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Mining, ag economic bright spots

Don Davis and Scott Wente
Bemidji Pioneer
February 29, 2008

ST. PAUL – Rural Minnesota provides the state with its only good news in an otherwise dismal economy.

High grain prices, especially, provide farmers more money to spend than they have seen in years. And Iron Range mines are working as fast as they can to meet demand for steel.

"They are the bright spots that we have," State Economist Tom Stinson said Thursday after an otherwise-bleak economic forecast.

On the other hand, Stinson and Toby Madden, a regional economist with the Federal Reserve Bank of Minneapolis, said another rural segment is among the worst – the lumber and forest products industry.

"On the ag front, things are going pretty strong," Madden said.

A recent survey of agricultural lenders indicated farm customers in the Upper Midwest are doing well.

"They saw tremendous increases in profits, capital expenditures and household spending," Madden said.

Stinson credited grain markets for much of the good news.

"When grain prices are high, they spend money in town," he said of farmers.

Big-dollar farm equipment, some of which costs well over $100,000, is selling well, Stinson said.

Good crop harvests last year and high prices have helped the agricultural sector, Madden said. While production costs have gone up for farmers and ranchers, their profits also have increased.

Predictions show production from rural sectors such as agriculture should increase in 2008. That is good for farmers, Madden said, but consumers probably will continue to pay higher prices for goods.

He warned that the state's rural economy could be hurt by major crop failures or commodity production elsewhere.

"Things could change rapidly, he said.

Worldwide construction and production continues to increase, boosting demand for iron ore and steel from northeast Minnesota's Iron Range.

"They've been digging it out as fast as they can," Madden said of taconite, used to make steel.

The future could be even brighter, Stinson said, if plans to open northeastern Minnesota copper and nickel mines materialize.

However, while the Iron Range is looking good, nearby foresters are not.

"That's not just a slump," Stinson said. "That's a disaster."

Lumber and wood products businesses are hurting in a large part because the nation's housing market has all but collapsed.

"It is going to be 12 months or more" before there is any change in that, Stinson said. The housing situation is driven by extremely tight loan markets, which are affecting all types of loans. There are instant bad credit loan to help those who don’t qualify for loans due to their credit.

"No one will loan anyone money at this point," Stinson said.

As an example of the housing market, Stinson said, in the last quarter of 2005, 2,400 permits for single-family homes were issued across Minnesota. In the same period of 2006, that had been cut in half. In the last three months of last year, just 800 permits were issued.

The state economist added that the situation is the same or worse in other states, and Minnesota's lumber industry serves a national market.

Combined, the state's forestry, agriculture, fisheries and mining industries only make up 2 percent of Minnesota's $250 billion annual gross domestic product, Madden said, although they also contribute to other sectors such as manufacturing.

Between half and two-thirds of the state's overall economic output is in the Twin Cities. There, problems with the housing industry and higher oil prices continue to affect the economy, Madden said.

Overall, Minnesota continues to post above-average income and production numbers.

However, nearby states, including North Dakota and Montana, are experiencing rates of economic growth higher than Minnesota. Much of the reason for the western states doing better, Stinson said, is because they are producing increasing amounts of oil and coal, and energy fuels are in high demand.

Stinson said the state is in a recession that should last through the first half of the year. The federal economic stimulus package will help improve the economy in the last half of the year, he said, but early 2009 probably will experience an economic slowdown once the federal rebate checks have been spent.

The economist said government and Americans need to be cautious about the economy.

"The outlook is quite uncertain," Stinson said.

Don Davis and Scott Wente work for Forum Communications Co., which owns the Bemidji Pioneer.

Next generation of mining: Creating jobs in a responsible way

By FRANK ONGARO
MiningMinnesota
February 29, 2008

It is clear from reading the Sunday, Feb. 10, guest column that the next generation of mining, and the progress and growth it will provide, continues to generate unrealistic fears in some people.

As proposed base and precious metal mining operations move forward, it is important to understand that the questions about the benefits, the risks, and the reclamation assurances are being, and will continue to be, addressed in the open, transparent, and very public State regulatory process.

