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Commodity prices dip, but still strong

Mesabi Daily News
August 30, 2008

Demand and prices for iron ore pellets and other metals have remained high so far in 2008, boosting profits for taconite producers and start-up chances for Northeastern Minnesota non-ferrous mining projects.

While metals prices seem to have come down slightly from peaks earlier this spring, industry officials and experts see a continued strong run into the near future.

"It's very evident that global demand for precious metals is strong, and will remain strong for the foreseeable future,'' said Frank Ongaro, head of MiningMinnesota, a nonferrous industry association. Strong demand has kept copper prices higher, which have come down a bit, said Jim Skurla, acting director of the Bureau of Business and Economic Research at the University of Minnesota Duluth. "Some of this was fueled on speculation.''

Precious metals prices have dropped slightly from their highs. Copper, which was priced at more than $4 a pound, is down to around $3.40/lb. recently, which "is still an extremely positive price,'' Ongaro added.

Of more immediate concern is the overall U.S. economic slowdown, which has helped tighten financing at a crucial time for potential mining projects needing funds to build.

"I think financing is becoming more of a factor,'' Skurla said, as stock markets "are pretty shaky.''

Skurla, who has studied mining in the region's economy, said project organizers for the non-ferrous ventures have been "pretty conservative'' in their estimates of what prices are break-even points, and what they need to still earn a profit.

Prices for non-ferrous metals should stay high for some time, he added, which for new mining projects means there's "a very good chance they're still viable.''

PolyMet Mining is the most advanced non-ferrous project, and is looking to start operations in the near future for copper, nickel and platinum-group metals. Other outfits such as Franconia Minerals and Duluth Metals are still in the exploring/drilling stage.

Non-ferrous metals prices have not been much of a concern to the Range in the past, but are becoming more familiar as projects draw nearer to start-up.

Copper and nickel are usually priced by the pound, while rarer, more expensive precious metals such as platinum and palladium are priced by the ounce. Copper is used for many products such as wiring, while nickel is used for stainless steel, batteries and wind turbines. Platinum is used for catalytic converters for vehicles' exhaust.

Global demand for non-ferrous metals is bringing a lot of interest to the region's Duluth Complex, which is one of the largest undeveloped deposits of copper and nickel in North America.

"The increase in demand is not so much in the developed world, but in India, China and Indonesia,'' noted longtime Minnesota minerals explorer Ernie Lehmann, who is now with Franconia.

As developing nations like those three in Asia continue to build up their infrastructure and add consumer goods, "commodity prices are strong and the consensus is they'll continue that way,'' he said.

Both the iron and non-ferrous industries are "very cyclical,'' and can be subject to international markets, Lehmann said. The U.S. dollar has risen in value against other currencies lately, which "has depressed the copper price.''

Lehmann himself has seen the highs and lows of the value of copper, such as in the Depression, when it was four cents a pound. "I can tell you, when I started in 1950'' as an engineer, copper was 12 cents a pound. He added that copper stayed at about 70 cents to 80 cents a pound in the mid-1980s, before dropping to that level again in 2001.

Better technology used in non-ferrous mining is cleaner, and has boosted global and U.S. demand for more consumer goods, Ongaro added. "And that presents a tremendous opportunity for Northeastern Minnesota.''

Worldwide markets are also driving the region's longtime taconite iron industry, UMD's Skurla noted.

In previous times, "America drove market demand,'' he said.

Where, 20 or 30 years ago, the cyclical nature of the U.S. economy was evident in an auto showroom if a consumer was buying a new car. Or not. Low sales would drop demand for steel for cars, affecting workers here. There have been such fluctuations in the Range economy over recent decades that inflation hasn't been a major factor, Skurla added.

The Range taconite iron industry's latest meltdown occurred around 2001-03, with the LTV and EVTAC plants closing and the former National Steel in Keewatin bought by U.S. Steel, and EVTAC, by Cleveland-Cliffs.

