Pinning hopes to billions we don’t have

Concentrator drums inside a taconite plant. (PHOTO: mananc, Flickr CC)

Let us, for a moment, suspend the old debate about mining projects in Northern Minnesota.

You know the one. Jobs vs. the Environment. “Twin Citiots don’t care about us” vs. “Dumb Rangers don’t know what’s good for them.”

I’ve long argued this as a false choice. It distracts from the real problem in Northern Minnesota’s economy, particularly here in our rusting communities along the Mesabi Iron Range. Of course the Iron Range needs jobs. Of course mining represents a calculable environmental risk, as it always has. We’ve been figuring this risk vs. reward equation for a long time. Labor. Capital. Supply. Demand. Environment. We’ve learned we must constantly balance these concerns.

Nevertheless, the debate has become cultural and clannish. It’s not possible for me to settle all that here. Rather, I’d like to talk about a problem I see. It’s not mining itself; it’s the nature of the mining business.

Lately I’ve been watching the BBC TV production “Poldark,” based on the Winston Graham novels of the same name. The story centers on the rebellious son of a noble old mining family in Cornwall, England, around the turn of the 19th Century. Many early Mesabi Range miners came from this craggy windswept peninsula in Southeast England, my family included. Poldark owns land and knows how to mine it. Things were different then, of course. Hand tools. Candles. Tri-corner hats. But some things weren’t.

For instance, after you navigate the heaving bosoms of the soap opera side of the show, the action primarily centers around the fact that Poldark wants to blast deeper into his mine. The bankers, however, won’t give him any money. But, he says, if he blasts more he could make more money. No, say the money changers. And so on.

You could make a good argument that mining has always been this way, and remains so. Mining is risky. To your wallet. It’s very hard work, very expensive to do in quantities, and subject to absolutely merciless market forces. It goes on for two reasons. We need the materials and some people (Maybe you! But probably not!) get very, very rich extracting them. Financing new mining is one of the highest risk, highest reward propositions you find — especially in a globalized marketplace.

Case in point. Frik Els, in a Mining.com piece, explains that financiers have been particularly stingy in underwriting new mining ventures so far in 2017. This despite the stock market’s favorable reaction to President Trump’s threats to increase foreign steel tariffs, and the relatively strong economy of the past few years.

In fact, mining companies, on the whole, have fared extremely well on the stock market this year. Analysts upgraded both Cliffs Natural Resources and U.S. Steel from “near death” to buying opportunities. That’s remarkable, but it’s still not freeing up much money for new ventures. That’s why we wait with bated breath for news of the new value-added iron mine near Nashwauk, and for the particulars of the junior miners behind PolyMet and Twin Metals.

Here’s what I’m getting at. If we click our heels to find that PolyMet or Twin Metals have gained all necessary permits to mine, we still aren’t mining. We need PolyMet’s biggest investor Glencore, or some other company, to make the critical leap of investing $1 billion into the construction and operation of a mine. Twin Metals is much further behind in its development. To be clear, these companies don’t have the money; they’re trying to get it. As many of you know, the fully permitted Essar Steel Minnesota project has languished for more than 10 years waiting for $1.6 billion in financing.

There’s your problem. Because no one’s really arguing about whether minerals are in the ground or whether people use minerals in products. Yes, and yes, but who’s going to put the money in? Who thinks they can make a fortune? Because the real lesson of Iron Range history, and Appalachian history, and Cornish history, etc., is that mines are not charities. They don’t open mines to provide jobs. They hire miners to make money.

This is the single most frustrating thing about the mining question. Right now, PolyMet and Twin Metals are prospective projects, new ventures being sold to investors. We, the people, are a bullet point on the Power Point slideshow. Do we support new mining? YES! Are we going to give the new owner any trouble? CERTAINLY NOT! What are we asking in return? JUST THE JOBS, SIR! AND A MODEST PRODUCTION TAX. A tuppence, really, in the scale of what mines gross in full production. We’ll take it, sure. But we should understand that the economic effects will be limited due to automation and efficiencies in modern mining.

Here on the Iron Range, we don’t control billions of dollars to invest. We have only ourselves, our time on Earth, and the tax base of our small towns, a figure with far fewer zeros on the end. Does that mean we are hopeless? Hardly.

The people of Northern Minnesota should invest our limited time, energy and dollars into creative community-building ideas. We don’t control whether international financiers will slide so much as a pittance across the table. Indeed, no one cares about our communities the way we do. If we demonstrate independence we begin the process of attracting people and investment on our own terms, not just those of the wannabe heirs to the old Oliver Mining Company.