The benefits are clear. The base and precious metal mining operations will provide hundreds, potentially thousands, of great-paying, enduring jobs. The jobs will allow our young families to live and work in the region, not only in the mines, but in the thousands of supplier company jobs as well. These mining operations will generate millions of tax dollars each year in local and state taxes. And, the royalties paid from these proposed projects could easily generate hundreds of millions of dollars to the Permanent School Trust Fund which supports school districts across all of Minnesota.

As Minnesota struggles economically, these benefits from mining are extremely important to our entire state.

The risks and financial assurances are also being addressed. Minnesota has a strict and demanding environmental review process in place. All the potential risk and financial assurances for reclamation of the waste from this extremely low sulfur ore body are part of that review process. All companies will be required to operate within Minnesota's strict environmental standards, making sure our air and water quality is protected.

Every aspect of these proposed projects are thoroughly reviewed by state agency staff. These objective state employees have decades of experience studying all environmental issues and concerns. In addition, the state hires recognized independent experts to provide additional review of the companies proposed activities.

In the case of PolyMet, several years and tens of millions of dollars have already gone into testing, research and development of their mine operation, processing, and waste material handling. This has all been undertaken by world class geologists, hydrometallurgical chemists and engineers, and experienced mine operators.

Most of us from this region, including those of us who are third generation Rangers, have as much respect for the environment as anyone. We want nothing less than to leave our wonderful lakes, woods, and clean air to our grandchildren to enjoy and appreciate.

Demand for base and precious metals is growing both domestically and globally. Mining development for this demand is growing as well, much of it in countries that have little regard for environmental safeguards. The United States is dependant on foreign imports for a majority of our increasing consumption of copper, platinum, palladium, and 100 percent of nickel. Some of these metals are on the Academy of Science's list of minerals "most critical" to the U.S. economy.

Our computers, our cell phones, batteries for hybrid cars, catalytic converters to remove emissions from automobiles, alloys for our defense systems, stainless steel for medical devices, wiring and plumbing for our homes, and even key parts of wind turbines for generating alternative energy all come form these base and precious metals.

The guest columnist also stated that base and precious metal mines "are not taconite mines," and that we should not "gamble on a boom and bust" industry.

He is correct, these are not taconite mines. In fact, in a number of regards they are much better. Total air emissions are projected to be only about five percent of an average taconite plant, they will have extremely low mercury emissions, and energy use will be significantly less.

This is not, however, a "gamble on a boom and bust" industry as the guest columnist suggests. Northeastern Minnesota has seen mining as an essential part of our economy for more than 100 years. Yes, there have been industry cycles. All industries have them. Automobiles, airlines, even retail. The fact is, a significant percent of our regional economy is resource dependant and we have a chance to make that grow.

Again, the questions are being asked. They have been for years. The environmental review system works and all the policies necessary are in place to assure responsible development of our natural resources.

We have a win/win opportunity for Minnesota. We can help meet the growing demand for metals with Minnesota jobs, and do it with Minnesota's strict environmental standards. As environmentalists, we should all get behind and support the excellent example of responsible development being proposed and hold it up as a standard for all mining development in the U.S. and in the world.

Frank Ongaro is executive director of MiningMinnesota. His e-mail is: fongaro@miningminnesota.com.

Duluth Metals options key infrastructure land parcel

Press Release
February 19,2008

Duluth Metals Limited ("Duluth Metals") (TSX: DM) (TSX:DM.U) today announced the signing of an exclusive option to purchase a key piece of infrastructure land called the Dunka Pit from Cliffs Erie LLC ("CE"), a subsidiary of Cleveland-Cliffs Inc ("Cliffs"). The acquisition of this strategic land parcel which is in close proximity to the Duluth Metals Nokomis Deposit would meet a two-fold objective of providing a location for offsite processing, while fulfilling Duluth Metal's commitment to environmental stewardship through use of an existing brownfield/industrial location.

"The potential use of Dunka is an excellent example of the 're-utilization' of former ferrous mining sites as processing plant locations", stated Dr. Henry J. Sandri, President and CEO. "The recycling of existing ferrous mining sites takes advantage of brownfield locations that have limited use, reduces the future disturbance of area lands, and, under new regulations, can ensure that the eventual sites are reclaimed to existing environmental standards. The anticipated acquisition of Dunka will meet Duluth Metals' objective of locating off site processing and re-using an existing brownfield/industrial location", stated Dr. Sandri.

