A mining industry merger that won stockholder approval Thursday sets the stage for developing a vast underground mine near Ely, Minn., to extract one of the world's richest deposits of copper, nickel and precious metals.
Franconia Minerals Corp. stockholders voted 88 percent in favor of the $75 million takeover by Duluth Metals Ltd., giving it control of mining rights beneath more than 25,000 acres in northern Minnesota -- deposits estimated at 1 billion tons that could take decades to extract.
"This puts in place the scale and the resource that will allow us to build a 21st-century mine that can meet all the requirements that our society puts on an industrial facility," said Vern Baker, president of Duluth Metals, who asserted that the mine's design will protect the environment.
The project's environmental review is sure to be contentious because the Friends of the Boundary Waters Wilderness and other groups say that sulfide mining -- so named because of the form of the deposits -- will pollute waterways in northern Minnesota's wilderness.
"What it does is create a mining juggernaut at the edge of the Boundary Waters Canoe Area," said Betsy Daub, policy director of the advocacy group based in Minneapolis. "We are beginning to see an appropriate level of concern because these mines have never been known not to pollute."
Antofagasta PLC, an international mining company based in Chile, earlier invested $130 million and took a 40 percent stake in a new joint venture, Twin Metals Minnesota, that expects to complete its first mine feasibility study next year, Baker said. Additional feasibility studies and an environmental review will takes several more years, he added.
The project got another boost Thursday when Gov. Mark Dayton signed a bill to reduce the cost and time of environmental review and permitting. In a statement, Twin Metals said the new law will help "to create new Minnesota jobs more quickly, while continuing to adhere to Minnesota's strong environmental standards."
Franconia will be delisted from the Toronto stock exchange after the deal is final, probably next week. Stockholders had the choice of 88 cents or 0.328 Duluth shares for each Franconia share. Total cash and shares available were capped at about 50-50.
The Twin Metals mine has been projected to cost up to $2 billion, and could employ 1,000 to 1,500 workers. The company says it plans to process ore into copper and nickel at a plant near the mine.
Another copper mine has been proposed in nearby Babbitt, Minn., by PolyMet Mining Corp. That plan is further along, and key decisions could come this year, though environmental groups have raised similar concerns about pollution. PolyMet recently dropped plans to refine ore in Minnesota, saying it would sell ore concentrate only.
One stockholder to gain from the takeover is the state of Minnesota. Two years ago, as part of a state economic development loan-grant deal with Franconia, the Iron Range Resources and Rehabilitation Board received warrants to purchase 2.5 million shares at 75 cents. Last week, the board agreed to exercise the warrants, briefly becoming a Franconia stockholder to earn up to $445,000.
Shares of Franconia closed at 91 U.S. cents, up 1.1 percent. Shares of Duluth Metals closed at $2.79, down 1 cent, on the Toronto exchange. Antofagasta shares rose 3 percent in London.
David Shaffer • 612-673-7090