Major Partner Won't Expand Stake In Mine Near Ely

MINNEAPOLIS (AP) — A major partner gave up the right Thursday to take a bigger stake in the proposed Twin Metals copper-nickel mine near Ely in northeastern Minnesota, which has been a target of criticism from environmentalists who fear it will harm the nearby Boundary Waters Canoe Area Wilderness.

Chilean-based mining company Antofagasta PLC said it has terminated its option to buy another 25 percent of Twin Metals Minnesota LLC. The announcement said Toronto-based Duluth Metals Ltd. is now assuming control of the joint venture.

Duluth Metals owns 60 percent of Twin Metals Minnesota. Antofagasta, which could have upped its stake to 65 percent, said it's now "evaluating its options" for what to do with its 40 percent interest in the joint venture and its 10 percent direct ownership stake in Duluth Metals.

"By doing this today Antofagasta has signaled they intend to walk away from the project," said Aaron Klemz, spokesman for the Friends of the Boundary Waters Wilderness.

An Antofagasta spokesman denied that.

"No they're not walking away," spokesman Robin Wrench said by phone. He said Antofagasta still likes the project for the long-term, it's just not exercising its right to buy a larger stake. The move means Antofagasta is only responsible for 40 percent of the project's future funding, not 65 percent, he said.

The announcement said Duluth Metals gets an option for six months to buy out Antofagasta's share, which would cost about $220 million. It must also repay a $10 million loan from Antofagasta regardless of whether it buys Antofagasta's ownership stake.

"We're very excited about today's news," insisted Chris Dundas, executive chairman of Duluth Metals. He said his company will be analyzing all its alternatives, including buying out Antofagasta's share. He said he's "fully confident" that Duluth Metals can finance the project going forward.

But Dundas said the company's main focus at the moment is finishing its "prefeasibility" study for the mine. He said highlights of that report will be released in the next few weeks and the voluminous study will be released 45 days later.

Klemz said that Antofagasta's chairman, Jean-Paul Luksic, said at the company's annual meeting in May that it wants to invest only in projects where it expects strong returns. And its chief executive, Diego Hernandez, said in Thursday's announcement the company's priority is "projects with the highest value and lowest risks."

Luksic said Twin Metals: "has significant reserves and is a world class deposit in terms of size. It also faces technical and environmental challenges which we believe will be overcome, but not until at least the end of this decade."

Klemz said Antofagasta's decision must put Duluth Metals in a difficult position, at least for the short term.

"This really will change the dynamics about this issue. It has to. It's going to become a challenge for Duluth Metals to find financing. That's going to change how this issue moves forward," Klemz said.

Both Twin Metals and a separate copper-nickel mining proposal for the area, PolyMet, have drawn scrutiny because the metals are bound up in sulfide compounds that can produce sulfuric acid and release other pollutants when exposed to air and rain. Twin Metals also is located in a watershed that feeds into the Boundary Waters, a federally protected wilderness area. Opponents have not been reassured by statements from the companies and regulators that the projects won't cause acid runoff.

(© Copyright 2014 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed.)