

But in July 1979, the dam collapsed, spilling 90 million gallons of liquid radioactive toxin and 1,100 tons of uranium waste into the Puerco River. Foul smelling poisonous yellow water gushed 50 miles downstream, crossing Navaho ranches and farmland and spreading 50 miles into Arizona.

“It would be nice to become a millionaire off of the deal,” Speiden says, “but I couldn’t in good conscience risk my neighbors’ downstream water supply and clean air.”

Virginia Uranium executives argue that the company is owned by locals who care deeply about their community and would never risk polluting it.

But behind Virginia Uranium Inc. is a complex web of Canadian corporations, including an executive from the former Canadian company that failed in the 1980s to win approval for uranium mining, according to public and private documents reviewed by Natural Resources News Service. Corporate executives are expecting to win the battle in Virginia this time, transcripts and other records show.

The National Academy of Sciences will release a long-awaited study in December on the environmental, health and safety effects of uranium mining. The academy will review mining in areas similar in geology, climate and population to Virginia but will not study the proposed mine in Pittsylvania County. It will provide research to help the legislature decide but will not say whether the state should allow mining. The $1.4 million study was commissioned by the state but paid for by Virginia Uranium.

The 3,500-acre site of the proposed uranium mining and milling project is surrounded by homes, farms, cattle pastures and bucolic rivers and streams that eventually feed into the Roanoke River. What is referred to as the Coles Hill deposit is actually two deposits that are very close together.

Local opponents, who have been assisted by environmentalists around the state, say they fear radiation contamination, air and water pollution and an increase in cancer. They say Virginia’s rainy climate and susceptibility to storms, hurricanes and even tornadoes make it especially unsafe.

Numerous localities that get drinking water downstream from the proposed mine have also opposed it.

After uranium ore is mined, it is taken to a mill, where the stone is crushed to free up uranium oxide or “yellow cake.” The waste materials, radioactive sand-like “tailings” are mixed with water and chemicals, creating toxic slurry. Virginia Uranium plans to put some of the radioactive slurry in underground holding cells and some back in the mine.

The tailings hold onto 85 percent of the radioactivity from the initial uranium ore, according to the Environmental Protection Agency. They contain thorium-230, which remains radioactive for 80,000 years and increases the risk of lung, pancreatic and bone cancer.

They also contain radium-226, which remains radioactive for 1,600 years and increases the risk of leukemia and bone cancer. Radon, another carcinogen, is continually produced by radium. The sludge produced in the milling process contains heavy metals, including lead and arsenic.

Coles Hill Historic Mansion
Coles Hill Historic Mansion
Virginia Uranium says it plans to mine all 119 million pounds of uranium ore, which have an average grade of .06 percent. At that low grade, for every six pounds of uranium recovered, five tons of radioactive waste would be produced. A preliminary economic assessment done for the company recommended mining 63 million pounds of higher grade uranium because it would cost too much to mine the lower grade. Even that smaller amount – 63 million pounds – would leave 29 million tons of waste, according to the preliminary report done by Lyntek, Inc., a mining engineering firm in Lakewood, Colo.

Virginia Uranium says strict state and federal laws will regulate mining at Coles Hill and that company executives “looks forward to meeting or exceeding those standards.” The Nuclear Regulatory Commission would regulate the milling and handling of the wastes. The state would monitor the mining. Officials are awaiting a vote by the General Assembly and any directives it may pass before establishing regulations.

“As Virginia Uranium’s name suggests, our roots are in Virginia,” the company says on its website. “Concern for the community’s progress and respect for the environment are deeply ingrained in the company’s values.”

Virginia Uranium says mining at Coles Hill could provide the state’s nuclear energy needs for 65 years or the entire nuclear power needs of the United State for two years and reduce the country’s dependence on foreign uranium. Company executives say the project will provide 324 jobs and pour $140 million a year into the local economy, which has been hard hit by the demise of the tobacco, textile and furniture industries.

Virginia Uranium, Inc. is in Chatham, Va., and says on its website that 78 percent of the firm is owned by Walt Coles Sr. and his wife, Alice, and the Bowen family, whose properties sit on the mining site. The rest of the company is owned by employees, management and investors, according to its website. The company notes that 31 of the investors are Virginians.

To point out the firm’s community ties further, it notes that the Coles and Bowen families have held their properties for several generations – in the Coles’ case, as far back as the 1780s. The Coles still live in the family’s historic home.

