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Brazil battles China for control of South African metals

Little noticed in recent news was the ongoing battle between the world’s largest iron ore miner, Vale SA of Brazil, and the Jinchuan Group, China’s biggest nickel producer.  They were bidding for control of South Africa’s Metorex Ltd, a medium sized producer of high demand non-ferrous metals like copper, nickel and cobalt, a contest finally won by Jinchuan.  One reason for this metals demand is their use in renewable energy systems which provide transmission, rechargeable batteries, and wind turbine technology. 

Commenting on the Metorex bids, Andrew Ross partner at First New York Securities LLC, said,  “The Chinese and the Brazilians have voracious appetites for mining assets. There’s a race for assets worldwide going on. China and Brazil are at the forefront of that race.” 

Dwarfing the mineral assets of Metorex Ltd are world class mineral deposits which lie in a band meandering from southwest to northeast, adjacent to the Archean granite of Minnesota’s Iron Range. This resource has attracted two major mining ventures including one by Polymet Corporation of Canada and another from Twin Metals, a joint venture between Duluth Metals and Antofagasta PLC of Chile, one of the largest international mine operators. A new estimate from Twin Metals has assigned high confidence to the presence of 13.7 billion pounds of copper, 4.4 billion pounds of nickel and 21.2 million ounces of palladium, platinum and gold. The platinum and palladium deposits are one of the largest outside of South Africa.

The Polymet project expects annual metal production of 39,000 tons of copper, 9,000 tons of nickel, 400 tons of cobalt, 22,000 ounces of platinum, 87,000 ounces of palladium, and 13,800 ounces of gold from its lease.

The state of Minnesota owns more than 6,000 acres of land in the region, and I estimate that Minnesota’s schools would collect at least $2.0 billion in royalties in the coming decades if these new mining projects proceed. This state property is known as “school trust lands.’’ Under the Minnesota Constitution, income from such lands is earmarked for the Permanent School Fund, which contributes about $60 per pupil to every school district. An analysis by the Minnesota Department of Natural Resources projected that the school fund, with assets of $720 million, could more than triple in size with these new royalties over 25 to 30 years. 

Environmentalists are lined up in opposition to the mining, viewing the projects as a serious threat to water quality in the entire region, including the Boundary Waters. Project advocates include ex-Congressman Cravaack, Senators Klobuchar and Franken, and most area mayors who want those new quality jobs on the depressed Iron Range.

An example of an effective sulfide mine is the Flambeau Mine at Ladysmith, Wisconsin. Kennecott was the operator of this open pit copper sulfide mine that operated 140 feet from the Flambeau River in the 1990s. During the mining operation all of the surface area drainage and pit pumping water went into a treatment plant that successfully purified the water so it could be safely returned to the environment. Upon closure, to avoid acid rock drainage(ARD), the pit was backfilled with the waste rock and 30,000 tons of limestone.  The limestone was added as an ingredient to neutralize any ARD which forms. The Flambeau Mining Company did not have any violations of its permits in construction, operation and closure. It was closed in 1997, almost 10 years ago.

There is a 714-page Draft Environmental Impact Statement(DEIS) for the Polymet Project from the Minnesota DNR and the Corps of Engineers. It is clear from the Statement that any effluent from the project ends up in the drainage areas of the Partridge and Embarrass Rivers. Those rivers flow south to the St Louis River and Lake Superior, not north to the Boundary Waters. 

The DEIS is generally positive about the project, and it suggests that if all of Polymet’s commitments are met, there is no serious impact on the environment. The following quote from the DEIS on the Partridge River applies to its analysis of all three rivers involved: “Even with these higher loadings and assuming no natural attenuation, the model results indicate that water quality standards for the Partridge River would be maintained for the eight constituents studied (i.e., antimony, arsenic, fluoride, cobalt, copper, nickel, vanadium, and sulfate) under all flow conditions and mine years modeled. Therefore, even using relatively conservative assumptions, the Proposed Action is not predicted to result in any exceedances of surface water quality standards for the Partridge River at the modeled locations.”

 One of the concerns with these projects is the financial status of the operators. They will have to to meet the substantial environmental commitments of the project which are described in the DEIS. There is also the final closure and remediation which is estimated to cost at least $50 million, and then the long (more than 1,000 years per the DEIS) followup of drainage from left over tailings and newly created storage ponds. 

However, Swiss commodity and mining giant, Glencore, now owns 18% of Polymet’s shares. Glencore also has Polymet convertible debentures and warrants which would increase its ownership to 25 percent.  Twin Metals is backed by Antofagasta PLC of Chile, the world’s largest copper miner. The commitment of Glencore and Antofagasta needs to be assured before the dirt begins to fly. 

In 2011, world energy demand burned more than 2 tons of coal, oil, and natural gas for every person on the planet.  This sent more than 35 billion tons of carbon dioxide into the atmosphere. World governments are forcing carbon free renewable energy programs. This is causing increased demand for non-ferrous metals, of which the world now produces just 35 annual pounds per capita.  Their price is rising as shortages develop. The pressures for production of these profitable metals from Minnesota’s Copper Range will be difficult to resist. It’s time for the dirt to fly.

Rolf E. Westgard is a professional member, Geological Society of America and is guest faculty on energy subjects for the U of Minnesota LIfelong Learning program.