The biggest change these days has been with world markets investing in the region. Producers such as China's Laiwu Steel investing in United Taconite (now bought out by Cleveland-Cliffs) in 2003; India-based ArcelorMittal now owning the former Ispat Inland plant and mine near Virginia; Kobe Steel of Japan working with Steel Dynamics in the Mesabi Nugget project; and India-based Essar Global taking over the Minnesota Steel project, make them area neighbors.

The price of stocks of the two major U.S.-based companies on the Range helps show the changes from 2001 to 2008. U.S. Steel and Cleveland-Cliffs' stocks were below $20 a share by late 2002 and mid-2003. Demand rose, as foreign companies bought shares and product, which put prices above $100 a share by late 2007, according to Internet search engines.

"Demand will stay high as long as developing countries aspire to the lifestyle we have,'' said Craig Pagel, head of the Iron Mining Association of Minnesota.

And sales of the Range's iron ore help even out the highs and lows of the past, with some positive benefits.

"Keeping total demand high cushions the Range somewhat from the [economic] downturn,'' Skurla said. He added that "this is one of the bright spots in the state of Minnesota.''

Mayors back mining ventures

Mesabi Daily News
August 30, 2008

As three mayors from northern Minnesota, we represent the people of our communities and we care about the natural environment that surrounds us. The PolyMet mining project proposed in our region has caused some confusion, so we would like to help set the record straight.

PolyMet currently owns the mineral rights to 6,700 acres of land on the edge of the Superior National Forest. This property is not prime forest land. It is bordered by an open pit iron mine, the old LTV taconite plant, a set of railroad tracks and high-power transmission lines.

It is mining land in the heart of mining country. PolyMet plans to use this land to open Minnesota's first copper/nickel mine, creating 400 good-paying permanent jobs and bringing long-term economic stability to nearby communities like ours.

The U.S. Forest Service would like to sell this land to PolyMet and use the proceeds of the sale to purchase higher-quality land that is actually better for the integrity of the Superior National Forest.

Under existing federal law, however, the Forest Service can only do a "land swap," exchanging the 6,700 acres for equivalent property owned by PolyMet.

A land swap in this instance is not the optimal solution because the Forest Service would not be able to choose new land that is best for the Superior National Forest. Why should they be forced to exchange one piece of mediocre property for another when there's a better option?

Representative Jim Oberstar, as well as Sens. Klobuchar and Coleman, are supporting bipartisan legislation that would strengthen the hand of the U.S. Forest Service in striking the best balance between protecting the natural environment of northern Minnesota and providing the opportunity for jobs and living wages for the residents of the region.

This legislation is really designed to help with a very specific issue: Because PolyMet already owns the mineral rights to the 6,700 acres, the Forest Service would be allowed to sell the land at fair market value and then use this money to purchase new land of its choice to serve the best interests of the Superior National Forest.

For example, there are scattered parcels of private land currently within the Superior National Forest that could be bought up.

The proposed legislation does not provide any special treatment to PolyMet. Before the land sale with the Forest Service can be completed, the PolyMet project must satisfy all relevant environmental protection requirements.

Minnesota has some of the nation's toughest environmental laws, with strict standards and a well-defined public process for reviewing the environmental impact of economic projects.

For the past three years, an Environmental Impact Statement for the PolyMet project has been carried out by the Army Corps of Engineers, the Minnesota Pollution Control Agency and the Minnesota Department of Natural Resources. The preliminary report will be made public in a few weeks.

The proposed land sale is really a win-win deal by almost anybody's definition. It is not about the environment or jobs. It is about the environment AND jobs. It will expand and enhance the Superior National Forest; it will ensure that PolyMet complies with all state and federal environmental requirements; and it will create hundreds of new permanent jobs.

In short, it will allow us to pass along a healthy environment and a strong economy to our kids.

Marlene Pospeck, Hoyt Lakes Mayor

Mary Hess, Aurora Mayor

Glenn Anderson, Babbitt Mayor

Duluth Metals plans new processing project

Minneapolis Star Tribune
August 27, 2008

Duluth Metals Ltd., one of four Canadian companies exploring copper and nickel deposits in Minnesota, is planning a $916 million project that would make it the second company to produce the two metals there.

