Birch Lake mining venture showcases its El Dorado — and stock price tumbles – by Ron Meador (Minnesota Post – August 26, 2014)

Last week we all got our first look at official projections of how the Twin Metals Minnesota copper/nickel mine at the edge of the Boundary Waters might proceed, and the numbers were frankly impressive:

  • $2.8 billion in capital investments to get TMM’s mines and processing facilities started, and another $2.6 billion in capital outlays over the first 10 years of operation.
  • A payback period on those expenditures of not quite six and a half years, thanks to a combination of favorably low production costs and a revenue stream estimated to flow at more than $12 billion in that first decade.
  • Metals production, over the 30 years that this phase might run, of 5.8 billion pounds of copper, 1.2 billion pounds of nickel, 1.5 million ounces of platinum, 4 million ounces of palladium, 1 million ounces of gold, and 25.2 million ounces of silver.

All in all, “one of the most compelling greenfield copper-nickel development projects in the world,” poised to be “one of the world’s great 21st century mines” — fortuitously situated to take advantage of low production costs, a ready work force with mining experience to fill an anticipated 850 jobs, and access to Great Lakes shipping. All in “a state that supports the mining industry.”

Those are the words of Kelly Osborne, CEO of Duluth Metals, the Canadian company that owns a majority of Twin Metals Minnesota, and you might think they would be music to investors’ ears.

Especially since this time they accompanied release of a securities-trading document, known as a pre-feasibility study, prepared by independent analysts under contract to Duluth Metals and filed with Canadian regulators.

But … not so much.

33 cents, a 52-week low

As reported by Minnesota Public Radio’s Dan Kraker, who had the best of fairly cursory coverage locally,

“Duluth Metals’ stock price tumbled 23 percent to $.33 a share by the end of trading Wednesday [the day of the announcement]. During a conference call to announce the report, investors appeared to have some concerns over the company’ s ability to raise the capital needed to finance the project. They also raised questions about Antofagasta’ s decision last month not to increase its ownership stake in Twin Metals.”

That sent me looking to mining and investment publications for further perspective and boy, did I find some.

The Northern Miner, published from Toronto, reported that “Wednesday’s tumble of 11 cents, to 31 cents a share, took it to a new 52-week low, far below its high-water mark of $1.46 for the previous 12 months.”

(The discrepancy with MPR’s figures reflects the fact that Duluth Metals is traded on both American and Canadian exchanges; I checked both the Toronto Stock Exchange and NASDAQ on Monday and found that Duluth Metals’ shares had fallen a few cents further still.)

The Northern Miner appraises the TMM project’s overall, lifetime economic profile as “positive, if not particularly robust.” And it had the clearest analysis I’ve seen yet of how the TMM project may be affected in the fairly short term by cooling enthusiasm at Antofagasta, the Chilean conglomerate with interests in some of the mines that make Chile the world’s largest copper producer by far.

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