Taking a Shine to Real Estate

By Eric Roston

Look west anywhere in Salt Lake Valley and you won't see the future--Americans' traditional association with that compass point--but the past. In Bingham Canyon, at the foot of the Oquirrh Mountains, five generations of copper miners spanning the 20th century have cleared a pit three-fourths of a mile deep and more than 2 miles across, seemingly large enough to catch the expansive Utah sky should it ever fall in. The sky hangs securely above, but the state's economy, which since 1988 had seemed equally horizonless, has slipped with everyone else's into a canyon-like rut.

Kennecott Utah Copper, the mine's operator since 1903 and owner of some 40,000 developable acres in the western valley, has passed its golden age, when the pit was bottomless and facilities could pump and dump waste with abandon. Times have changed. A pound of copper sells for about half what it did five years ago, and cleaning up the environment absorbs many of the resulting pennies. So K.U.C. was pleased to stumble onto an asset that doesn't appear on the balance sheet of its corporate parent, Anglo-Australian mining behemoth Rio Tinto: its own backyard. There, a 4,500-acre community is expected to be built on a reclaimed polluting ground. Wheat grows there now.

While new housing generally doesn't warrant more than a fleeting stomach knot over the sacrifice of yet another field to the demon sprawl, the Sunrise project, as Kennecott has dubbed the 40,000-person development, will stand at the unlikely intersection of the latest in urban planning and new pressures on the mining business. A planned community a la New Urbanism, Sunrise will offer residents jobs and stores just a walk away, along with trees, parks and affordable housing for diverse incomes. The city of South Jordan, where Sunrise will be located, entitled the land in 2000, and the developer has hired urban planner Peter Calthorpe, who is helping to reanimate blighted spots like Denver's old Stapleton Airport. Kennecott Development president Peter McMahon wants to break ground for infrastructure next year. "There's just inevitable development heading in that direction," he says.

The project will address the valley's rapid growth and repay some of the environment-related capital expenses Rio Tinto has incurred during its 12-year ownership--a $2 billion total that includes a new, cleaner, $1 billion smelter. Bingham Canyon will wind down in the next 15 years, sticking Rio Tinto with further cleanup bills. The company's half-year returns show that K.U.C. constitutes 15% to 20% of its asset base but generated just 3% to 4% of its $841 million profit. Over the next 20 to 25 years, K.U.C.'s Sunrise could bring Rio Tinto the current equivalent of several hundred million dollars. Last year Rio Tinto earned $1.5 billion on revenue of $10 billion. It mines coal, copper, gold and talc in the U.S.

But who ever heard of a mining company turned real estate mogul? "Mining is not welcome in the U.S.," says John Gross, publisher of the Copper Journal. "That's a fact of life." Environmental rules and the high cost of operating in the U.S. have pushed miners to less developed countries such as Chile, the world's largest copper producer. Add to the mix that mines tend to be remote, and the uniqueness of Kennecott's marriage with South Jordan emerges. The Western states have seen enormous population growth in the past decade. A net total of 212,000 people settled in Utah (pop. 2.23 million) alone, and what's more, the state benefits from a high birthrate: 2.6 children per woman, compared with less than than two nationally. That means a lot of big families and a need for new housing. South Jordan grew during the 1990s from 12,000 people to nearly 30,000.

Kennecott's once dominant local stature has diminished over the years with its shrinking operations, the influx of new-economy folk like computer-chip makers and software firms, and growth in tourism and business services. Tech companies such as Intel and Provo-based Novell draw on Utah's young, educated work force. This creeping diversity isn't only commercial: in August a Hindu temple opened in South Jordan, which is 75% Mormon.

That Kennecott can moonlight as a land developer is an extreme example of how new pressures affect the mining business. While analysts uniformly laud Rio Tinto as the standard-bearer for industry responsibility, that's not a standard others agree with. "The corporate poster child for environmental and social abuses" is the way Joshua Karliner of Corp Watch describes Rio Tinto's global activities.

Oscar Groeneveld, CEO of Rio Tinto Copper, defends the company's global progress but says, "We haven't got it 100% right yet. I think we'll be working for a long time before we satisfy the majority of our critics."

There are issues in the U.S. too. In Nevada, where Rio holds a 40% stake in a mine operated and 60% owned by Placer Dome, the Environmental Protection Agency is concerned about groundwater contamination from current mines and the potential for future damage to sacred lands of the Western Shoshone. In Salt Lake Valley, Rio Tinto has paid some $300 million in reclamation costs and is not finished. A 72-sq.-mi. plume of toxins, one of the world's largest, has rendered water from an aquifer beneath Salt Lake City undrinkable. Engineers must halt its spread and prevent public exposure.

Still, even the EPA lauds Kennecott's stewardship in the valley. "That particular mine is at the forefront of the industry. Having a booming metropolis has forced Kennecott to deal appropriately at that site," says Dan Randolph, the EPA's Southwest-circuit rider.

Visitors leave Bingham Canyon awestruck at the historic feat of engineering that dug such a deep pit. Environmentalists may see only the hole that humanity has dug for itself. Rio Tinto hopes that future generations will look west from their Sunrise homes and see the remnants of an old, strategically vital industry reshaped by new sensibilities and needs.