by Steve Timmer

Jul 19, 2013, 8:00 PM

Colonizing Ely

Well, and Hoyt Lakes, too

There was a terrific comment piece in MinnPost a couple of days ago, in fact, it won a Spotty™, an award that is hardly handed out just willy-nilly. The piece was the joint effort of several people who like to paddle around in the BWCAW and who expressed alarm at the prospect of sulfide mining in the area. For me, and a lot of other people, too, this was the money quote:

Since when do we fancy ourselves a Banana Republic, accepting pennies on the dollar from outsiders and colonizers?

Pretty direct, but spot on, so to speak.

Twin Metals Minnesota is a joint venture between a Canadian company, Duluth Metals, and its Chilean sidekick, Antofagasta plc. Twin Metals wants to mine near Ely. PolyMet, which wants to mine near Hoyt Lakes, is also a Canadian company; its largest shareholder is Glencore, described by Business Insider: an incredibly powerful and clandestine commodities trading firm — [having] a global network spanning 40 countries.)

Polymet says on its website that:

Our team includes many third- and fourth-generation miners – people whose experience in environmentally responsible mining demonstrates our commitment to investing in the health of our region [what region is that?] and making this a great place to live for generations to come.

One wonders if the “environmentally responsible mining” includes Glencore’s projects in South Africa and Zambia. Sulfide mining has such a rich history of environmental responsibility. It’s nice to know we’re in such good hands.

Our Canadian and Chilean colonizers say Think of the employment! Never mind the pollution! But be wary of these claims, kids.

Today, we’re going to focus on the employment.

Polymet says it will create “hundreds of jobs.” That is probably the right order of magnitude, at least for mine operation. There has been reference here to a Minnesota Environmental Quality Board report on copper/nickel mining in Minnesota issued in 1979. Here is a graph that can be found on page 31 of the Executive Summary of that report:

In a state with five million inhabitants, this is hardly an impressive number. But, it would doubtlessly spawn dozens of new burger joints and the minimum wage jobs they create, too!

One of the interesting things, though, is to realize that over half of the employment attributable directly to the mine is for smelting and refining. Kids, we definitely do not want a smelter. But the mining companies often talk about “value added” jobs created by a mine. That simply won’t happen, unless we’re willing to turn Hoyt Lakes or Ely into Sudbury, Ontario.

Personally, I don’t recommend it.

Remember, nobody ever got rich picking the bananas.

The bananas are going somewhere else: to Sudbury or someplace controlled by Glencore. Minnesota would just be a feedstock operation. Truly, Minnesota would be the banana plantation in the scheme of things.

The graph above shows stable employment for the life of the mine until shutdown. Well, maybe, assuming no shutdowns in the meantime. We have plenty of examples in Minnesota of taconite mines shutting temporarily when commodity prices fall. Sulfide mines are no different; Lake Shebandowan mine, referred to here earlier, was shuttered for a time when nickel prices were too low to operate the mine. There are many, many other examples.

The pro-mining forces in Minnesota are also fooling themselves if they think most of the good jobs are going to local people. Here’s Vern Baker, president of Duluth Metals [of Toronto], talking to a group in Sudbury:

So what’s in it for Northern Ontario? With an estimated $600 to $700 million annual operating cost, most of it spent on supply buying, Baker suggested companies in Sudbury and across the North could use their mining expertise to leverage some supply and service contracts at TMM.

“That one project has the potential to generate hundreds of millions of dollars of supply purchases. Obviously, that’s something that this group here can help with in the future,” Baker said.

“Especially since the focus where we’re looking at is predominantly underground operations, there’s a specialization here in Sudbury underground that has been tremendous, and you guys probably carry as much knowledge of underground mining and its needs as there is anywhere in the world right here within your group.”

Duluth is particularly keen to explore new technologies to maintain efficiencies, and Baker praised local companies like Rail-Veyor, as well as research being done on underground ventilation systems, for using innovation in their approaches to mining.

People in Ely and Hoyt Lakes will, of course, be at the front of the line for the burger-flipping jobs.

Update: Paul Krugman recently posted about the slowdown in China’s economy. He said:

Commodity prices are a potentially bigger story. China is a major consumer of raw materials — for example, about 11 percent of world oil consumption. And because the supply and demand of commodities tend to be relatively unresponsive to prices in the short run, a sharp drop in Chinese demand could lead to sharp falls in commodity prices. So the Ponzi bicycle shock could be a bigger deal for countries that sell raw materials, whether they sell to China or not, than it is to China exporters.

This has implications for metal prices too. And mine layoffs.