Mining the filings at Newmont, Massey & more…

September 3, 2010

Six days ago, near the small town of Winnemucca, Nevada, a mine employee was carrying his lunchbox. Another employee maneuvered a large front-end loader around the mine’s maintenance shop.

Corporate filings don’t normally include this kind of you-are-there detail. But these vignettes are now permanently enshrined in the database of the Securities and Exchange Commission thanks to a 174-word provision in the recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act. Or perhaps they’re there because Newmont Mining (NEM) has nervous lawyers — or wants to make a point about congressional meddling.

The catch is that the two workers at Newmont’s Twin Creeks Mine weren’t doing these things the way they were supposed to under mine-safety rules: The man with the lunchbox was supposed to have it attached to him as he approached a particular piece of mining equipment; the one on the front-end loader’s decking lacked “fall protective devices,” according to this 8-K filed by Newmont.

We’ll kill the suspense: Both workers are fine. Mine operations weren’t disrupted. In fact, these events were non-events. Yet both wound up in Newmont’s “The loader was stopped and the employee immediately exited without incident,” the filing noted. “The employee attached the box to his body without incident…”

So why the SEC filing? Newmont blames section 1503(b)(1) of the Dodd-Frank act, which, sure enough, requires that

“each issuer that is an operator, or that has a subsidiary that is an operator, of a coal or other mine shall file a current report with the Commission on Form 8-K … disclosing the following regarding each coal or other mine of which the issuer or subsidiary is an operator:

(1) The receipt of an imminent danger order issued under section 107(a) of the Federal Mine Safety and Health Act of 1977 (30 U.S.C. 817(a)).”

Mind you, in Newmont’s case, these imminent danger orders seem to have lasted mere moments — until the one man strapped on his lunchbox, and the other employee stopped and exited the front-end loader. While we don’t know all the details, we can only assume that a company or government inspector happened to see this behavior and intervened — in formal terms, issuing an imminent danger order — and then “terminated the order” when all was set right in short order. Still, the issuance of the order must have triggered the 8-K.

Newmont is hardly alone in this meticulous documentation of safety slip-ups. Other mining companies have been doing it since the Dodd-Frank act was signed into law in late July.

Peabody Energy (BTU) filed an 8-K on Tuesday noting a vague citation for “violating fall protection rules” that was “immediately corrected.” Massey Energy (MEE) filed an 8-K on August 23 reporting a citation for “the improper underground storage of a locked box containing explosives” (which actually sounds pretty serious to us); the problem was fixed when the box was brought to the surface, and the explosives were later disposed of. Arch Coal (ACI) disclosed that the operator of a “diesel manlift” at the Sufco mine in Utah failed to wear a safety belt or use tie-off lines, according to an 8-K filed on August 19. As with the others, Arch Coal’s problem was fixed without incident.

None of this should be read to suggest that mine-safety is trivial. The events at Massey’s Upper Big Branch Mine, where 29 people were killed in an April explosion, and the drama unfolding in slow motion in Chile serve to underscore quite the opposite. (Massey went so far in its 8-K on August 23 as to say that the improperly secured explosives “did not relate to the April 2010 Upper Big Branch tragic accident.”)

In any case, expect to see more references to mining infractions in the filings. The Dodd-Frank bill also includes other mine-safety provisions, requiring publicly traded mining companies to disclose in their regular filings the number of health or safety violations at each of their mines, along with the aggregate dollar value of proposed penalties and total fatalities, as well as other safety statistics.

If the additional attention brought on by these imminent-danger 8-Ks prevents another disaster like Upper Big Branch, it’s hard to get too upset. But if the new rule only serves to elevate all infractions, however brief, to the same level, it could wind up doing more harm than good.

Image source: Canadian Design Resource

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