Taking Stock 27 August 2026

Edward Lee writes:

THERE comes a point in any debate when legitimate scrutiny gives way to speculation. We may have just reached that point with Santana Minerals’ proposed gold mine.

Nobody should argue that a mining project should proceed without careful scrutiny. There are legitimate questions about water, ecology, landscape effects, rehabilitation and the design of the tailings storage facility. These questions deserve proper answers.

But there is an important difference between identifying a risk and assuming that the worst possible outcome will occur.

Increasingly, some of the arguments against the project seem to make precisely that leap. We are being asked to contemplate a future where the gold price collapses, the mine becomes uneconomic, the engineers get the tailings facility wrong, the structure fails, enormous numbers of lizards die, water becomes contaminated, vineyards suffer and tourists abandon Central Otago.

Each possibility is presented as another reason the mine should not proceed. Stack enough worst-case assumptions together and the conclusion is presented as if failure has now become inevitable.

But this is not how sensible risk assessment works.

One argument raised against the project is that today’s gold price will not last. That is perfectly possible. Nobody, including Santana, knows what it will trade at in five, ten or fifteen years. 

However, Santana’s economics were never built around today’s gold price. 

Infact, its updated Pre-Feasibility Study used a base-case gold price of just A$3,500 an ounce compared to the current price of A$6,400 an ounce today.

At A$3,500, the project produced an after-tax NPV of A$780 million, an internal rate of return (IRR) of 39% and an estimated payback period of 2.6 years.

Gold therefore does not need to remain anywhere near today’s price for the project to be economic.

And looking at the financial metrics at A$6,000 (less than the current gold price), the NPV almost triples to A$2.1 billion, an IRR of 85% and a 15-month payback period.

Could gold eventually fall substantially? Of course. It could also rise. That is commodity investing.

But forecasting a dramatic fall in gold and then treating that forecast as evidence that the project is uneconomic is not analysis. It is simply choosing the commodity price necessary to produce the conclusion you want.

The people risking hundreds of millions of dollars developing the mine will ultimately have rather more incentive to determine whether the project is economic than somebody writing a submission opposing it.

Then we move to the tailings storage facility. Tailings facilities deserve scrutiny. History provides some examples around the world to demonstrate why. But the appropriate response to that risk is engineering, regulation, monitoring and independent review. It is not to assume that the structure will fail, as the vast majority don’t.

The proposed Bendigo-Ophir facility is intended to comply with the New Zealand Dam Safety Guidelines. Its design criteria include an extreme seismic event with an annual probability equivalent to approximately one in 10,000 years. The proposed structure will also be supported by an enormous engineered rockfill landform.

There are geotechnical questions still being considered, including the potential interaction with historic landslide material. Those questions should be resolved before construction. That is precisely what a consenting and detailed-design process is for.

Yet some of the public discussion seems to begin at the opposite end. Instead of asking whether the engineering can satisfactorily manage the risk, it assumes that the engineering will fail and then assesses the consequences of that hypothetical failure.

Apply that standard consistently and New Zealand would build very little.

Dams can fail. Bridges can collapse. Wastewater systems can leak. Transmission lines can cause fires. Aircraft can crash. None of these risks is zero.

Society instead requires competent design, appropriate safety margins, independent oversight and systems that reduce the probability and consequences of failure to an acceptable level.

Mining should be treated no differently.

Then there are the lizards.

This is a genuine environmental issue and deserves to be treated seriously. The expert conferencing process concluded that more than 500,000 lizards could be living within the development footprint. The experts also agreed that the project’s effects on lizards are significant and that it will not be feasible to salvage every individual.

Those are important findings. But something rather strange happens when this enters the public debate.

More than 500,000 lizards being present within an affected area can quickly become “hundreds of thousands of lizards being killed by a mine”.

They are not the same statement.

The expert evidence itself discusses several different effects, including habitat disturbance, displacement, mortality, salvage, relocation and eventual rehabilitation. There are legitimate disagreements between the experts about how successful that rehabilitation will be and about the appropriate mitigation and compensation. That is exactly the discussion the consenting panel should be having.

