Opinion ID: 493685
Heading Depth: 2
Heading Rank: 3

Heading: Is Electrowinning Necessary or Incidental to Mining?

Text: 22 According to Sec. 613(c)(2), a process necessary or incidental to a mining process is itself a mining process. Even processes specifically listed as nonmining (like electrolytic deposition) can nevertheless be counted as mining processes if they are necessary or incidental to mining in a particular situation. See Sec. 613(c)(5). Sunshine argues that electrowinning is necessary or incidental to two mining processes, the leaching of silver-copper concentrate and the recovery of antimony. The regulations provide: 23 A process is necessary to another related process if it is essential to the performance of the other process. 24    25    26 A process is incidental to another related process if the cost thereof is insubstantial in relation to the cost of the other process or if the process is merely the coincidental result of the application of the other process. Treas.Reg. 1.613-3(f)(2)(iii). 27 The regulations suggest that necessary is to be interpreted narrowly. For example, mineral storage may be necessary if a certain process cannot be effectively applied without a stock of stored minerals. Sunshine's argument is that leaching cannot be effectively done without electrowinning because the cost of obtaining fresh sodium sulfide without recycling would be prohibitive. 28 We reject Sunshine's commercial gloss on necessary. A test of commercial necessity, or necessary to make a profit would have uncertain and uneven application, depending on the market price of the mineral, the grade of the ore, and the producer's location and overall profit margin. Moreover, it would penalize more efficient producers. The commercial sense is not required by the statute or regulations. We read the term necessary narrowly, so that electrowinning would be necessary to leaching only if there was no known way to leach silver-copper concentrate without electrowinning. 29 Sunshine's argument that electrowinning is necessary to the recovery of antimony is beside the point unless it is first shown that recovery of antimony is a mining process. In fact, the two processes are the same from Sunshine's point of view, so Sunshine is in the curious position of arguing that electrowinning is necessary for itself. In any case, the argument that recovery of antimony is mining reduces to the claim, considered and rejected above, that any process separating valuable minerals from ore is mining. Recovery of antimony is instead a practical result that does not qualify as a mining process to which electrowinning can be necessary or incidental. As such, the exception in section 613(c)(5) is inapplicable. 30 Finally, electrowinning is not incidental to any other process, mining or otherwise. Neither party claims that the cost of electrowinning is insubstantial or that electrowinning is a mere coincidental result of some other process. 31 D. Should This Court Follow Ranchers ? 32 Sunshine relies heavily on a Tenth Circuit case, Ranchers Exploration & Development Corp. v. United States, 634 F.2d 487 (10th Cir.1980). In Ranchers, the court held that 33 the term electrolytic deposition, as it appears in ... Sec. 613(c)(4)(D), encompasses only those processes ... that start with solid metal or partially processed ore and beneficiate the same to a degree that such processes constitute smelting, refining or manufacturing. We hold that electrowinning ... is an allowable mining treatment process since it extracts the first identifiable valuable mineral from the raw ore leach solution. 34 Ranchers, 634 F.2d at 493. 35 The Ranchers court accepted many of the arguments considered and rejected above and concluded that it could not accept ... a literal construction [of the statute] as the will of Congress. Ranchers, 634 F.2d at 492. To that extent, as earlier parts of this opinion show, we believe the court erred. It is unnecessary to assign error, however, because Ranchers is distinguishable from the present case on three grounds. First, the court emphasized that the electrowinning process used by the Ranchers Corporation had replaced an earlier cementation process which both parties acknowledged was mining. Ranchers, 634 F.2d at 488-89. In this case, by contrast, the antimony electrowinning process did not replace an earlier mining process. Before 1942, Sunshine sold its silver-copper concentrate directly to smelters for refining. Second, the Ranchers court noted that [w]e would perhaps be inclined to characterize [electrowinning] as a refining process if the resulting solid were sufficiently pure to meet commercial standards. Ranchers, 634 F.2d at 493. In this case, Sunshine admits that the antimony recovered in electrowinning is commercially usable, though some of it is refined further. Finally, the copper electrowinning process used by the Ranchers Corporation produced the first identifiable valuable mineral from the raw ore. That case involved a copper mine and it is understandable that the court considered all the work necessary to recover a salable ore as mining. In this case, antimony is recovered as a byproduct after several grades of valuable ore, including the high grade silver-copper concentrate, have already been separated and sold. III