That way if new mines come, they come. If they don’t, we thrive anyway.

The old economic cycle of booms, busts and finger-pointing should be broken, not repeated.

Aaron J. Brown is an author and college instructor from northern Minnesota’s Iron Range. He writes the blog MinnesotaBrown.com and hosts the Great Northern Radio Show on Northern Community Radio. This piece first appeared in the Sunday, Aug. 6, 2017 edition of the Hibbing Daily Tribune.

 

Comments

  1. Tom Legg says:

    Great story. Well said.

    The question is whether we have much to offer the rest of the world that does not relate to our natural resources. Tourism is based on our natural resources, but struggles to provide living wage work for very many.

    If we are to have another source of good income it is likely to come from very tradional factors: highly educated flexible workers supported by good infrastructure. Unfortunately, we don’t seem to have our shoulders to those plows right now.

  2. Terrible story. Lose the flamboyancy fluffery in the commentary and explain the issue. I think I actually are with you but there’s to much foliage to see the forest or even the tree.

    If your saying this project is a high risk because the developers don’t have secure financing, the market is not established and could leave, and if the project fails, the community will be left to pick up the pieces with a fresh scar on the land, then I am inclined to agree with you.

    If your audience is the common man, try a more straight forward approach with less superficial caca. The fluff might make a connection with urban readers but is a disconnect to the rural reader.

    We need “dirty jobs” like Iron ore mining. A healthy steel industry is good for America and honestly better for the world environment than what’s being done in China. Exporting these jobs to China does not help the environment. That said, when we see the red flags of empty promises by a company, it does no one any good to ignore them. If the company tells local government officials whatever it takes to gain approval but don’t have the financing to follow through in the hard times, the project is a mistake. Underfunded mines without the capabilities, knowledge, and experience to succeed should not be approved.

  3. Kathleen McQuillan says:

    Good thoughts. And as we invest in “creative, community-building ideas”, let’s call upon our valued members of the miner’s community (folks that have experienced first-hand the benefits of higher wages and benefits secured at the bargaining table) to help lower paid workers organize, to allow their wages to rise and finally receiving what they are due. Elder and child care workers, customer service, maintenance and retail workers, many skilled trades people who haven’t access to union representation — occupations, by the way, that are always necessary and therefore, not subject to “boom and bust” cycles. These kinds of initiatives, along with good ole’ fashioned economic development and diversification, will really bring prosperity to the Iron Range and surrounding communities.

    • Ranger47 says:

      You nailed it Kathleen, 99.9% of the article outlines potential pitfalls of mining – old, new, existing or future. Same ole, same ole….mining is evil. 0.1% is devoted to any alternative solutions. In fact only one is mentioned. And that is – “The people of Northern Minnesota should invest our limited time, energy and dollars into creative community-building ideas”. Liberal speak for higher taxes, bigger government & more social programs. Absolutely no mention of ideas for new wealth creating jobs.

      You confirm you’re on board with this approach by encouraging “union representation” & “bargaining tables”, for all workers. You’re far from being the only Ranger with this we/they approach to new or existing employment opportunities on the Range. You simply reinforce how deep-seated, long-standing the anti-business attitude is.

      You close the deal with – “These kinds of initiatives, along with good ole’ fashioned economic development and diversification, will really bring prosperity to the Iron Range and surrounding communities”. So…if you think that’ll do it, you and Aaron should take this show on the road. Let’s get started!

      p.s. Once you’ve shown the first Power Point slide entitled Growing the Iron Range Through: 1) Creative Community-Building Ideas, 2) Union Representation, 3) Bargaining Tables, 4) Good Ole Fashioned Economic Development, and last but not least, 5) Diversification…..be prepared for tough questions from the audience such as – “what the hell you talking about?”

  4. independant says:

    Aaron, you appear to think you have the insight that the companies currently investing hundreds of millions of dollars on the exploration and feasibility of these projects will not be able to put together financing to build out any of these projects. There are many variables with individual projects and individual companies in any industry that cause successes and failures but to think current investors of this magnitude didn’t do their due diligence on the ability and probability of the entities to complete the entire process is a little weak.