Dunka is a former iron ore / taconite open pit mine located at the northeastern tip of the Mesabi Range iron ore deposits. Dunka was mined first by Erie Mining Company and then later by LTV Steel Mining Company ("LTVSMC") until 1994 and Dunka's ore, along with five other mines, was shipped to the beneficiation facilities at Hoyt Lakes, Minnesota for processing into pellets. CE acquired Dunka along with other LTVSMC properties and operations when it purchased the LTVSMC assets in 2001.

The Dunka assets include approximately 1,845 acres, including three interconnected previously mined iron ore pits, rock berms, adjacent lands, access routes, rights-of-way, infrastructure and utility corridors, and operational facilities, including a water treatment plant. Dunka is presently a brownfield site in the final stages of remediation. After exercise of the option by Duluth Metals, the completion of the sale would be subject to State of Minnesota regulatory review, including the transfer of ongoing environmental and reclamation obligations of the Dunka site to Duluth Metals.

Duluth Metals will be evaluating the Dunka site as a future infrastructure and residual rock disposal site for the processing of copper, nickel and platinum group metals ores from its Nokomis Deposit, located approximately 8 kilometers (5 miles) to the northeast.

Other recent examples of the scrap metal recycling of former ferrous mining operations include CE's sales and options to sell other portions of the former LTVSMC site. These include a sale to Mesabi Nugget (for an iron nugget facility), a sale to PolyMet Mining, Inc. (for a copper-nickel mining and processing facility), and an option to Excelsior Energy (for a 603 MW coal gasification power plant).

Duluth Metals recently reported on the completion of a NI-43-101 compliant independent Scoping Study by Scott Wilson Roscoe Postle Associates. The Scoping Study confirmed robust economics and indicate the potential for the Nokomis Project to be one of the world's low cost copper-nickel producers operating on a large scale over a very long period of time. The Nokomis Deposit currently contains 347 million tonnes of Indicated Resources and 108 million tonnes of Inferred Resources (NI-43-101 compliant resource estimate).

David Oliver, P. Geo. and Duluth Project Manager is the Qualified Person, in accordance with NI 43-101 of the Canadian Securities Administrators, and is responsible for the technical content of this press release and quality assurance of the exploration data and analytical results.

About Duluth Metals

Duluth Metals is committed to acquiring, exploring and developing copper, nickel and platinum group metal (PGM) deposits. Duluth Metals' principal property is the Nokomis Deposit located within the rapidly emerging Duluth Complex mining camp in northeastern Minnesota. The Duluth Complex hosts one of the world's largest undeveloped repositories of copper, nickel and PGMs, including the world's third largest accumulation of nickel sulphides, and one of the world's largest accumulations of polymetallic copper and platinum group metals.

About Cleveland-Cliffs

Cleveland-Cliffs Inc, headquartered in Cleveland, Ohio, is an international mining company, the largest producer of iron ore pellets in North America and a major supplier of metallurgical coal to the global steelmaking industry. Cliffs operates six iron ore mines in Michigan, Minnesota and Eastern Canada, and three coking coal mines in West Virginia and Alabama. Cliffs also owns 80 percent of Portman Limited, a large iron ore mining company in Australia, serving the Asian iron ore markets with direct-shipping fines and lump ore. In addition, Cliffs has a 30 percent interest in the Amapa Project, a Brazilian iron ore project, and a 45 percent economic interest in the Sonoma Project, an Australian coking and thermal coal project.

This document may contain forward-looking statements (including "forward-looking statements" within the meaning of the US Private Securities Litigation Reform Act of 1995) relating to Duluth Metals' operations or to the environment in which it operates. Such statements are based on operations, estimates, forecasts and projections. They are not guarantees of future performance and involve risks and uncertainties that are difficult to predict and may be beyond Duluth Metals' control. A number of important factors could cause actual outcomes and results to differ materially from those expressed in forward-looking statements, including those set forth in other public filings. In addition, such statements relate to the date on which they are made. Consequently, undue reliance should not be placed on such forward-looking statements. Duluth Metals disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, save and except as may be required by applicable securities laws.

