MARQUETTE - Kennecott Eagle Minerals Company plans for long-term nickel and copper exploration and development in the Upper Peninsula remain intact, despite sinking global economic fortunes and tumbling commodity prices.
Kennecott Eagle Project Manager Jon Cherry said efforts to develop the company's proposed mine on the Yellow Dog Plans are continuing, with additional exploration and development slated for the future.
"We've got a world-class ore body here. It's the highest grade ore body in the world," Cherry said. "We're taking the long-term view of nickel mining in the Upper Peninsula."
As part of the company's plans, Cherry said permit applications necessary for a new rock refining facility at the Humboldt Mill will be filed with the Michigan Department of Environmental Quality by the end of the month.
Kennecott officials said about 100 construction jobs and 50 full-time jobs in operation would be created by the project. The milling site could eventually become a regional processing center for use by additional companies.
On Wednesday, Kennecott's parent company Rio Tinto announced it will eliminate 14,000 jobs, cut capital spending from $9 billion to $4 billion in the coming year and expand the scope of assets targeted for divestment, including "significant assets" not previously up for sale.
"Rio Tinto has announced a detailed package of measures in response to the unprecedented rapidity and severity of the global economic downturn, which has caused sharp falls in commodity prices and a significantly weaker outlook," Rio Tinto chief executive Tom Albanese said in a news release.
Last month, Rio Tinto staved off a hostile takeover bid by Melbourne-based BHP Billiton Ltd.
Albanese said Rio Tinto remains committed to an exploration and development strategy. But Albanese also said the company's capital expenditure reductions will result in "impacts on projects across the board. Some projects will be canceled and others deferred until markets recover."
Rio Tinto will not announce affected projects until Feb. 12.
In the wake of Rio Tinto's new measures, some financial analysts have speculated the $300 million Eagle Project could be on the canceled projects list because of faltering nickel prices and delays in starting the mine due to legal challenges over permits.
"Theoretically, it could be (on the list), but so could any project we have slated for capital investment in the coming year," said Tony Shaffer, Rio Tinto principal advisor of media relations for the U.S. and South America. "We cannot give specifics right now."
Cherry said that currently "there won't be any significant or direct impacts to Eagle."
Kennecott remains focused on the outcomes of several ongoing issues that could affect the Eagle Project, including a state contested case hearing ruling, a lawsuit by mine opponents against the Michigan Department of Natural Resources, a permit application with the U.S. Environmental Protection Agency and an upcoming decision on potential federal Endangered Species Act protections for the coaster brook trout.
If the Eagle project does move forward, it will be years before production begins. The delay could prove helpful to the company, providing time for the global economic picture to brighten.
"Once Eagle goes into construction, it will be approximately two years before production will commence. That's a long horizon and as we know, economic conditions, demand conditions and other circumstances can change rapidly," Kennecott spokeswoman Deb Muchmore said. "We take a long view with respect to our investments and business plans, and are moving Eagle forward accordingly."
But mine opponents are also aware of the potential for economic matters to change over time and see it as a potential problem.
Michelle Halley, attorney and Lake Superior Project manager for the National Wildlife Federation, said one of the group's concerns is the sulfide mining industry's boom and bust history and the instability it creates.
"Just because the company may say this project is a 'go' today, doesn't mean it will be tomorrow," Halley said. "That is the problem with the notion of relying on sulfide miningas an economic base for our U.P. communities."
Kristi Mills, director of Save the Wild U.P., said the job losses for Rio Tinto are another reflection of the uncertain global economic climate.
"We saw copper and nickel prices at their highest value less than a year ago, only to watch stock prices and commodity values tank," Mills said. "Our concern continues to be about the economic sustainabilty versus volatility of new mining projects. Wilderness, eco-tourism, and recreation dollars are more welcoming and dependable."
Cherry said the Eagle Project currently has 26 employees working in development, exploration and management, with no plans in the near future for the staff size to change.
Two contract engineering firms working on clean-up efforts at the Humboldt Mill have finished most their work. One firm will be finished at the end of the month, the second will remain.
Core drilling is slowing with work completed for the season on targets detailed in summer aerial flights. Work to evaluate collected samples will be done this winter, Muchmore said.
An exploration equipment storage facility being erected on the Eagle Project site is expected to be completed this month. Footings for the structure are in the ground and Kennecott is awaiting delivery of a membrane covering.
Muchmore said Kennecott is overseeing "very responsible management of expenditures" and is "proceeding with elements of projects that are appropriate to the development timeline of Humboldt Mill, Eagle Mine and ongoing exploration activities."