Duluth Metals aims to process 20,000 metric tons a day of ore containing copper, nickel, platinum, palladium and gold from the Toronto-based company's Nokomis deposit in Minnesota's Duluth complex, Chairman Christopher Dundas said in an interview. Production would start as early as 2012, he said.

An increase in industrial- and precious-metal prices in the past five years has renewed interest in the Duluth complex, where iron ore has been mined for half a century.

The higher prices have spurred the development of a new process that PolyMet Mining Corp. will begin using next year to produce copper and other metals at its Minnesota project.

"We expect the project finance market to improve early in 2009, so we're optimistic that … we'll be able to structure the financing with a minimum amount of dilution for shareholders," Dundas said.

Provided Duluth Metals secures financing and environmental permits, the company may produce about 45,000 metric tons of refined copper a year from Nokomis, Dundas said.

It plans to use a hydrometallurgical process that employs pressurized liquid solutions instead of relying on high temperatures.

 

It’s past time for state to move on the PolyMet project

Mesabi Daily News
August 23, 2008

For those who did not attend the PolyMet Mining Company Open House on Aug. 14 in Hoyt Lakes it's unfortunate because it was well worth your time if you were at all interested in learning about the company.

PolyMet clearly went all out in making this open house as informative as possible. Every person in any way associated with their effort was present and available. If there was any lack of information on any particular subject I am not aware of it.

I believe that this is indicative of the openness and transparency that PolyMet officials have exhibited from day one. Ask us what you need or want to know and we'll tell you, has always seemed to be the PolyMet approach. Everyone was understanding and supportive of the need to develop non-ferrous mining regulations as opposed to existing ferrous mining regulations. Time would be needed to do it right. All concerned showed the patience that was required.

However, that was then and this is now. Years have past and uncertainty as to the conclusion of the process still looms large. The same questions can only be asked and responded to in so many ways without the patience that everyone has exhibited going to the breaking point.

If PolyMet were to fail on its own merits or lack thereof then so be it. However, that is not what is happening. It's being bled to death.

Let's be fair and let's be rational. The time to move this project along is now.

Mining project by the numbers

Mesabi Daily News
August 18, 2008

HOYT LAKES – The numbers of the PolyMet nonferrous mining project say a lot about how much investors are putting into the venture; the jobs it would create; the taxes it would generate and the overall economic development it would produce for the Iron Range.

Here's a snapshot look at the PolyMet nonferrous mining project by the numbers – a project that is all private investment, no public dollars:

• Cost: $602 million.

· Employment: More than 400 high-quality jobs.

· Payroll: $40 million annually.

· Spin-off jobs: More than 500 with a $242 million economic impact.

· Construction jobs: More than 1.5 million man hours.

· State and local taxes: $17 million annually.

· Federal taxes: $53 million annually.

· Environmental capital investment costs: Total: $100 million, including $40 million for the mine site, $8 million for the process facility, $17 million for the tailings basins and $35 million for wetlands mitigation, Environmental Impact Statement and permitting.

· EIS cost so far: $15 million.

· Environmental Review: To date, 4 1/2 years – began in March 2004 with the Environmental Assessment Worksheet.

· Procurement, construction, management effort: 250,000 hours.

· Excavation to open mine: 15 million cubic yards.

· Foundation for process plant: 50,000 cubic yards.

· New concrete: 20,000 cubic yards.

· New steel: 10,000 tons.

· Pipe in process plant: 130,000 lineal feet (25 miles).

· Pipe in mine and tailings basin areas: 25 more miles.

· Water quality: Zero surface water discharge. All water used recycled.

· Air quality: Emissions minor.

· Mercury emissions annually: Average from forest fires in the state – 240 to 550 pounds; previous LTV facility that closed in 2001 – 88 pounds; PolyMet (worst case scenario) – 8 pounds.

PolyMet: Ready, set but no go yet

Mesabi Daily News
August 18, 2008

HOYT LAKES – The former LTV worker looked around the vastness of the crusher building, stunned by the eerie silence of a facility that she knew by its rumbling noise of production.