Mining’s future in area is bright

Mesabi Daily News
February 16, 2008

For more than 100 years, mining has been a vital part of the economy and even the culture of Northeastern Minnesota.

To say, as some have recently, that mining's economic contribution is questionable or that it must be limited or even prevented from increasing in order to ensure we can protect our natural environment is mistaken. Given the existence of improved industry structure and operations and the existence of modern environmental regulation, there is no reason why we cannot have an increased positive economic impact from mining while having the environmental quality we all expect. The mining industry has been and remains responsible for the existence of thousands of well-paid jobs in our region either directly or indirectly. At Minnesota Power, mining customers use approximately one-third of the power we provide ��" approximately 600 megawatts annually. Additionally, Minnesota Power has plans to provide significant additional power for new mining projects anticipated to come on line in the next few years.

There is no doubt that mining is vital to Minnesota Power and its more than 1,000 employees who live, work and recreate in the region. Many other businesses, their employees and really anyone who has an interest in a positive regional economy are stakeholders in the existence of a vibrant mining industry.

While mining is cyclical and has seen its share of ups and downs, it has survived and improved technologically and economically with the times. The steel downturn earlier in this decade saw a major and much-needed rationalization of steelmakers in the United States, resulting in fewer and much stronger parent companies owning Minnesota's taconite mines. These stronger companies have made substantial capital investments in their Minnesota operations within the last few years. These larger, globally oriented companies are better able to compete in and withstand national and world economic cycles than were their predecessors.

Few state residents who do not live in Northeastern Minnesota are aware of the ways in which mining continues to play a large and positive role in our region. Nor are many aware of the major positive transformation that has occurred in mining with broader industry business structures and technology improvements.

Unlike start-up economic development ventures, Northeastern Minnesota is already well-equipped to support the mining industry with basic infrastructure and excellent rail and port transportation systems, not to mention a highly skilled mining and supplier work force. It would be most imprudent for Minnesota to refuse to sustain and further an industry with such an extensive economic platform and one that is literally tied to a natural resource existing in the state. Unlike some service industries or less capital intensive businesses that can literally "pull the plug" and walk away from employment commitments at virtually a moment's notice, the mining industry must invest in and maintain solid business foundations in order to operate.

Some have suggested that drawing a larger retiree population to the region and relying on recent growth in health care are avenues to reduce the need for mining in our economy. While the growth of industries such as the health care sector is welcome, health care services are largely needed where there are people with jobs in other industries. Furthermore, Northeastern Minnesota has a great interest in encouraging the presence of younger workers as well as retirees and other populations in its midst.

We also should not forget that our region is remote from other natural economic development advantages available in locales closer to the Twin Cities, for example. Consequently, Northeastern Minnesota must be allowed to continue making use of the natural and unique economic advantage the presence of minerals provides.

Some argue that our region should reduce the presence of mining to reduce economic risk. The fact is that Northeastern Minnesota is poised like never before to build on and diversify its mining industry in ways that can strengthen its economic backbone. The impact of previous negative business cycles can be moderated through diversification into products such as steel slabs, iron nuggets and non-ferrous minerals. Yet, even with these tremendous opportunities at hand, some people suggest Minnesota is incapable of creating a stronger mining base while conscientiously protecting the natural environment that is part and parcel of why we live here.

In reality, the mining industry's environmental practices are heavily and thoroughly regulated by the State of Minnesota. For more than 100 years, mining has existed in our region on the whole compatibly with the natural environment. Northeastern Minnesota is still a beautiful and healthy place to live, and Minnesota Power and its employees along with other industries and residents of the region intend to keep it that way.

While environmental practices of four or five decades ago were admittedly inadequate to everyone in hindsight, modern industry and regulation have changed mining environmental management dramatically in this state and country for the better.

Furthermore, public and private awareness and action regarding environmental values and stewardship are also dramatically greater than they were decades ago. One can only hope that mining practices in developing countries follow the example of stewardship and high level of environmental standards set in present day Minnesota.

