Arizona Daily Star reports Rosemont stiffed Forest Service on $514,000 bill for starting 2011 wildfire that charred 1,826 acres

Rosemont Copper Company has failed to pay a $514,000 bill owed to the U.S. Forest Service since last August for expenses related to a 2011 wildfire started by one of its employees, the Arizona Daily Star reported Sunday.

The unpaid bill comes as Augusta Resource faces a continuing cash crisis. The company has been forced to borrow $10 million from its chairman, Richard W. Warke, and largest individual shareholder, Ross Beaty. Augusta is relying on borrowed funds to finance permitting and other activities, including a $109 million loan from RK Mine Finance, a London-based metals hedge fund, that comes due in July.

The wildfire burned about 1,826 acres on public and private land after the ranch hand’s welding activity sent a spark onto grassland that ignited the blaze, the Daily Star reported.

After a lengthy investigation, the Forest Service demanded the $514,000 payment on Aug. 31, 2013, in letters to the mining company and the ranch hand, Eric Pavolka, the newspaper said.

Rosemont, according to documents obtained by the Daily Star under the Federal Freedom of Information Act, had not responded to the bill as of Jan. 31, according to the story.

In letters last August to Rosemont CEO Rod Pace and to Pavolka, the Forest Service wrote that to avoid having to pay interest, having the debt reported to credit bureaus or having a collection agency called, the company or Pavolka must within 30 days pay the debt in full, agree to a payment plan or document that they are in a bankruptcy proceeding that would place the debt on hold, the newspaper reports.

Rosemont is a subsidiary of Vancouver, B.C. Augusta Resource Corporation and Augusta’s only significant asset. Rosemont is seeking state and federal permits to construct a mile-wide, half-mile deep copper mine on the northeastern flank of the Santa Rita Mountains on the Coronado National Forest southeast of Tucson.

The outstanding unpaid bill also comes at the same time the Coronado National Forest has released the Final Environmental Impact Statement and draft Record of Decision for Rosemont’s proposed open-pit copper mine in the Santa Rita Mountains.

A coalition of ranchers, environmentalists, business owners and citizens filed extensive formal objections to the FEIS last week. Pima County also filed objections to the FEIS. The Forest Service must respond in writing to each objection within 75 days.

Many of the objections assert that the Forest Service has issued the FEIS in violation of the National Environmental Policy Act because the Forest Service knows the project will violate state and federal laws to protect the air and water.

The Forest Service’s August 2013 letters to Rosemont CEO Rod Pace and Pavolka said that Pavolka and the owners of Rosemont Ranch are “jointly and severally liable for the full amount of this debt,” because the government doesn’t attempt to allocate each party’s share, the Daily Star reported.

Pavolka’s actions also violated a federal law prohibiting actions causing “timber, trees, slash, brush or grass to burn except as authorized by permit,” said the August 2013 Forest Service letter from Lisa Lux, branch chief for the service’s claims office, the newspaper stated.

On May 3, 2012, Pavolka apparently signed a plea agreement in which he agreed to pay a $100 fine and a $10 special assessment on the charge of the federal law violation. He was placed on five years’ probation, the Daily Star reported.