Mining project good deal or bad deal?

Prices are right for Birch Lake initiative with promise of jobs, but critics say environment will pay heavy cost

Beneath the ground at a Birch Lake mining site near Babbitt are a lot of non-ferrous minerals ”” copper, nickel, platinum, palladium, even a bit of gold.

They are minerals in demand in a mushrooming global economy. They are minerals that if mined today would command a hefty profit on the commodities market. They are minerals that, if extracted, would create 200 to 250 full-time jobs on the Iron Range with wages and benefits averaging more than $60,000 a year.

And they are minerals that should be mined as soon as possible and can be mined without damaging the environment, supporters of the Franconia Minerals project say.

But to Sierra Club environmentalists they are minerals of mass destruction that would ”destroy” the Birch Lake site.

Mining and jobs and a stronger economy versus the quality of the area’s environment and beauty ”” can they coexist comfortably or are they inevitable combatants? It’s a question that will be asked over and over and over in the coming months and years as the project moves toward a hoped-for 2010 mining operation.

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The Franconia project is nowhere near the biggest mining project ever on the Iron Range. It’s dwarfed by some ore and taconite undertakings of the past. And it’s not even the biggest of other mining and energy projects currently proposed for the area. The Minnesota Steel & Iron steelmaking project slated for Nashwauk and the Excelsior Energy coal gasification plant earmarked for Itasca County are larger in scope and dollars.

But a $200 million project is no small undertaking. And up to 250 good-paying full-time jobs in an area that has suffered severe job loss the past 20 years would be welcome, indeed.

Franconia Minerals Corp., an Alberta, Canada, mining firm, began a core drilling program last week to put a shaft down into the Birch Lake site near Babbitt. It’s an 11,000- to 15,000-foot exploratory drilling program that will include three or four holes and offset wedges. The bounty being sought is reserves of several non-ferrous minerals.

The drilling program is the first phase of a two-phase $10 million initiative that the company says is geared to improve the processing of the ores (copper, nickel, platinum, palladium), focusing on the recovery of nickel from ore to concentrate. The second phase is set to begin the last three months of the year and will drill holes to collect material for pilot plant runs of both concentration and hydrometallurgtical processes.

”The purpose of the drilling is two-fold,” Ernie Lehmann, chairman and director of Franconia Minerals Corp., said in a telephone interview. ”To better define the availability of the ore and better define a mine by taking a bulk sample of about 50 tons of material for a definitive metallurgical study.

”We have an optimistic schedule. If everything goes well and according to plan, we will finish the feasibility study and the EIS (Environmental Impact Statement) by around the end of 2008 and then we’d be two years away from commercial production,” he said.

The Iron Range Resources Board in mid-June approved a loan of $1.25 million for the Franconia Birch Lake project, which will be matched by another $1.25 million from the Department of Employment and Economic Development for the $10 million drilling phase. The other $7.5 million is put in by the company.

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So why so much optimism about the copper-nickel-platinum mining project? It’s in the numbers, Lehmann said. And the current market numbers don’t lie.

Lehmann said the company did two different analyses of market prices for the metals and the average for a break-even mining project were: Copper, $1.05 per pound; nickel, $5 per pound; platinum, $750 an ounce; palladium, $225 an ounce.

If the Birch Lake project was operational with today’s commodities prices, it would be a big money-maker: Copper, about $3.50 per pound; nickel, $9 to $10 a pound; platinum, $1,100 to $1,300 an ounce; palladium, $350 to $400 an ounce.

”I’m pretty optimistic about the project … particularly because we’re looking at a mature ore body and twice the tonnage and economies of scale that will not decrease capital cost per ton of production,” Lehmann said.

Lehmann, who has long been involved in mining ventures, is well aware of the roller-coaster ride that is the commodities market.

”Metals prices are cyclical … we know they are cyclical. High prices will encourage new development and lower prices. I expect we will see another cycle downward, maybe in three years or five to 10 years. But the demand is going up and as it increases worldwide, it will again reverse itself. We’re focused on trying to have enough floor available to live through two or three of those cycles. I’m quite sure we have that at B Birch Lake,” Lehmann said.

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The metals of Birch Lake have various uses in modern society, especially in rapidly developing countries such as China and India.

Copper is used for wire and pipe, clocks and watches, parts of boats and guns.

Platinum is often used in jewelry production, including watches, wedding bands and pendants. It is also the mineral in catalytic converters for cars, which help control vehicle exhaust. It is also used in the making of pacemakers.

Palladium also has uses in jewelry, along with dentistry. But it’s in greatest demand for autocatalysts, which helps eliminate harmful emissions produced by internal combustion engines. Autocatalysts are by far the largest user of palladium; autocatalysts convert more than 90 percent of hydrocarbons, carbon monoxide and oxides of nitrogen produced in the exhaust from gasoline engines into carbon dioxide, nitrogen and water vapor.

Nickel is mostly used in industrial construction, but also in such home products as pots and pans and stainless steel kitchen sinks. Birch Lake would be the only nickel mine in North America.

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But Clyde Hanson, co-chairman of the Sierra Club Mining Without Harm Campaign, calls it a project of ”risky technology and short-term jobs. The result: ”The site would be destroyed on Birch Lake,” he said.

Hanson, who helped organize a canoe trip of 20-25 people to the Birch Lake site last weekend, in a telephone interview would not directly answer a question of whether the group is against the Birch Lake project.

”We’re against pollution,” he said.

”Are you against the project?” he was asked.

”I’m not going to answer that question, but people have to know that taconite mining is benign compared to this type of mining. Sulfide mining waste is like nuclear waste, it lasts for a long time,” he said.

However, Hanson was quick to respond directly to a question about governmental environmental safeguards.

”Do you trust the Minnesota Pollution Control Agency’s oversight of the project?”

”No.”

Regarding use of some of the materials to help reduce pollution, such as platinum for catalytic converters, Hanson said there should be ”100 percent recycling of these metals before we open any new mines and disrupt beautiful natural areas.”

State lawmakers on the IRR Board at last month’s meeting voiced strong support for the project, even though state Sen. Tom Bakk, DFL-Cook, said it was an economic risk the agency was taking. ”But we take risks with all projects,” said state Rep. David Dill, DFL-Crane Lake.

And state Rep. Tom Rukavina, DFL-Virginia, said he is confident that modern technology can allow mining, and the jobs it creates, to move ahead without threatening the environment. ”We can have both … mining and good jobs in a healthy environment,” he said.

Lehmann said that in mining’s past ”there were a lot of things done wrong … or else people didn’t care. But those days are gone. Look at the lengths we go now to protect the environment … and we’re not just forced to do so, we are willing to do that.”

He said that some environmentalists opposed to the project need to take a less narrow view of it.

”I think they are not really looking at what the science and engineering abilities are today. Also they aren’t understanding the physical process and the permitting process and the role of the state in making sure things are done well, and also our commitment to doing that.

”We are not your father’s or younger people’s grandfather’s generation,” he said.

Source: www.virginiamn.com