"It's so quiet. It's like it died," she said to another former worker of the taconite plant that shuttered in 2000 during a tour last Thursday of the PolyMet plant site.

"It did," the other worker said. But the mining operation just north of Hoyt Lakes may soon come back to life, this time producing copper/nickel/precious metals rather than taconite pellets.

PolyMet officials say they are set to go now – have been for some time – and are getting more and more frustrated by delay after delay in the environmental assessment process of the Minnesota Department of Natural Resources.

"It's incredibly frustrating. How many hoops do we have to jump through? We've already spent $15 million of our own money on all the environmental studies," LaTisha Gietzen, vice president of governmental and environmental affairs for PolyMet, said at the Hoyt Lakes Arena last week during the company's Community Open House.

She was, however, bolstered by the public support of the Iron Range shown at the Open House. While about 800 people were expected, the number was closer to 1,500, Gietzen said.

"This is very heartwarming. We will need this support going forward when the EIS (Environmental Impact Statement) is released and public hearings are held," she said.

She also praised the support of the project by 8th District U.S. Rep. James Oberstar, D-Minn., and Minnesota U.S. Sens. Republican Norm Coleman and Democrat Amy Klobuchar, along with Republican Gov. Tim Pawlenty.

DNR officials said earlier in August that the draft EIS for the $602 million nonferrous mining project, which would create more than 400 permanent jobs and another 500 spin-off jobs, will be done by the end of September and be posted for public notice by mid-October. Two public hearings, one on the Range and the other in the Twin Cities, will then be held.

PolyMet officials, however, have heard other dates being set in the past for release of the EIS, only to see them fall through.

"After more than three years and $15 million of environmental testing, modeling and analysis, the state needs to move the environmental review into the public domain so that the local communities and other interested parties can form their own opinions and express their views," said PolyMet President and CEO Joe Scipioni in response to the latest DNR EIS deadline.

The overall environmental process has been 4 1/2 years in the works. It began with an Environmental Assessment Worksheet, developed in March of 2004, to outline the scope of the EIS.

"We have a lot of support from the public up here, which is gratifying. But investors' patience is not unlimited," said PolyMet CFO Douglas Newby.

Bill Murray, PolyMet executive chairman and former president and CEO, works closely with a large group of investors in a project that is supported solely by private funding, not public dollars.

"It's very frustrating because I'm the main interface with the board and the investors. We have done everything asked of us and more. It's way past time for movement on this," he said.

Murray and Newby both pointed out that there are considerably more investors from the Midwest – the Twin Cities and Milwaukee and Chicago – getting involved in PolyMet.

"And that's a great thing for this project, this area and Minnesota. To get that kind of investor backing in the region is just great," Murray said.

DNR officials say the delay in releasing the draft EIS is tied in part to ensuring that most of the public's questions about copper/nickel/precious metals mining will be addressed by the document. It would be the first nonferrous mine in the state's history.

Environmental critics, including groups such as the Sierra Club, have already been highly critical of sulfide mining. They point to abuses to the environment from mines that operated in other parts of the country.

But PolyMet officials say that the sulfide in the rock formation is low and the company's mining process includes using some of the sulfide for part of its own energy source. They also point to much lower air emissions compared to other mining projects or even natural causes, such as forest fires. And they add the water quality will not be affected because all water used in the process will be recycled.

And even with a recent dip in the price of commodities that will be mined and produced by PolyMet – copper, nickel, cobalt, palladium, platinum and gold – prices still are far above the break-even point.

For example:

· Copper had a $3.23 per pound average for 2007; break-even, $1.05 per pound.

· Nickel had a $16.90 per pound average for 2007; break-even, $4.57.

· Cobalt had a $29.05 per pound average for 2007; break-even, $10.71 per pound.

· Palladium had a $335 per ounce average for 2007; break-even, $158 per ounce.

· Platinum had a $1,305 per ounce average for 2007; break even, $632 per ounce.

