Federal Land Management:

Estimates of Value and Economic Effects of the New World Mine Project

RCED-97-232R: Published: Sep 9, 1997. Publicly Released: Sep 16, 1997.

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Pursuant to a congressional request, GAO obtained estimates and reported on the value of the mineral resources associated with the Crown Butte Mines, Inc. proposal to construct and operate a gold, silver, and copper mine in the New World mining district in Montana, and the effects of the mine on jobs, payrolls, and taxes, had development occurred. GAO did not evaluate the reasonableness of the methodology and assumptions on which these estimates are based.

GAO noted that: (1) estimates of the mineral values varied widely, reflecting differences in the methods of computation as well as differences in assumptions about such things as the size and grades of ore reserves, discount rates, the future price of minerals, and the options for disposing of tailings from the mine; (2) the lowest estimate GAO obtained ranged from minus $4.2 million to $56.7 million in net present value, and the highest estimate was almost $900 million in gross resources value, not discounted to a net present value; (3) a preliminary assessment of the range of possible property values is currently under way; (4) Forest Service officials expect this assessment to be completed in the fall of 1997; (5) the mine would provide as many as 321 direct jobs and up to 145 indirect jobs during the project's development, according to a draft environmental impact statement (EIS) begun by the Forest Service and Montana's Department of Environmental Quality; (6) the total payroll during the peak year of construction was estimated in the draft EIS to be $10.3 million; (7) the draft EIS also estimated that the mine's operation would provide 175 direct jobs and 87 indirect jobs, with a total annual payroll of about $7.5 million; (8) a separate estimate, provided by the author of an article appearing in the Northwest Mining Association Bulletin, projected that salaries and wages would total $347 million over the life of the mine; and (9) Crown Butte estimated that federal, state, and local taxes would have totalled over $3 million annually had the mine been developed.

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