Chilean mining giant buying Duluth Metals, Minnesota copper interests

Duluth Metals, the firm that's been pushing to build a copper-nickel mine in northeast Minnesota, said Monday it is selling its operations to Chilean mining giant Antofagasta PLC for about $85 million.

Antofagasta and Duluth Metals have been partners in Twin Metals Minnesota, which wants to build a massive underground mine near Ely, Minnesota, just a few miles south of the Boundary Waters Canoe Area Wilderness.

The region may hold what could be the world's largest untapped source of copper and other precious metals valued at perhaps $100 billion.

Duluth Metals, which also controls 40,000 acres of mineral interests on properties near the proposed Twin Metals project, has been exploring northeast Minnesota for nearly a decade searching for veins of copper and other metals.

It hasn't received as much attention as the efforts by another company, PolyMet, to build a copper-nickel mine. But Duluth Metals' plans are far larger.

The group's estimated that building the $2.5 billion mine would generate some 850 permanent jobs and upward of 3,500 construction jobs, three times the number of jobs the PolyMet mine would create.

Those potential benefits, however, haven't won over critics in the Ely area, who fear mining could wreck the nearby boundary waters and kill the area's reputation as a wilderness vacationland.

Toronto-based Duluth Metals' stock price recently dropped to seven cents a share, indicating little investor faith in the mine, which could take three years to build.

But Duluth Metals CEO Christopher Dundas said Antofagasta has the financial resources to get the project done.

"I think this deal removes a certain amount of uncertainty in the marketplace because Antofagasta is quite a substantial company in very good financial condition," he said.

It's not clear yet how the $85 million Antofagasta takeover will affect the efforts to secure permits for the proposed mine.

There have been severe doubts about the mine's viability. Before Monday, Duluth Metals stock had fallen 50 percent in value during 2014.

Earlier this year, Antofagasta officials said they weren't interested in boosting their ownership stake in Duluth Metals, saying the company was focused on "prioritizing projects with the highest value and lowest risks."

Antofagasta, however, said Monday the Ely mineral deposits remain attractive and the company will re-evaluate the project's design and continue seeking required permits.

Mining accounts for 90 percent of Antofagasta's business. Last year, the Chilean firm earned $660 million on revenue of $6 billion.

But these have been tough times even for big mining firms. Antofagasta's sales fell about 10 percent from 2012 to 2013, and the company's share price is less than half its five-year high.

"The market now for mining stocks is very challenging, especially for those that need financing for big capital projects," said analyst Alex Terentiew, who follows the mining industry for Raymond James.

"It's something that people should not give up on," Terentiew said. "Duluth is doing the best job they can to show this is going to be a sustainable project built to high standards. But it's going to take time."

Meanwhile, environmental groups, including the organization Friends of the Boundary Waters, remain worried about the project.

Friends of the Boundary Waters will be evaluating whether the buyout makes the project more likely to proceed, spokesman Aaron Klemz said.

"We'll pay close attention," he added. "But we're unclear about what this might mean for the project moving forward."