Doh! It seems the Canadian Environmental Assessment Agency rejected Taseko Mines' (NYSEMKT:TGB) proposal to open its New Prosperity gold and copper mine in British Columbia based on erroneous information supplied by another government body.

Instead of a tailings storage facility designed by Taseko to minimize any seepage that could negatively impact the environment, the agency relied upon a design submitted by Natural Resources Canada (NRCan) that showed there would be "significant adverse environmental effects" from the tailings pond. Where Taseko's plan included a soil liner to restrict seepage, NRCan's plan did not have such a liner.

New Prosperity project. Source: Taseko Mines

In a statement released this week, Taseko said the government's design was "completely different than the Taseko design," a fact that was brought to its attention by one of the industry's pre-eminent engineering firms, Knight Piesold. And because the assessment agency cited NRCan's design in rejecting Taseko's proposal, the miner will challenge its decision and ask Minister of the Environment Leona Aglukkaq to consider other information before making her ultimate ruling. 

A tailings storage facility is a large area typically located in a low valley that has been walled in where "tailings" -- a mix of water and finely ground rock left over from the mining operation -- are stored. The water eventually separates from the rock, which sinks to the bottom, creating a tailings pond. The water is then used in the mining operation.

The liner that Taseko's engineering firm designed is actually similar to those already in use at existing mines in British Columbia, one of which was Knight Piesold's design for Thompson Creek Metals (OTC:TCPTF) at its Mount Milligan gold and copper mine. A second one is in use by Imperial Metals at Mount Polley, another copper-gold project.

With the New Propserity project estimated to contain 5.3 billion pounds of copper and 13.3 million ounces of gold, potentially producing up to 70,000 tonnes of ore per day over its 20-year lifespan, it's understandable why the miner is fighting so hard for it.

The Canadian government has developed something of a reputation as not the friendliest to mining interests. British Columbia banned all uranium mining in 2008, and two years later completely prohibited mining and drilling for oil, gas, and coal in the Canadian portion of the Flathead River Basin that straddles the Montana border. Companies from BP to Cline Mining had projects planned for the region that are now off limits.

While the tailing storage facility issue was significant, it is not Taseko's only hurdle at New Prosperity.

In addition to the charge that the mine would degrade water quality at Fish Lake, while also obliterating Little Fish Lake by creating the storage site in the first place, there's also the impact the project would have on the cultural and religious practices of the local aboriginal peoples who use the area. Concerns about how indigenous tribes are affected has put projects on hold that Cliffs Natural Resources (NYSE:CLF) was developing in Ontario and that Barrick Gold (NYSE:GOLD) and Codelco were undertaking separately in Chile. Even locals in Romania have brought a project by Newmont Mining (NYSE:NEM) into question.

Add in doubts about Taseko's ability to minimize harm to the local grizzly bear population, and we can see the tailings storage issue is but one headache the miner faces. Investors valuing the miner may want to focus solely on its Gibraltar copper-molybdenum mine and ignore whatever additions New Prosperity might bring to the equation. 

Shares of the miner jumped on the possibility it gets a do-over, but in taking another bite at the apple, Taseko Mines -- and investors -- may still find it's full of worms.