· Gold had a $697 per ounce average for 2007; break-even, $316 per ounce.

Public support strong for PolyMet; now let’s make sure it is maintained

Mesabi Daily News
August 16, 2008

There is absolutely no doubt about the level of public support for the PolyMet copper/nickel/precious metals project slated for the former LTV Mining Co. site near Hoyt Lakes.

That strong backing was clearly evident last Thursday when a Community Open House was held. Expected attendance: 800. Actual attendance: Nearly double, about 1,500.

And that type of hardy support is needed to send a powerful message to state and federal officials that the mining project is a good one that will create 450 jobs, many more construction and spin-off jobs and a lot of business for area vendors – and it will be done with great respect for the environment. This is a $602 million project with a lot of advantages for not only the Iron Range but also the state and nation. When up and fully running, hopefully within two years, PolyMet will annually generate $53 million in federal taxes and $17 million in state and local taxes, while extracting nonferrous minerals that are critical to so many products that affect our daily lives. Also some of those products, such as catalytic converters for vehicles, are critical for a better environment.

There are opponents of the venture in the environmental movement who are already using scare tactics regarding sulfide mining to try to derail the project. And they will be even more visible and vocal when two public hearings are held – one on the Range and one in the Twin Cities – following release of the Environmental Impact Statement, which officials of the Department of Natural Resources have said will be completed by the end of September.

Playing on the fears of people because of some problems in the past with sulfide mines, opponents are trying to portray the PolyMet project as no different than those other mines. But when the facts regarding PolyMet are looked at in a rational manner, those concerns are easily allayed. This project will have the benefit of 2008 technology and that is good for the environment.

This project requires persistent advocacy by local officials, legislators, the governor's office and our federal elected officials. All are supportive of the project, but it's essential such support is public and continuous. You can be assured that the anti-PolyMet drum beat will grow louder leading up to public hearings.

We hear repeatedly from elected officials that jobs are of the highest priority. Well, there are 450 permanent good-paying jobs at stake here, so let's hear about the importance of them often.

The mine should already be up and running. Three years of study and environmental assessment – all $15 million of it so far absorbed by PolyMet – is far too long. Release of the EIS has been delayed and delayed.

It's time to move ahead and to do so with confidence in a project that is good for the economy and for Americans. And let's make the case with certainty that this venture is not an enemy of the environment.

Minnesota DNR Updates PolyMet EIS Progress

News Release
August 12, 2008

Hoyt Lakes, Minnesota, August 12, 2008 – PolyMet Mining Corp. (TSX: POM; AMEX: PLM) ("PolyMet" or the "Company") reported today that the State of Minnesota has committed to completing the PolyMet draft Environmental Impact Statement ("EIS") by the end of September. This will provide time to complete an expanded statistical analysis of water quality predictions that forms part of the State's environmental review of PolyMet's development-stage copper-nickel-precious metals mine located in northeastern Minnesota.

The Minnesota Department of Natural Resources ("MDNR") and the U.S. Army Corps. of Engineers ("USACE"), jointly the "Lead Agencies", are preparing the draft EIS. As previously reported, the EIS Contractor, who works on behalf of the Lead Agencies, delivered 14 of 19 chapters in early June and these chapters have been reviewed by other cooperating agencies participating in the EIS, and their comments are being incorporated into the draft EIS. With the exception of the data recently requested for the statistical analysis, PolyMet has delivered all of the technical information requested for the remaining 5 chapters, which the EIS Contractor is completing.

The MDNR has added an expanded sensitivity analysis of water quality predictions that forms part of the environmental review. This expanded scope of work was not originally planned by the EIS Contractor and, as a result of contractor manpower availability, the draft EIS will now be completed in late September.

Mark Holsten, Commissioner of the MDNR said, "The State of Minnesota recognizes the importance of copper-nickel mining to the State. We are committed to publishing a thorough and complete draft EIS that provides the public with the information it needs to understand the PolyMet project. We are committed to completing the draft EIS by the end of September, with official public notice marked by publication in the State's Environmental Quality Board (EQB) Monitor in mid- October."