    • Investors are taking a flier on a big payoff for a relatively high risk investment. My point is that a junior miner is a linear thinker with a new project like this. It found a resource, and it estimates that a mine of its design can extract that resource within a price range that the junior miner thinks will be profitable to someone, at some time. To a junior miner anything is possible, because it’s just a question of engineering. And yes, it’s true, the minerals are there and we can mine them. Fact and fact. But the world over these junior miners often don’t become actual mines because of financial barriers that occur later in the process. Getting speculators to drop $100 million is different than getting a big miner with customers lined up to spend $1 billion and then sell the ore at profit.

      I’ve maintained that PolyMet is far more likely to happen than Twin Metals just because of the more feasible logistics of their mine plans. For that reason, PolyMet is also more likely to get financed. But the point of what I wrote here, and to address what Steve wrote above, is that in the pantheon of problems the Range has, getting these new mines to go isn’t the first thing that needs to happen. If they go, great (economically speaking), but the process — both legal and corporate — will take years. Meantime, we find our communities in need of attention and care. When I see all our leaders lined up in a row at promotional rallies for these new projects, but I don’t see them doing much else, that’s a frustration for me. I think it frustrates a lot of people who aren’t part of the normal power dynamic on the Iron Range. I know it frustrates my students and young people deciding whether they stay on the Range or not. I hear from people like this twice a week. Increasingly they’re leaving. That breaks my heart and so I try to call attention to the realities of this business and the capabilities we have in ourselves to do more.

      • independant says:

        Don’t let “existing power dynamics” or large established industries be an excuse for not moving forward with new ideas. I always sense an us vs. them in many of these stories when it should be an “all of us” economic plan. Why in the hell can one not be both a supporter of existing iron mining, fledgling copper/nickel/PGM mining (which will bring thousands of direct & indirect jobs on its own) and also push for new industries and the support of local entrepreneurs. I have personally gone against 800 lb. gorillas in my industry that are all based outside the Iron Range and created new local jobs and support systems that are located here instead of Minneapolis/St Paul.

  5. The last lines of Aaron’s last paragraph are all too true.

  6. Reid Carron says:

    I think Aaron does a great job in calling attention to the need to diversify the economy of the Iron Range. But I am certain that, smart and thoughtful though he is, even he fails to appreciate the unmitigated disaster that a Twin Metals mine would be for the Arrowhead. Aaron’s original article here treats the prospect of sulfide-ore copper mining as “maybe it will happen and maybe it won’t; if it does, great, but in any event the Range needs other options.” In his comment, above, he writes: “If they [Twin Metals and Polymet] go, great (economically speaking), but the process — both legal and corporate — will take years.” I believe he is dead wrong when he says that it would be great “economically speaking” if Twin Metals happens. Ely and Grand Marais are the success stories in the Arrowhead. They are successful because of the health of the Superior National Forest and the beauty of the Boundary Waters–the Arrowhead is a great place to live at present. Twin Metals would destroy Ely and seriously harm Grand Marais and other Wilderness-edge communities and Duluth. It would gut several thousand acres of the Superior National Forest just southeast of Ely and render essentially valueless hundreds of homes (both seasonal and year-round) along the South Kawishiwi and Birch Lake–homes occupied by thousands of people who spend money in Ely because of the exquisite natural environment surrounding it. Twin Metals would pollute the Boundary Waters (there is simply no question about this; it is borne out by history and by peer-reviewed science) and turn the beautiful Highway 1 corridor into a massive industrial mining zone. Resorts, outfitters, and other businesses would be hammered. My wife and I would move away, as would hundreds of other people. Scores of thousands of wilderness travelers and northwoods vacationers would stop coming. And the only significant mining jobs would be held by engineers sitting behind computer terminals in Duluth operating equipment remotely. I have lived in Minnesota since 1973. The two constants are that the Vikings can’t win the Super Bowl and the Iron Range is begging/pleading/demanding help from everybody else because the mining economy sucks. Desiring more mining–especially sulfide-ore mining that brings poison and destruction wherever it is done–is simply insane.

    • independant says:

      My friend Ely has hundreds of houses for sale along with over two dozen businesses. For a town the size of Ely that is no success story.

      • David Gray says:

        Except, maybe, for the tourists.

      • Trixi Mail says:

        People move out when they know of impending mining, pipelines, fracking or other operations that can lower the value of their homes. They move out prior to the event if they are smart. Unfortunately this is what you have described is occurring in Ely.

  7. independant says:

    Please Trixi, the downward trend in Ely has been happening for at least the past 20 years plus. I just came off of Basswood lake in the BWCA where for the last couple decades I have witnessed first hand the number of users continuously dwindle since the early ninety’s.

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