Walter Coles Sr.
Walter Coles Sr.
Coles is Virginia Uranium’s president and his son, Walt Coles Jr., is vice president. But when the company was first formed in 2007, Norm Reynolds, a native of Canada, was the president. Reynolds was also president of Marline Uranium Corp., the Canadian firm that discovered the Coles Hill deposit in 1978. Marline failed to win approval for mining before the market tanked in the mid 1980s and abandoned the project in 1990, but Reynolds stayed on in Virginia.

The Virginia company’s web of complex Canadian ties starts with the company “Holdco.”

Virginia Uranium is owned by Virginia Holdings, Inc., or “Holdco,” a private Yukon corporation, according to papers filed with the Toronto Stock Exchange. The Coles and Bowen families and all the other investors get their interests through Holdco. Virginia Uranium officials have been reluctant to name the principals of Holdco and the company has often changed leadership. Reynolds was the first president of Holdco.

Coles Sr. said in an interview that Holdco was formed for tax purposes and that his son was an executive and Reynolds was on the board but that he could not remember who else was in the company.

Coles himself is listed as an executive officer of Holdco, according to papers filed in February with the Security and Exchange Commission. Henry Bowen, Coles’ daughter, two other locals and a New Yorker are also listed as officers. Peter Grosskopf, president of Sprott Asset Management, a resource-based hedge fund in Toronto, which has a huge interest in Virginia Uranium, is an executive officer, too, according to the filing. Reynolds is no longer listed as part of the company.

There are two major Canadian investors in Holdco and thus Virginia Uranium, Inc. The first investor is a complex combination of Canadian companies, according to various filings with Canadian stock exchanges. In August 2007, Reynolds started Virginia Uranium Ltd. in the Yukon, which solicited investors for the Coles Hill project. Reynolds’ Yukon company held a 12 percent interest in Virginia Uranium, Inc., granted through Holdco.

Then Santoy Resources Ltd., a uranium mining company in Canada, took an interest in the Coles Hill project. In July 2009, Santoy bought out Reynolds’ firm for 1 million Canadian dollars (approximately $822,000) and acquired its 12 percent interest in Virginia Uranium. Santoy also paid Holdco 6.5 million Canadian dollars (approximately $6.1 million) and traded stock with Holdco to increase its interest in Virginia Uranium to 29.9 percent. Santoy immediately changed its name to Virginia Energy Resources, Inc., although it remains in Vancouver, British Columbia, Canada.

It installed Coles, who has no experience in the industry, as chairman and his son, a financial analyst, as chief executive officer, but all seven of the directors represent Canadian corporations with diverse mining interests in Canada, the United States, Peru, Zambia and Mongolia.

The second major Canadian investor in Virginia Uranium is Sprott. In November 2010, Sprott paid 6 million Canadian dollars (approximately $5.9 million) to get a 19.9 percent interest in the firm and become a “strategic partner,” according to a report filed with the Toronto Stock Exchange and a press release.

That means that two Canadian corporations – Virginia Energy Resources and Sprott –now hold a 49.8 percent interest in Virginia Uranium, Inc. Contrary to claims on the Virginia Uranium, Inc., website, the Bowens and the Coles, whose properties sit on the uranium deposit, could not own 78 percent of the firm. At best, they own about half.

Coles Jr. told a group of potential investors on Wall Street last February, according to a transcript of the meeting, that Ron Netolitzky, a board member at Virginia Energy Resources and the former chief executive officer of Santoy, is expert at investing in small companies, developing them for two years and then selling them for a profit to a larger group. He did not say whether that was an option for Virginia Uranium.

Walter Coles Jr.

He also said that Virginia Uranium and Virginia Energy Resources plan to merge, which would further reduce Virginia Uranium’s local control on mining decisions. Virginia Energy Resources already has “the right of first refusal” under its contract with Holdco, which gives Virginia Energy control over Virginia Uranium’s finances. When Virginia Uranium sets out to raise the money needed to build the mining and milling facilities, for example, Virginia Energy gets to decide first whether it wants to step in with the money in exchange for a greater share of the company.

Coles noted the powerful outside interests in Virginia Energy Resources in his talk on Wall Street. He said Lucas Lundin, of Vancouver, who chairs seven Canadian mining companies, is the largest individual shareholder in the company. Other prominent investors include Pinetree Capital Limited, a resource-based investment firm in Ontario, which increased its share of Virginia Energy Resources to 12 percent in mid November (after the election); Sprott; Dundee Resource Ltd., a Toronto mining company; and Cormack Securities, an investment banking firm, formerly part of Sprott, in Calgary and Toronto.

