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Copper Mining Could Yield $2.5B for Minnesota Schools

Fri April 01, 2011 - Midwest Edition
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MINNEAPOLIS (AP) Two proposed copper mining projects could yield a $2.5 billion windfall for Minnesota schools, according to a new analysis by the Department of Natural Resources.

The state owns more than 6,000 acres of ore-rich land scattered south of Ely and Babbitt. Two ventures hope to mine copper, nickel and precious metals there on what are called “school trust lands.” Under the state Constitution, income from those lands goes into the Permanent School Fund, which contributed $59 per pupil to every district in the state this year.

The Star Tribune reported March 8 the DNR expects the fund to swell with royalties over 25 to 30 years if mining goes forward, which has yet to be settled. The operations will face lengthy environmental reviews, but the newspaper said the size of the projected royalties underscores the economic importance of copper mining in the state. The new industry also would generate jobs, taxes and possibly spinoff industries.

“It might go a long way toward helping our state’s budget situation for funding K-through-12 education,” said Peter Clevenstine, the DNR’s manager of engineering and mineral development, who did the analysis.

Three years ago, before copper prices skyrocketed and mining companies boosted their estimates of available ore in Minnesota, Clevenstine estimated the state trust lands might bring in about $1.4 billion in royalties. His latest projections increase the royalty estimate by about $1 billion.

Copper, the third-most-used metal in the world, has seen growing demand and soaring prices in the past two years as emerging economies, especially China and India, have recovered from recession. Copper is used in a wide range of industries, from construction to electronics.

The two companies that have signed leases with the state are Teck Resources Ltd. and Twin Metals Minnesota. Teck, based in Vancouver, Canada, has said little about its Minnesota plans. Twin Metals has proposed a deep underground mine costing more than $1 billion south of Ely. Neither company has sought environmental reviews or applied for permits to mine so far.

Prospects for the Twin Metals’ project got a boost when shareholders of Franconia Minerals Corp. agreed to a $75 million takeover by Duluth Metals Ltd. Duluth Metals is part of the Twin Metals joint venture, which also includes Chilean mining company Antofagasta PLC.

Vern Baker, president of Duluth Metals, said the proposed mine would be a boon for schools and state government.

“If you look at the direct contribution of the property taxes, the royalties, the income taxes that will be paid by the company and the employees of the company, the state is going to end up being one of the major beneficiaries of the flow of money,” he said.

State law requires the DNR to manage school trust lands in a way that generates the best return. The agency also regulates mining and oversees the environmental review of new mine projects. The dual roles worry some environmentalists, who say copper mining could pollute lakes, rivers and wetlands.

“It is a conflict of interest,” said Scott Strand, executive director of the Minnesota Center for Environmental Advocacy. “I am not challenging anyone’s good faith, but it puts an enormous amount of pressure on people to serve competing goals.”

Clevenstine said the DNR often has competing goals, which are built into the agency’s mission to manage lands for recreation, economic development and protection of natural resources. He said engineers like him are called on to make professional judgments on controversial projects.

“That’s what we do,” he said.

Minnesota owns 2.5 million acres of school trust lands, mostly on the Iron Range. Over the years, income from such things as timber sales or iron ore mining royalties has slowly built the fund to its current size. Only the fund’s earnings are spent on schools.

The state spends $5,124 each year per student overall, yet the money from the fund matters to many districts. For small districts, this year’s $59 per pupil payout adds up to tens of thousands of dollars. For the largest, it can be millions.

“It can be enough to pay for another teacher,” said Charlene Briner, spokeswoman for the state Education Department. “In times of diminishing resources, it can be significant.”

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