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The Michigan Strategic Fund Board on Tuesday postponed a decision on whether to award a $50 million grant to a copper mining project in the western Upper Peninsula, amid questions about the project, its finances and the need for state investment. , sent a request to the subcommittee for further consideration.
The current project is the Copperwood Mine in Gogebic County, just west of Porcupine Wilderness State Park, where the area has a long mining history. The property is owned by Highland Copper, a Canadian company that is also developing the White Pine North copper mine project on the east side of the park.
The Copperwood mine will employ about 380 people at annual wages of $80,000 to $120,000, said Vicki Schwab, MEDC’s Upper Peninsula regional managing director. She said this is well above the median household income of $38,000 and would be “transformative” in a region struggling with job loss, population decline, aging communities and declining school enrollment.
As a member of the MEDC staff, Mr. Schwab proposed the project to the Michigan Strategic Funds Commission, which held a special meeting to consider Highland Copper’s request for a $50 million Strategic Site Preparation Program grant. was held.
The grant program is supported by the Strategic Outreach and Attraction Readiness Fund, known as the SOAR Fund, and has channeled approximately $2 billion in taxpayer funds to private projects since its creation in 2021. The grants are designed to attract, retain and grow Michigan businesses. .
Strategic Fund Director Dan Mayerling questioned whether Highland Copper’s expected returns were so promising that state investment was needed to move the mine forward.
“Based on the project’s financial projections based on over $600 million in copper and expected revenue and payback period, it appears that the capital raising and financing portion of this project will move forward further,” CEO Meyering said. he said. of Trillium Investments. “It doesn’t seem like you necessarily need state funding to make this happen, but you’re moving along with the project.”
The $50 million state loan sought for Copperwood Mine is essentially equal to Highland Copper’s market capitalization, or the total amount of stock the company owns. Highland Copper CEO Barry O’Shea said the company has a market capitalization of between $50 million and $60 million and has about $30 million in the bank.
Mr O’Shea said major shareholders who wanted to support domestic copper production were keen on the Copperwood mine project, although he did not name them, adding that Highland Copper had made significant efforts to raise debt financing. Stated.
“We’re progressive, but we don’t have firm commitments,” O’Shea said. “I can say with confidence that an award of this kind will make a huge difference in how debt providers and equity investors view our company. , a real support.”
Strategic Fund board member Charles Rothstein said finding additional financing partners could reduce Highland Copper’s ownership stake in the Copperwood Mine, calling the $50 million request “a lot” He said that.
“We’re being asked to move forward with projects where the ownership structure is unclear,” said Rothstein, founding partner of Beringia LLC. “If bank financing is not available, depending on the size of the company and the size of the project, even with our subsidies, the situation will change one way or another…
“It’s a great project in the perfect field and we’re rooting for it, but it doesn’t seem to have solidified enough yet.”
O’Shea said Tuesday that board members’ reluctance to approve the grant created a chicken-and-egg problem for Highland Copper.
“As we seek to obtain additional funding, this approval from the state and this initial capital will be extremely helpful as we complete this financing and put the overall package together and begin construction. “It will be,” he said.
The state grant for the Copperwood project supports infrastructure investments, which Mike Foley, O’Shea & Highland Copper’s Copperwood site manager, said will help upgrade County Road 519, cell phone and This was explained as strengthening broadband services and improving energy infrastructure.
According to Eric Wolford, MEDC’s strategic project advisor, the government funds will be awarded as reimbursement after the company pays for the work.
Foley, a native of western UP, reminded the board of the local stakes presented by Copperwood Mine. He says the small community has no other economic prospects.
“If this doesn’t start, nothing will come after it,” he said. “This is an opportunity for the community in this area.”
The boom-and-bust economic cyclical nature of the mining industry has raised concerns from Chemico Group founder and CEO board member Leon Richardson, who said the state is not willing to invest in projects with limited lifespans. He questioned whether it was wise to spend $50 million.
“This is going to be a very large grant in a very short period of time, and we think it’s going to generate revenue,” Richardson said. “If I remember correctly, this is only an 11-year project and at the end of 11 years the mine will be closed and all the work we have done will be over? .”
Mr O’Shea said early drilling showed the mine had an 11-year lifespan, but the lifespan could be much longer. He said Highland Copper envisions Copperwood as a mine for 15 to 20 years or more.
The western Upper Peninsula has a long history of mining, primarily copper and iron ore. Its heyday was in his 19th century, and today the region struggles to balance the need to source minerals for electric vehicle batteries and renewable energy systems, while preserving UP’s character as a largely undeveloped wilderness. is at the center of a tense debate.
The region is home to the only nickel mine in the country, and copper mining also occurs at the Eagle Mine in Michigam Township, northwest of Marquette. Talon Michigan LLC is pursuing exploration rights to nearby state-owned nickel deposits.
The Copperwood mine project has been in the works in some form for more than a decade and has already secured some of the necessary permits from the Michigan Department of Environment, Great Lakes and Energy. Highland Copper took over the project in his 2014.
Mr O’Shea announced several details about the mine on Tuesday. Like Eagle Mine, it will be underground. He said the company no longer plans to source water from Lake Superior for its operations, but previous plans had caused concerns among residents.
O’Shea emphasized the role copper will play in the transition to renewable energy, a key component of the climate change plan pushed by Gov. Gretchen Whitmer and President Joe Biden’s administration.
Copper is a federally designated “critical mineral,” meaning it is considered essential to the nation’s economic or national security. Used in electric vehicle batteries, renewable energy production, and energy storage systems.
Over its lifetime, the Copperwood mine will produce enough copper to power 3,500 electric vehicle batteries, Schwab said.
“This is the copper that we will produce here and ideally supply here,” O’Shea said. “Copper is important from a federal and state perspective, but it’s also important from a commercial and corporate perspective. We’re in early discussions with GM, Ford and others to be able to supply copper directly. We have started and that is how we operate.”
Board members voted to put the project on hold and send it to a subcommittee for further consideration and to revisit it after answering several questions.
ckthompson@detroitnews.com
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