Never Mind - Part II Why They're Hanging Around (Woods Person Blog) 09.27.2012

Woods Person: Thoughts and reports on what is happening in Wisconsin's Northwoods

Never Mind Part II - Why They're Hangin Round.

In part one we posed the scenario that the Penokee iron deposit may be too expensive, risky and difficult to mine profitably and that our mining company is not really serious about mining.

Then, why is the mining company still here?  Explaining that  is not easy.  The answer to the question “What the hell are they up to?” is daunting.  Why?  Because we have only clues, partial information, past history and “they aren’t sayin nothin.”

Here is what we do know.

Our mining company has purchased a lease option on the deposit from its current owners for some unknown amount of money and unknown conditions.  Not much help there, Watson.

That lease, apparently, comes with access to some 300 core samples done in the late 50’s and 60’s which probably define the extent of the deposit and condition of the overburden.  The information contained in those cores is not being shared.  No help there either.

Since purchasing that lease option, what has our mining company done or accomplished?:

• The company came to town in late 2010 and promised lucrative jobs to locals, then insisted on changes to our mining and environmental laws – effectively dividing the populace.  A divided negotiator is a weak negotiator.

• The company obtained a lopsided lease agreement with Iron County for use (for whatever purpose it deemed necessary, to be returned to the county in whatever condition) for up to 3,750 acres of county land – said lease negotiated without public hearing or input.

• The company obtained permits for further exploration from the state.

• The company won the strong support of the largest state business/industrial lobby.

• The company won the unquestioning support of the Republican party and helped to fund election of the new governor.  That party successfully cast the debate over a new mining bill as a partisan issue, stereotyping any opposition as “job killers.”

• The company negotiated a deal with Ironwood, MI to buy 1.2 million gallons per day of “makeup” water.

In the foreseeable future:

• The company may yet get an incredibly advantageous mining bill passed, making it possible to get at least state permits “on the cheap”  after the bill is passed. 

•  The company may be able to get other favors from the local communities such as roads, rail right of ways, loading docks, etc. in return for job promises.

So what?

Every one of those bullet points above increased the value of the leasehold!  How much?  That is the impossible to put a number on part.  We do know that without the sweetheart lease deal from the county the mining property was virtually worthless – no place to put the waste rock and tailings.

My latest interview with a retired expert on mining economics and process estimated that what they have now is worth many times a reasonable original lease price and if they get a lax law and permits, put another multiplier on top of that.  And they did it on the cheap.  A few employees, lobbying and a store-front office.

What then?  Sell it!  To whom?  Another recent interviewee said; “You’ve got to realize that there are investors  out there with incredible amounts of money that buy this kind of stuff – just on speculation.” What kind of speculation?  Here’s a "what if" fer ya."  What happens if the U.S. and China get into a spat and China says; “Hey U.S. industry, go get your steel somewhere else, or, pay us lots, lots more.”?

Next, Part III – What do we care?