Reviving the Bunker Hill: Company betting on historic mine runs into financial troubles
For nearly a century, the Bunker Hill Mine in Kellogg was the source of tremendous wealth.
The massive underground mine produced lead for bullets fired in two world wars and zinc for rust-proofing steel. Paychecks from the Bunker supported generations of Idaho workers and their families, and the profits enriched shareholders far beyond the Silver Valley.
These days, however, the closed mine costs U.S. taxpayers about $1 million annually. Polluted water gushes out of the Bunker Hill’s portal at a rate of 1,300 gallons per minute, traveling by ditch to a treatment plant run by the U.S. Environmental Protection Agency. The federal government spends about $80,000 each month to remove toxic levels of heavy metals from the water.
In March, the Trump administration announced a deal that would allow the Bunker Hill Mine to reopen under new management, ending 14 years of Superfund litigation. Scott Pruitt, the EPA administrator at the time, lauded the settlement as a path to creating about 300 jobs while generating cash to pay back part of the $24 million the federal government has spent on water treatment.
But the Bunker Hill Mining Corp. – the Canadian company trying to restart the mine – quickly ran into financial troubles. Prices for base metals slid over the summer, reducing investor interest in the $100 million project. In addition, the company’s ties to Robert “Bobby” Genovese, a penny stock promoter who’s facing U.S. Securities and Exchange Commission charges for alleged stock manipulation, have raised questions.
While many Silver Valley residents are eager to see the Bunker Hill reopen, the Coeur d’Alene Tribe is wary of restarting a historic polluter in the nation’s second-largest Superfund site – even under modern environmental laws designed to protect air and water quality.
The next 18 months will be crucial for Bunker Hill Mining Corp. Company officials need to raise money for drilling and engineering work to demonstrate the mine still has mineral reserves that can be put back into production. Financial institutions require those studies before they consider major loans, said Bruce Reid, the former chief executive officer.
In Kellogg, locals residents have watched other efforts to restart the Bunker Hill come and go.
“Our position would be one of cautious optimism,” said Rod Plank, a program manager for the city of Kellogg. “There have been previous efforts to reopen the mine, and we’ve had our hopes up several times before.”
If the company can pull it off, Plank said the 300 new jobs would benefit the Silver Valley’s entire economy.
“If we don’t do it, somebody else will,” Reid predicted last week. “This is a very legitimate project.”
A ‘larger than life’ mine
Reid, a mining geologist from Toronto, has reopened seven closed mines, including another Silver Valley property, the Galena. He said the Bunker Hill has intrigued him since he studied the lead-zinc-silver deposit during his university years.
“It was always larger than life. It’s an incredible deposit. … There is still a colossal amount of resource left in that mine,” Reid said.
Prospector Noah Kellogg discovered a lead outcropping in 1885 that was part of the deposit that became the Bunker Hill Mine. After nearly a century of operations, the mine and its smelter closed in 1981 when the owner, Gulf Resources Corp., went bankrupt. About 2,200 employees lost their jobs.
Besides bringing mineral wealth to the Silver Valley, the Bunker Hill’s smelter blanketed the area around Kellogg with heavy metals. During the 1970s and 1980s, local children had some of the highest blood-lead levels ever documented in North America. The EPA began Superfund cleanup of mine pollution in the Silver Valley in the early 1980s.
“I won’t try to candy-coat it. I hate to think about the damage the smelter did to people living in the area. It must have been terrible. … There’s no question the Silver Valley was a dirty, dirty place,” Reid said. “But at no point by restarting the Bunker was any of this going to be relived.”
Current efforts to reopen the mine don’t include a smelter operation, Reid said. Lead-zinc concentrates would be shipped to Canada or overseas for processing. And the mine couldn’t open without securing a permit under the federal Clean Water Act and an approved plan for mine tailings disposal.
“The EPA wouldn’t have approved the settlement if they thought it was going to do more damage to the environment,” Reid said.
Reid resigned as CEO from Bunker Hill Mining Corp. in October, citing health issues. He has Parkinson’s disease and said he needed to cut back on travel.
His resignation occurred about the same time the company announced it had defaulted on a $400,000 lease-purchase payment to the mine’s current owner, Placer Mining Co. Reid said he stayed on a bit longer to renegotiate a lower monthly payment to Placer Mining.
Bunker Hill Mining Corp. also wants to revise its payment schedule to the federal government for the $20 million the company would pay for past wastewater treatment costs. According to settlement documents, a $2 million payment was due Nov. 1. Neither the company nor the federal government would comment on the status of negotiations.
Reid owns about 7 percent of Bunker Hill’s stock, but is no longer involved in day-to-day operations. The acting CEO, John Ryan, is a mining engineer who helped Reid reopen the Galena Mine in Wallace. Like Reid, Ryan has a long-standing interest in the Bunker Hill and was involved in an earlier effort with Reid to purchase the mine.
