Duluth Metals Minnesota announced it's acquiring Franconia Minerals Corp. in a deal valued at $76 million, that creates a potentially giant underground copper-nickel mining operation.
Duluth Metals and Franconia Minerals have progressed the second farthest in pre-mining regulatory spade work behind PolyMet Mining, which is now completing environmental studies.
Structurally, the deal is complex, involving both a subsidiary and a partner of Duluth Metals, the Chilean mining giant Antofagasta PLC. But as far as the land is concerned the deal is simple, two adjoining areas become one.
In a conference call, Duluth Metals Chairman and CEO Christopher Dundas described two projects with common borders that will easily combine. Dundas said the combined mine creates new efficiencies for mining platinum group metals.
"The combination of these contiguous properties adds resources, thousands of acres of surface rights, and promising exploration lands to one of the largest emerging undeveloped [platinum group metals] deposits in the world," Dundas said.
Platinum group metals include copper and nickel, along with precious metals like platinum, palladium and gold.
The combined operations will hold mineral rights to about 56,000 acres, in a 10-mile stretch along the Kawishiwi River and Birch Lake from south of Ely. The goal is underground mining in a formation called the Duluth Complex.
Duluth Metals President Vern Baker said the combined project also provides advantages to regulators like the state of Minnesota.
"Instead of the state having to permit, and the federal government having to permit two completely separate projects ... we can bring all that together," he said. "We have a smaller impact on the environment. It's one that really looks exciting."
Chile-based mining company Antofagasta kicks in $30 million toward the acquisition and will buy another $20 million worth of Duluth Metals stock.
That's a strong vote of confidence in this new Minnesota mining venture, said Tony Barrett, a College of St. Scholastica economist.
"This shows to me as an economist, that these projects make sense," he said. "I mean, Antofagasta is not going to be messing around. Now, it may take yearsm, but the fact is this tells me corporations are willing to spend a lot of money just setting the table."
The plan will likely draw considerable opposition from environmental groups.
Platinum group metals are found in sulfide bearing rock. Poor mining practices in western states have created severe pollution from acidic runoff.
Environmentalists have criticized Polymet's open pit mining proposal as a serious threat to the St. Louis River and the Boundary Waters Canoe Area Wilderness.
The Duluth Metals-Twin Metals projects involve underground mining.
Much of the waste tailings would be returned to the mine. Still, some would be left in surface storage. Betsy Daub with the Friends of the Boundary Waters Wilderness promises close scrutiny of the plan saying a large mine in the area can effect a wilderness experience.
"What it does now is create sort of a mining juggernaut at the very edge of the wilderness," she said. "This area that is highly prized for clean water and natural forest conditions is ground zero for a vast new mining district."
Concerns include air or water pollution, noise, congestion and ecological damage from a growing population.
So far, the operations still lack a permit to conduct mining.
Duluth Metals President Baker won't predict a timeline for permitting but he says the goal is to move as quickly as possible.
Franconia's Board of Directors unanimously approved the deal, which still needs two-thirds approval from shareholders in February, and approvals from Canadian officials.