Duluth Metals stock soars on joint venture news




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Duluth Metals Ltd


. has won up to $227-million from one of the world's largest copper miners for a joint venture to exploit what it says are its massive reserves of copper, nickel and platinum-group metals in Minnesota.

The deal will see London-based Antofagasta plc, which mines copper mines mostly in Chile, help finance a $1.3-billion mine on what the Canadian company calls its Nokomis property, about 150 kilometres north of Duluth, Minn., in the Superior National Forest.

The announcement sent Duluth Metals soaring more than 50 per cent on the Toronto Stock Exchange Thursday.

"From the point of view of validation of what we've got, and validation of the company, this is huge," Duluth chairman Christopher Dundas said in an interview, adding that a major partner was needed to make a project of this scale a reality.

While Mr. Dundas acknowledged that the reserves are of lower-grade material, he compares them to those in the Sudbury basin and Voisey's Bay and says the deposits are second only to the massive Norilsk deposits in Russia.

But hurdles remain, including possible protests from environmentalists and the winning of environmental approvals from the state of Minnesota.

Mr. Dundas said the project will be a low-cost operation, able to continue even if copper falls from the heights it has now reached after rebounding from the global commodities crash. It would be at least three or four years before any mine is up and running, he said.

Local environmentalists have raised concerns about the possible effects on lakes and rivers from a nearby proposed project by Canadian miner PolyMet Mining Corp.

But Mr. Dundas said he is that confident the environmental impact of the Nokomis project would be low and that it would win state approval: "Minnesota is one of the states ... that understands mining, and will approve mining."

The material under Nokomis is already low in sulphur, one of the byproducts from mines that can pollute water, he said. He said his company's preliminary testing suggests that resulting sulphur will be below allowable levels.

Plus, he said, the mine will be underground and not an open pit, which will reduce its environmental impact.

"On any mining project, anywhere in the world, you're going to have some environmentalists' noise," Mr. Dundas said.

Several mining companies have been exploring northern Minnesota, where iron ore has been mined for over a century and where copper, nickel and other minerals have been known to be hiding in the ground.

Some firms see it as a safer bet than developing countries where political instability can make doing business difficult.

Mr. Dundas said the state of Minnesota has been attracting companies to come in and look for minerals other than iron ore, in an effort to diversity the state's economy and bring in jobs to areas hit hard by the recession.

The deal will see Antofagasta provide $130-million (U.S.) to finance the project, in exchange for a 40 per cent interest in the joint venture, with an option to buy another 25 per cent. Duluth commits its Nokomis project and other properties, but maintains 100 per cent control of some its other exploration assets in Minnesota, in exchange for a 60 per cent interest in the joint venture.

Antofagasta will also provide Duluth with an additional $30-million, and to invest $11.6-million in the firm for a small minority stake. Additional commitments mean Antofagasta's has agreed to provide $227-million for the project.

Marcelo Awad, chief executive of Antofagasta Minerals SA, said the reserves have potential: "This is a large deposit that has the potential to become one of the world's premier low-cost copper-nickel producers."

Duluth Metals was spun off from parent Wallbridge Mining Co. Ltd. to exploit the Nokomis deposits and went public with an initial public offering on the TSX in October 2006.