Details emerge on 3rd-party developer for Crow Wing Power's Emily deposit
During a special meeting Monday, the Crow Wing Power Board of Directors agreed to an agreement with representatives of North Star Manganese—a Minneapolis-based development company—to potentially pursue development of the mine.
"It took a lot of research, hard work and due diligence, but we found the right partner to move this project forward," stated Bruce Kraemer, CEO of Crow Wing Power, in a news release Thursday, June 6. "We are excited about the potential of this investment to produce a strong financial return for the cooperative and its members."
While co-op officials have touted the deal as a positive step toward realizing the Emily mine, critics have denounced the deal.
"To me, that's just another example of the board of directors and CEO Bruce Kraemer slapping 38,000 members across the face," former state Rep. Dale Walz told the Dispatch June 3. "They're more worried about patting themselves on the back and lining their own pockets than the members of that power electric co-op. As a former state legislator, I am appalled at the way they're acting."
Both Board President Bob Kangas and Kraemer's office did not respond to requests for comment by deadline.
In the news release, Kraemer stated talks between Crow Wing Power and North Star Manganese began last year, but gained significant momentum the last three months.
According to the Minnesota Secretary of State's Office, North Star Manganese Inc. filed April 10 as a domestic corporation in good standing and was approved for 100,000,000 shares of authorized stock. The company has virtually no internet presence.
These talks, North Star CEO Henry "Rick" Sandri said, began between Crow Wing Power and Battery Mineral Resources, a Canandian-Australian outfit with offices in Toronto. Once Battery Mineral Resources opted to go a different direction with cobalt, lithium and graphite, company heads encouraged members of the staff—which already operate much like semi-independent contractors—to pursue the Emily mine on their own volition.
"If the Emily project turns out to be something of merit, they'd probably like to talk to us," Sandri said during a phone interview of Battery Mineral Resources' participation in the deposit.
Sandri described the deal as a non-binding agreement to explore the potential of the mine site.
He noted North Star representatives were not notified of threats of legal action against the cooperative, inquiries by the Minnesota Attorney General's office as stated by board members, or the existence of the 2008 royalty agreement between the Carlton Group and Crow Wing Power executives, only learning of them less than 48 hours prior to Monday's meeting.
However, based on his understanding, Sandri said, these developments don't look to factor into the mine's development just yet. Should the venture prove nonviable, Sandri said, North Star will exercise its right to back out of the deal.
"If it turns out there is anything we don't like, or can't figure out, or can't work around—we walk," said Sandri, who emphasized the tentative and exploratory nature of the deal at multiple points. "That's all we've agreed to. We have not agreed to start development. Essentially, we've agreed to a hard look."
History of the Emily deposit
According to the most current reports available, the Emily lode represents an intriguing opportunity—possibly the largest manganese deposit in all of North America and specifically in the U.S., which imports 100 percent of its manganese from Africa, Asia and South America.
It's a deposit featuring a rare combination of size, accessibility and high-grade manganese—estimated at 4 to 10 billion pounds—potentially worth $3.48 billion to $8.7 billion, dependent on market factors and size of the deposit. In addition, there's a further $250 million to $350 million worth of iron ore that could be harvested.
Manganese—while historically used to toughen steel—is crucial in the manufacturing of products from medical implements and plow equipment, to burgeoning markets for batteries and electric cars.
In particular, Steve Carlton of the eponymous Carlton Group, previously pointed to the car industry—of which Tesla is only a part—shifting into a focus for electric vehicles. He said by 2023 the industry could be producing 1.4 million electric cars a year and drivers could be steering 30 million electric vehicles on the road by 2030. These electric vehicles require batteries. Batteries of this caliber require manganese.
Crow Wing Power steps in
Initially, Carlton put the mine up for sale on the internet in 2006—drawing potential buyers from India, Ukraine, Japan, China, Australia and other areas. Crow Wing Power's involvement stemmed from a chance conversation at a birthday party, Carlton said. Once Crow Wing Power executives' interest was piqued, a meeting was arranged with the Carlton Group.
Crow Wing Power—an electricity company with little to no proven mining acumen, as well as a public co-op to boot—didn't seem a likely candidate. However, it sported success with the sale of a for-profit subsidiary the co-op bought in 2000 and turned around for a tidy profit in 2006—Hunt Technologies.
Armed with a sizable return on that investment, and reportedly a $50 million line of credit, Carlton said, Crow Wing Power executives negotiated a deal with Carlton and his associates that allocated an exponentially higher portion of the mine's profits in royalties to the Carlton Group than he could ever expect in a deal with an international corporation.
In all, 43.75 percent (and then, of that, 5 percent for Hunt interest holders) of the mine's profits would be set aside for interest holders, Carlton said—noting it's rare to see a deal assign royalty stakes anywhere near that percentage.
In 2011, tests began to determine if the deposit could be extracted via borehole mining—or, essentially, a hydraulic method during which water is blasted into a vein to produce a slurry that is transported to the surface and processed. However, largely because of its volcanic origins, the Emily manganese deposit proved too compacted and dense. Borehole mining operations at that time stalled.
Shortly thereafter, Crow Wing Power executives formally terminated their consulting agreement with the Carlton Group on Dec. 1, 2012, and negotiations between the two parties deteriorated quickly over the following years.
Carlton said communications between Crow Wing Power and the Carlton Group are virtually silent—both informally and formally—while Kraemer described Carlton as a "disgruntled business partner" motivated by frustration with the mine's progress.
In the decade since November 2008, Crow Wing Power spent roughly $23 million on the mine—cash and credit, not asset values—while development of the deposit progressed little beyond drilling tests, the construction of inactive surface facilities for ore processing and transportation, as well as a number of negotiations with third-party groups that haven't produced tangible results so far.