Bunker Hill Mining Corp.’s largest shareholder is Genovese, a Canadian citizen who spends his time in the Bahamas and Florida. Genovese owns about 20 percent of the stock.
Fraud allegations follow Genovese
Last year, the Securities and Exchange Commission filed charges against Genovese and a business associate at a New York brokerage firm. The lawsuit alleges Genovese netted $17 million through a stock manipulation scheme in 2012 with the help of the associate.
The case involved Liberty Silver Corp., a purported silver exploration company in Nevada.
Genovese bought a substantial number of shares of Liberty Silver through his offshore company, B.G. Capital Group, according to the suit.
After pumping up the stock price through a promotional campaign he orchestrated and paid for, Genovese planned to sell off some of the stock to pay for a second, even more elaborate stock promotion, the suit says. Genovese needed the money to afford an extravagant lifestyle that included a yacht, lakeside estate near Toronto and private jets, according to court documents.
Genovese spoke glowingly about Liberty Silver’s prospects, the suit says. He also hired two “newsletter” writers and paid them to publish misleading articles encouraging people to buy shares of Liberty Silver, court documents say. Genovese didn’t disclose he paid the writers or that he was promoting the stock while selling his own shares, according to the suit.
Over a six-week span, Liberty Silver’s stock price shot up from 70 cents per share to $1.43 per share, the lawsuit says. Weekly trading volume rose from about 25,000 shares to 2.4 million.
Genovese also sold shares between various companies he owned, creating an illusion of higher trading interest in the stock, according to court documents.
“Genovese dumped millions of (Liberty Silver) shares in the U.S. as the stock price dramatically increased,” the lawsuit says.
Based on the suspicious activity, the SEC halted trading for Liberty Silver’s stock on the Over-the-Counter Bulletin Board in fall 2012.
The Ontario Securities Commission also stopped the stock’s trading on the Toronto Stock Exchange. Although trading later resumed on the exchange, the stock was eventually delisted.
Both Genovese and his business associate have denied the allegations. The case is headed to trial in New York.
Liberty Silver was later renamed Bunker Hill Mining Corp. Last year, the shares were approved for listing on the Canadian Securities Exchange.
When asked whether the federal government did background checks on Bunker Hill’s investors before signing the settlement, the U.S. Department of Justice responded with a brief statement.
“We looked at publicly available information sources,” the statement said.
Genovese has a “mixed reputation,” Ryan said in an email. As a result, the company’s executive team has “taken steps to try and alleviate worry.”
Genovese doesn’t have a management role at Bunker Hill Mining Corp., nor does he sit on the board of directors, Ryan said. An escrow agreement forbids Genovese from selling his shares without written consent, and the company retains voting control of those shares, according to Ryan.
“The SEC investigation involves only Bobby and does not include Bunker Hill Mining,” Ryan said.
A tribe’s unease
To the west of the Bunker Hill Mine, a $48.6 million construction project is underway. It’s a new water treatment plant, designed to improve water quality in the South Fork of the Coeur d’Alene River – and ultimately downstream in Lake Coeur d’Alene.
The new plant will replace older technology, more effectively scrubbing lead, arsenic, cadmium, zinc and other heavy metals from area groundwater. The plant is being paid for with money from a past settlement with Hecla Mining Co. over other historic mining pollution in the Coeur d’Alene River Basin.
Most of the new plant’s capacity will be devoted to treating water from the Bunker Hill site – unless the mine reopens. Then, Bunker Hill Mining Corp. would be responsible for treating its own acid mine drainage within five years, and the EPA could use the new plant to treat other water polluted with heavy metals in the Silver Valley.
“The water coming out of the Bunker Hill is never going to stop. It’s a perpetual issue,” said Ed Moreen, an EPA program manager. “We owe it to the taxpayers to be paid so we’re not using taxpayer dollars to treat a private party’s water.”
If the Bunker Hill earned even a modest profit, Reid said the company could take action to reduce acid mine drainage from parts of the mine that weren’t shut down properly in the 1980s.
But the EPA settlement makes the Coeur d’Alene Tribe uneasy. More than a century of mining activity in the Silver Valley polluted 160 miles of the Coeur d’Alene River, Lake Coeur d’Alene and the Spokane River. The Bunker Hill Mine contributed to that pollution, said Phil Cernera, director of the Coeur d’Alene Tribe’s lake department.
He’s skeptical the Bunker Hill will ever reopen. But if it does, the stakes are high for members of the Coeur d’Alene Tribe, who cherish the lake as their homeland, Cernera said.
Each year, about 400 tons of lead from historic mine waste in the Coeur d’Alene Basin washes down the Coeur d’Alene River into the lake.
“The tribe has a hard time considering old mines reopening when we’re in the throes of a major Superfund cleanup,” Cernera said. “Our general sentiment is, ‘Really? We’re going to start mining again?’ ”