California, NYC Continue Call for Rio Tinto Divestment from Pebble Project
The chief financial officers for the city of New York and the state of California are continuing to call for major mining company Rio Tinto to divest itself from Northern Dynasty. Both New York City and California hold substantial amounts of Rio Tinto stock, and as shareholders they're trying to promote responsible investments, which they say the Pebble Mine is not.
KDLG’s Dave Bendinger has more:
A January 31 letter sent to Rio Tinto CEO Sam Walsh calls the company's decision to strategically review its investment in Northern Dynasty "encouraging", but that recent developments make it even more clear that holding investments with the Pebble Mine is a bad idea.
The letter is signed by both New York City Comptroller Scott Stringer and California’s Controller John Chiang, and the recent developments they cite are the findings in the EPA’s Bristol Bay watershed study published in January.
"When we're talking about Bristol Bay, we're talking about tremendous damage that could occur in terms of mining pollution if this project is further developed," said Chiang. "So we're obviously concerned about the environmental consequences and the financial consequences of the Rio Tinto investment."
As the state’s controller, Chiang oversees both the CalPERS and CalSTRS retirement plans, which he says are the two largest public plans in the US. Between those two funds, California held some $450 million dollars in Rio Tinto stock last year. That gives California, as a major long-term investor, some serious skin in the game.
"We like to be sustainable investors," he said. "We try to encourage the companies to do the right thing, to have better governance practices, better corporate practices. We like them to foster long term sustainability, not only in regards to the environment, but financially for their shareholders as well."
Northern Dynasty acquired 100% ownership of the Pebble Mine project in September, after Anglo American pulled out of the partnership. That left Rio Tinto, which holds 19.1% of Northern Dynasty’s shares, with a more conspicuous role in the Pebble project.
That prompted Chiang and then-New York City comptroller John Liu to send a first letter to Rio Tinto last November, and again in mid-December, asking the mining giant to review its Northern Dynasty holdings.
"From what we're reading, we think that makes sense," said Chiang. "We think Northern Dynasty is engaged in some silly attacks against the Environmental Protection Agency, and that they're not fully addressing the issues raised. If Northern Dynasty isn't going to get serious about looking at the huge impact of the Pebble project, we think it makes sense for Rio Tinto to look at divesting."
Of course, there is the chance that if the Pebble Mine is developed, investors could see windfall profits. That would benefit California’s retired teachers and state employees covered by the CalPERS and CalSTRS funds.
But that short changes the longer outlook, says Chiang.
"We could benefit financially, but there are long term consequences and damages. Ultimately we all pay the price when you engage in bad practices, when you leave tons of pollution, tons of waste. We don't know what the risks are on the long end."
As mentioned, Rio Tinto did agree to undertake a review and said it would consider divesting from Northern Dynasty, but that was two months ago. The company has since announced to its own shareholders that 2013 was a good year, with underlying earnings of 10.2 billion, a 10% increase over the previous year.
Meanwhile, Northern Dynasty is actively recruiting another major mining company to take the role of Anglo American in a partnership to develop Pebble. A divestment by Rio Tinto could not possibly send the right message to potential new partners.
Northern CEO Ron Thiessen responded to the first two letters with a letter of his own dated January 3. Thiessen harshly rebuked California’s Controller and New York City’s Comptroller, calling their views and understanding of the Pebble project “significantly under-informed.”