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Right now people are voting on DFL primary day in the Minnesota House 3A Special Election. It’d be safe to assume that a good number of people are voting at least in part based on their opinion of controversial Northeastern Minnesota nonferrous mining proposals in the Lake Superior and BWCA watersheds. Some for. Some against.
But the outcome of today’s election is highly unlikely to advance or stop a project like PolyMet in Hoyt Lakes. For that matter, neither will the anticipated state approval of the environmental review later this year. This is certainly true in comparison to a bit of world financial news that relatively few voters will see before they cast their ballots.
The global mining giant Glencore, one of the principal partners in PolyMet and widely believed to be the future majority owner, saw its stock drop by almost a third yesterday. Glencore’s collapse was spurred by the continuing anemia of the world commodities market, which now shows little sign of improving in the near future. One analyst now compares Glencore’s situation to the Lehman Brothers collapse at the outset of the Great Recession six years ago.
Glencore has responded today, claiming itself to be “operational and financially robust.”
As I’ve said about the issue before, PolyMet needs in the order of $1 billion to start mining. So does Twin Metals, which is several steps behind PolyMet. That’s not just a serious investment, that’s the kind of investment that Minnesota companies or even most American companies wouldn’t even remotely consider.
For more than a decade, I’ve tried to sort out the issue of nonferrous mining in Northern Minnesota. I’ve heard nearly all the arguments on both sides. There are many risks, hopes and possibilities. My single biggest concern about these projects is that the chance of them financially imploding is very high. Sure, the ores exist in great quantities, but at significant cost to extract. This is why companies didn’t mine the reserves 40 years ago. This is why companies didn’t mine the reserves 100 years ago. The presence of copper and other minerals east and north of the Mesabi Iron Range have been widely understood for a long time. The problem is that the vast stores of minerals are more thinly dispersed in waste rock than you find in typical mines.
So while it’s very true that mining jobs are good jobs (especially when protected by collective bargaining and safety regulations), the reality is that basing an economy on a whole new mining industry is a little like putting all our hopes in one specific player in a global Monopoly board game putting a hotel on Marvin Gardens. It could happen, but who knows? Monopoly players don’t care about the tiny hypothetical people who live along Marvin Gardens. They care about winning. Right now, the player who has shown the most interest in PolyMet is running out of money. So who else in the world wants to mine expensive ore in Northern Minnesota right now?
It could be several years or more before Glencore raises capital or another company shows interest. Which is why my biggest criticism about the nonferrous mining debate in Iron Range regional politics is that it wastes our time when we have so many other thing we could work on first.
Quick! Everyone! Learn what the candidates’ positions are on other issues! Maybe they have new ideas. They certainly should.
Polymet stock fell to 70 cents a share as well. If Glencore stops propping up the stock price of this make believe corporation it may well fall all the way down to its actual value of zero. Aside from a mining lease this co. has no assets… liquid or otherwise.
I wish this could be required reading before voting today. I appreciate the passion on both sides of the nonferrous mining debate, but it astounds me that people have spent YEARS of their lives debating this issue, waiting for hypothetical mining jobs to save everything, meanwhile they could have used that energy to create positive change in their communities.
Another informative column, Aaron. Too bad it won’t fit on a yard sign.
Brings to mind another tale of deceit. These stories are as old as the hills:
http://www.theguardian.com/film/2013/may/23/king-of-marvin-gardens-review
Don’t forget the hundreds of millions in financial assurances for the state on top of the start up investment. Perhaps the IRRRB is planning on chipping in the whole Doug Fund to help with that.
I’m sure Glencore and Polymet are happy that so many are worried if their investment in mining will be profitable. I am sure they will be moved by your concern. I am also positive that the hundreds of studies they have done to see if thy can be profitable mining copper on the Range will over ride all of your concern. This is not a Govt program that thrives on the fact they can tell voters look what we are doing with your tax dollars and have no profits or results to show for it. Solyndra, trillion dollar stimulus package come to mind. If Polymet can not be profitable they will go out of business, they understand this. there are no guarantees in starting ANY business. In business you do models to cover when copper is high- what will be profits, when copper is low- what will be profits. If they choose to mine up here they will know the pit falls. They are big boys and girls with business backgrounds and will make a financial decision…. That is called capitalism.
I wish the American people were this concerned over Federal & State Government programs, our wasteful spending would be reduced. Normally hard to get folks concerned with other folks money unless they are trying to get their hands on it.
Well said
From the Star Tribune, “Glencore plans to suspend dividends, sell assets, cut copper production and raise cash, among other measures, to cut its net debt by a third by the end of 2016.” How will this affect Minnesota?