“They said, ‘We’re a local company,’ and they’re not a local company. If they can’t even tell the truth about that, how are we supposed to believe them about anything else?” asks Karen Maute, who lives about 15 miles from the proposed mine and heads Piedmont Residents in Defense of the Environment.

“They’re not a local company. Who are they? Who are we going to be dealing with? Who’s accountable here? And if we can’t trust the people that are supposedly local that are supposedly looking out for our best interests, how are we going to be able to trust people somewhere else that we don’t even know.”

Patrick Wales, Virginia Uranium project manager, said at a mining forum in Richmond this month that company executives have been to Canada to get advice from the country’s mining experts and to solicit investments but that the company is not interested in selling out to a larger corporation.

“We are a Virginia company. Yes, we have outside investors, but that’s the nature of these endeavors,” Wales says, adding that Canadian corporations have offered to buy Virginia Uranium. “These offers have been refused.”

In the late 1970s and early 1980s, Marline, the Canadian firm that failed to win approval for mining from the Virginia General Assembly before the market tanked in 1985, had workers crisscross the state with Geiger counters, hopping out of their cars when an area seemed promising. Marline bought up leases on 16,000 uranium-rich acres in Fauquier, Madison, Culpeper and Orange counties, which have since expired. Opponents of lifting the moratorium say they fear that Virginia Uranium will seek to mine the sites that Marline found and that the state will be overrun by uranium mines.

Virginia Uranium executives insist publicly that they have no interest in other mines.

“We’ve made it clear we’re only interested in Coles Hill,” Wales said at the Richmond forum.

But Coles Jr. seemed to suggest that the company is, indeed, interested in other mining possibilities at a meeting with potential investors in London in February. Coles said the geologist who discovered uranium at Coles Hill has long believed that more deposits will be found. Virginia could be another “Athabasca Basin” Coles said, referring to an area in Saskatchewan, Canada, where 41 companies mine one third of the world’s uranium supply.

“Talking to the lead geologist,” Coles said, “he’s insistent to this day that Coles Hill is the first of more major discoveries in Virginia that might lead to another Athabasca-style resource play.”

Virginia Uranium says the mine will provide jobs for a generation. It is scheduled to remain open for 35 years. The cost of extracting uranium is estimated at $30 per pound for the first 10 years, $37.52 for the next 10 years, and $51.30 for the last 15, according to the Lyntek report done for the company. Mining becomes more costly in the later years because the higher-grade uranium ore is gone and the lower grade is much more difficult to extract.

The long-term contract price for uranium is hovering around $60 to $62 dollars per pound and the short-term spot price is running between $50 and $52 per pound. Mining opponents question how Virginia Uranium could operate with expenses of $51.30 per pound in that kind of market. They say the company is promising jobs that will last for 35 years only to win support from this economically depressed community.

Virginia Uranium says figures in the Lyntek report are only estimates and the company’s project director Wales says the company can make money as long as prices for long term contracts remain at $60 per pound.

Patrick Wales
Patrick Wales
In 2007, when efforts began again to lift the Virginia moratorium, the industry was touting a “nuclear renaissance.” But the uranium market hit a tailspin after an earthquake and tsunami struck Japan’s Fukushima power plant in February, causing three nuclear reactors to meltdown, spewing the most ever radioactive waste in the ocean and contaminating tap water 170 miles away in Tokyo. The spot price of uranium plummeted from $67.75 per pound to $48.75 per pound.

Germany, Switzerland and Italy have announced they will phase out or curtail nuclear power. Japanese officials have sent mixed signals. They have said both that they will continue to build plants and that they may phase out nuclear power. French nuclear giant Areva said this month that it will suspend work on the Bakouma mine in the Central African Republic for two years because of the low price of uranium.

“There has been some good news,” says Rob Chang, a widely quoted analyst with the Versant Partners, a Canadian investment bank. “Looking at it from a global standpoint, the number of nuclear reactors under construction, planned or proposed has significantly increased.”