We must do everything we can to encourage the ongoing presence of an economically and environmentally healthy mining industry in Northeastern Minnesota. With the strong environmental regulatory presence Minnesota has established around mining and the stronger economic footing of the mining industry itself, it is a false proposition to say we need to choose between a healthy environment and mining jobs. Minnesota already has shown it is possible to have both.

Deposits are found, mines are made

Duluth Budgeteer News
February 15, 2008

If all goes according to plan, Duluth Metals could be mining near Ely for a long, long time.

"We have, nominally, 72 to 74 years in front of us right off the bat," said Rick Sandri, the Canadian company's president and CEO. "Well, if we're equally as lucky – and I can't say we will be, because we don't know yet – it could easily double or even triple."

As stated, Duluth Metals isn't actually local. It takes its name from the Duluth complex, which starts in Duluth and goes up to the Canadian border.

Though it doesn't look like much now, Duluth Metals' site near Ely could spawn a 500-employee, 70-year mining operation. Submitted photo
Though it doesn't look like much now, Duluth Metals' site near Ely could spawn a 500-employee, 70-year mining operation. Submitted photo

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"It's a big, sort of backwards ‘D,'" explained Sandri, who's opened and closed mines from South America to central Africa. "You take the lake as the backbone of the D, and it goes right up to the Iron Range. What these are are big, magmatic basalt flows that occurred when North America actually began ripping itself apart at one point."

 

And, as far as geological complexes are concerned, the Northland's is huge, "absolutely huge."

"And so underexplored," Sandri continued. "Even though a lot has been learned about it over the last 25 to 50 years, it's almost as if it's still virgin ground up there in terms of discovery."

Duluth Metals is a spinoff of Wallbridge America – itself a division of the Canadian corporation Wallbridge – and has been independent since it went public in October 2006.

While it operates out of the St. Paul suburb of Oakdale, and employs primarily Americans, Sandri (a U.S. citizen himself) explained the need to remain a Canadian company: "To raise money in North America, you tend to do it in the mineral industry in the Canadian market," he said. "To do that, you need to have a Canadian registration."

The company has been watching a site near Ely on its Maturi Extension properties for nearly six years. Known as the "Nokomis Deposit," it contains one of the largest deposits of copper, nickel and platinum group metal (PGM) in America.

"The properties up here have been known for about 50 years, but they've never been taken to development because, when they were first discovered, they were considered lower grade than ones that were being mined at the time," Sandri said. "Most of those, by the way, have all been mined out, so they (the ones near Ely) kind of move up the chain."

Sandri, who learned the mineral trade at the Colorado School of Mines in Golden, said that this Ely site isn't your average, everyday find.

"A lot of people just think you can go out and mine a mineral project," he said. "It's not that way. The geologists frequently say that one out of 10,000 deposits – or depositions of mineral you look at – has the possibility of making a mine. Well, that's an awful lot of frogs you gotta kiss before you get one."

Sandri explained that bringing a mine to fruition is a "really long process."

"There's a lot of money spent looking at things, never getting anywhere," he said. "People don't always relate it the same way, but it's very similar to what a drug company is doing when it says, OK, we're going to try to find a cure for lip cancer or breast cancer or something like that.

"And, 20 years and $100 million down the road, all they found out thus far is that they now have 950 things they know that don't work."

So far, so good

As stated, there are many steps to take before a mine can become a reality. Luckily for Duluth Metals, their site near Ely is showing promising signs.

"Every hole we've drilled to date has hit mineralization," Sandri said. "So, if that continues, we probably will be there well over 100 years at the current production rate – and maybe 150 years, which is a pretty good thing."

One of the first steps was the conceptual scoping study which proved that, yes, the Nokomis Deposit could sustain a mine. Next up is a prefeasibility study.

Sandri said four years is a reasonable estimate of when Duluth Metals would have a fully operational mine on its Ely property.

But, he cautions, "it's never a perfect deal."

"It's like buying a house," he said. "Up until you sign, there's always that question. But everything that we see about this project indicates that it is, one way, shape or form, doable – within the normal bell curve of getting things done."