But the public deserves to understand what the numbers actually mean. If 500,000 animals live within an area affected by a development, it does not follow that 500,000 animals will die. Turning an estimate of population affected into an implied death toll might make a better headline. It does not make it better science.

The economic arguments become even more extraordinary.

Opponents have raised concerns about vineyards, tourism and Central Otago’s reputation. Again, there may be some effects.

A vineyard immediately neighbouring a mine may reasonably have concerns about amenity, landscape or disruption. Those effects should be considered.

But from there the doomsday argument starts expanding.

The mine damages the landscape. That damages the wine industry. That damages Central Otago tourism. That damages Queenstown and Wānaka. That potentially damages New Zealand tourism. Eventually a mine in Bendigo becomes a threat to a sizeable part of the South Island economy.

Really?

The economic expert evidence provides some useful perspective.

Only a tiny proportion of Otago visitor days occur in areas near the proposed mine. One economist involved in the expert conferencing said that, without further evidence, he was not persuaded that the project would have large effects on tourism activity in Queenstown and Wānaka.

That seems a rather more reasonable starting point. Central Otago is not going to disappear. Neither is Queenstown. Neither are its vineyards. Nor is New Zealand’s tourism industry.

Indeed, mining and tourism already coexist in New Zealand. Macraes has operated in Otago for decades. Waihi has a working gold mine beside a town. The existence of mining does not automatically extinguish every other economic activity around it.

Water provides perhaps the clearest example of the problem.

A mine should absolutely be required to demonstrate that it can appropriately manage groundwater and surface water. There should be baseline measurements, monitoring, limits, reporting requirements and contingency plans.

And there are.

The Bendigo-Ophir process has included baseline water reporting, water management plans, water quality assurance work, groundwater modelling, treatment studies, geochemical testing and expert conferencing involving specialists from different parties.

That does not mean contamination is impossible. It means the risk is being studied and controls are being designed around it.

Economic evidence has even contemplated scenarios in which groundwater contamination affects the output of local wineries.

Again, it is reasonable to ask what the consequences of a serious event would be. But there is an enormous difference between assessing the consequences of an event and establishing that the event is likely to happen.

This seems increasingly absent from this debate.

Perhaps the strangest suggestion is that the Fast-track process somehow means these issues are not receiving adequate scrutiny.

Anyone who has followed the process would struggle to sustain that argument.

There have been specialist reports and expert conferencing covering groundwater, water quality, geochemistry, freshwater ecology, lizards, terrestrial ecology, engineering, geotechnical matters, economics, air quality, contaminated land, traffic, landscape, heritage and numerous other subjects.

The panel has requested further information. Experts have disagreed with one another. Management plans have been changed. Additional evidence has been supplied. Hearings have been held. Conditions have been debated. And the public have been able to participate.

So the process has been exhaustive and that is how it should be.

The purpose of environmental regulation should not be to establish that a project has no effects and no risks. No meaningful infrastructure project could satisfy that test.

The question is whether the effects can be appropriately avoided, mitigated, remedied, offset or compensated for, and whether the remaining effects are acceptable when weighed against the benefits of the project.

Santana potentially represents billions of dollars of economic activity, hundreds of jobs and substantial tax and royalty revenue for New Zealand. Those benefits do not give Santana a free pass. But neither should opponents receive one.

If Santana’s engineering is inadequate, demonstrate why. If its water modelling is wrong, demonstrate where. If its rehabilitation programme will not work, provide the evidence. If the mine will materially damage Central Otago tourism, quantify the effect and establish the mechanism. If the economics only work at an unrealistic gold price, test the numbers.

That is scrutiny.

Predicting that everything that could conceivably go wrong eventually will is something else entirely.

New Zealand needs to become better at distinguishing between risk and catastrophe. Every major project involves risk, so the job is to understand it, reduce it and decide whether what remains is acceptable.

If instead our starting assumption becomes that engineers will fail, environmental controls will fail, rehabilitation will fail, commodity prices will collapse and surrounding industries will suffer their worst imaginable outcome, we should at least be honest about the consequence.

Assuming that the worst is guaranteed to happen will not simply stop the Bendigo-Ophir mine.

It means that eventually we will stop building almost everything.

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