Joe Scipioni, President and CEO stated, "After more than three years and $15 million of environmental testing, modeling and analysis, the State needs to move the environmental review into the public domain so that the local communities and other interested parties can form their own opinions and express their views."

* * * * *

PolyMet Mining Corp. (www.polymetmining.com) is a publicly-traded mine development company that controls 100% of the NorthMet copper-nickel-precious metals ore body through a long-term lease and owns 100% of the Erie Plant, a large processing facility located approximately six miles from the ore body in the established mining district of the Mesabi Range in northeastern Minnesota. PolyMet has completed its Definitive Feasibility Study and is seeking environmental and operating permits to enable it to commence production. The NorthMet project is expected to require approximately one million man hours of construction labor and create at least 400 long-term jobs, a level of activity that will have a significant multiplier effect in the local economy.

Franconia eyes first mine first

Mesabi Daily News
August 9, 2008

BABBITT – Franconia Minerals will be concentrating now on its potential first mine first, at Birch Lake, and plans winter drilling at its second site, the Maturi Deposit four miles to the northeast.

Indicated and inferred copper-nickel-precious metals reserves are at almost 200 million tons, but the exploratory firm is focusing on its main site with drilling this summer.

The state of the economy these days means there is "a pretty significant credit crunch in the U.S.," said Bill Brice, Franconia director of government and community relations. It is easier to begin first-mine operations and develop the second mine site later, in terms of cash flow, due to the financing crunch, he added. The firm, collecting samples in exploratory drilling, took residents and officials on a visit to its drilling barge Friday.

Out on the lake, the barge had just been anchored at new site P8-1, the latest site in 2008, for drilling beginning Saturday. Drilling goes on 24 hours a day, with a three-person crew pulling 12-hour shifts on the barge. A total of 30 persons, mostly contractor employees, work around the site; Franconia has about 10 employees so far.

Each drilling goes down at most several thousand feet, in bedrock, to bring up core samples. A technique known as wedging allows oblique drilling after the first hole is made, letting several samples be taken to give more assurance to the ore body at each site, Brice said.

Any potential mine will have a minimal footprint, maybe a square mile, with a plant and vertical mine shaft, and most of the space taken up by a tailings basin. Brice explained that underground mining would be of the room-and-pillar kind, with backfilling of opened areas with about half of what waste rock there will be being sealed with lime and gypsum underground.

"It's going to be very much like Tower-Soudan,'' he said, referring to the original iron mine on the Range, now a state park. Mining would be conducted about 1,600 to 2,800 feet below the surface, he added.

Plans are to continue with metallurgical tests and floatation-platsol bench testing of samples into the fall, with drilling of the Maturi site in the winter and similar tests on those samples in 2009.

Preliminary scoping for feasibility will continue while metallurgical testing goes on. A feasibility study as well as an environmental impact statement are in the timeline, with permits after that.

As things are now, if all that proceeds, two-year construction employing 1,000 workers can begin after permits are obtained, and then hiring for up to 500 permanent mine workers could begin when operations start up, at this point about 5-1/2 years from now, or early 2014, Brice said.

Earlier, Brice answered questions from residents on any lake effects, and also from St. Louis County commissioners Mike Forsman and Keith Nelson.

Any sulfur in the ore body will be at most 1 to 2 percent, compared to 20 to 50 percent out west; and half of tailings will remain sealed underground, Brice said.

Nelson asked what the county can do to help, such as with infrastructure like roads or with wetlands issues.

Brice replied that any road would probably be a private one, but access for workers or suppliers to get to the site would be a need.

Nelson also inquired about possibilities for any facilities for copper production or fertilizer being built in the area. "We want to value-add anything we touch here,'' he said of Minnesota production and jobs.

If several of the non-ferrous mining companies are in production, it would be possible to combine for perhaps a gypsum plant or fertilizer plant if there is enough material, Brice said.

As cathode copper will be produced onsite, a plant "could make copper wiring and piping'' in the area, Brice said.