Chang blames the low price of uranium on the worldwide depression and predicts prices will increase in six months to a year. Nuclear power plants demand about 180 million pounds of uranium, 45 million pounds less than is produced, he says. The shortage has been partially mitigated by the Highly Enriched Uranium Agreement, which downgrades Russian nuclear warheads for use in power plants. The agreement expires in 2013.

There are 440 nuclear reactors around the world and another 565 under construction, called for or proposed, according to the World Nuclear Association. China, India and Russia are pursuing nuclear energy the most aggressively.

“Even if only half are built, that’s another significant demand for uranium when we already have a 45 million pound shortfall,” Chang says. “They’re going to need the energy to turn on the lights.”

The United States has 104 nuclear reactors and the Nuclear Regulatory Commission is reviewing applications for another 18. Nuclear power is making a comeback, energy experts say. No new reactors have been built for three decades.

President Obama has been strongly supportive of nuclear energy, seeing it as a way to avoid the greenhouse gases of coal and oil. In his State of the Union address this year, the president proposed giving the nuclear construction industry a quota for clean energy. The proposal, however, has not gotten far.

In February, Obama’s Energy Department approved $8 billion in conditional loan guarantees for construction of two new reactors near Waynesboro, Ga. Georgia Power and a group of utilities is preparing the site while awaiting permits to begin construction. Site work has also begun for two new reactors in South Carolina and one in Tennessee. An EPA spokesman says the agency hopes to decide on the applications by the end of the year or early next year.

On the international front, Energy Secretary Steven Chu touted the Obama administration’s commitment to nuclear energy at a September meeting of the International Atomic Energy Agency in Vienna.

“The United States supports expanded and reliable access to fuel supplies, working through the commercial marketplace and public private partnerships for peaceful nuclear programs,” Chu said.

Uranium mining appears headed for revival out West. Several states are planning to bring back mining or expand what they already have. Even in the southwest corner of Colorado, once home to the extinct town of Uravan, most residents are eager to see uranium mining and milling return. Residents of Paradox Valley either believe the government overreacted when it tore down Uravan and dismiss the miners’ high rate of cancer or do not care as long as mining means jobs.

They say tougher regulations will protect them.

Energy Fuels Resources Inc.
Energy Fuels Resources Inc.
Energy Fuels Resources Inc., headed by a local rancher with a parent company in Canada, plans to reopen mines for 100 miles and build a mill in the town of Naturita, about 15 miles from where Uruvan stood. It will be the first new mill in the country in 30 years.

Sheep Mountain Alliance and two other environmental groups are opposing the mining project. So are residents of Telluride, a ski resort town about 50 miles away. It gets its drinking water from the Delores River, seven miles from the planned mill.

Environmentalists say the 90-acre radioactive waste impoundments that the mining company is planning could leach into groundwater or spread contamination through air, land or wildlife. Every mill on the Western Slope of Colorado has a history of contamination, according to Sheep Mountain Alliance.

Colorado, the Alliance warns on its website, is “on track to repeat mistakes of the past.”

The mill in Uravan processed radium for Madam Curie in the 1920s. It switched to milling vanadium, used to strengthen steel, and then to uranium in the 1940s for the Manhattan Project. Eventually it milled uranium for nuclear power.

Life in Uravan, a town of 800 at its peak, revolved around the mill. Even the town’s name came from the minerals it milled: uranium and vanadium. Most men worked at the plant or in the mine, and kids waited on the street in the early evening to hear the whistle blow and welcome Dad home. Jobs outside the uranium industry were scarce and lives were planned around the income earned at the mill or in the mines.

In 1984, the mill shut down. Two years later the Environmental Protection Agency, declared the mill a Superfund site. The EPA found 13 million cubic yards of radioactive tailings and other debris and 380 million gallons of liquid toxic waste. There was so much radioactive toxin that it took 20 years and $120 million to clean it up.

And the radiation had spread so far that the entire town of Uravan had to be torn down. Just like that. Erased from the map. Everything had to be cut apart and entombed, even the trees.

The Uravan theater that doubled as a roller-skating rink was ripped apart board by board and buried. The swimming pool where kids hung out in the summertime is gone. So is the town center where residents got together to square dance. The rock forts that boys built were pulverized and the pebbles hidden under ground.

“I have a lot of fond memories of that area,” Ralph Hurd writes on a website dedicated to the memory of Uravan. “I was sorry to see the town disappear.”

NEXT WEEK: Part Two: Uranium Mining – The Virginia Battleground – Environmental Concerns vs. Corporate Interests