Antofagasta, the Chilean-based global mining giant, will take complete control of the proposed Twin Metals copper project near Ely after acquiring Duluth Metals in a deal announced Monday.
The acquisition gives Antofagasta 100 percent ownership of the copper project proposed near the Kawishiwi River along Minnesota Highway 1.
The $85 million deal appears to buoy the Twin Metals project after Duluth Metals’ corporate value continued to shrink without a major investor to help the so-called Canadian junior mining company at a time when metal values are declining.
While Twin Metals was Toronto-based Duluth Metals’ only project, Antofagasta is an established mine owner and operator.
“From the Minnesota pint of view, I think this is a good thing. They’re going to develop that mine and employ a lot of people,” Mara Strazdins, Duluth Metals’ vice president of corporate relations, told the News Tribune on Monday. “Antofagasta has deeper pockets. They have the ability to get through what is really turning out to be tough times for the industry, especially for some Canadian juniors like” Duluth Metals.
Strazdins said she expects the Duluth Metals name to fade away completely after the deal is completed. She said it’s unclear what will happen to the five Duluth Metals employees in St. Paul and two in Duluth.
“They may join the Twin Metals operations now. We really don’t know what the details of this will be,” she said.
The deal gives Duluth Metals stock holders about 45 cents per share (Canadian), a big premium over the Friday closing stock price of about 7 cents.
“During a difficult period for the mining industry, Duluth has been able to negotiate a significant premium to the current market share price,” said Kelly Osborne, Duluth Metals chief executive officer, in a statement Monday announcing the deal.
The deal comes just a few months after Antofagasta, which already owned 40 percent of the Twin Metals project, announced it would not exercise an option to expand that investment.
Antofagasta officials on Monday hinted at some sort of change in the design of the huge underground mine. Twin Metals has mineral rights to about 40,000 acres around the project.
“The acquisition of Duluth provides Antofagasta with a long-term option to develop a large polymetallic resource in a stable and proven mining region,” said Diego Hernandez, Antofagasta’s chief executive officer, in a statement. “The Duluth complex is an attractive deposit and upon closing of the offer we will commence the process of re-evaluating the project’s design while also continuing with the permitting activities.”
Twin Metals has not yet applied for any state or federal permits for the copper project. But in August, Duluth Metals released the results of a “pre-feasibility” study on the mine saying the project has substantial reserves, would have a low cost of production and could turn a solid profit.
The report said the proposed mine would take about three years to build at a cost of $2.8 billion and eventually would employ about 850 people mining some 50,000 tons per day.
Christopher Dundas, Duluth Metals executive chairman, said at the time that Ely project’s hallmark would be ample ore reserves and low production costs when compared with mines worldwide. The mine is predicted to produce valuable minerals for at least 30 years - including an estimated 5.8 billion pounds of copper, 1.2 billion pounds of nickel, 1.5 million ounces of platinum, 4 million ounces of palladium, 1 million ounces of gold and 25.2 million ounces of silver.
The August report also predicted the mine would have $12.1 billion in revenue over the first 10 years, and profits would pay off the cost of building the mine in just 6.4 years.
The project has been criticized by environmental groups for its location, abutting the Boundary Waters Canoe Area Wilderness, and the possibility that mine runoff or unforeseen disasters could pollute the region’s pristine waters.
The company has been analyzing mineral samples from dozens of test drill sites across the 40,000 acres to which it holds mineral rights, both north and south of Minnesota Highway 1. Duluth Metals also has been collecting environmental data in the mine area for several years but has not begun any formal environmental review process, nor has the company applied for any state permits. Those efforts could still be several years away.
Twin Metals was formed in 2010 to develop the Ely-area mine when Antofagasta paid $130 million for its initial 40 percent interest in the project.
The Twin Metals project would incorporate several apparently rich deposits on either side of Minnesota Highway 1, near the Kawishiwi River and Birch Lake areas. While the mine would be in the BWCAW watershed, the company said it plans to process the ore in developed areas to the south, in the Lake Superior watershed.
