Friday, June 21, 2013

Opinion: Thoughts on Rio Tinto, Lundin Mining Corp. and Michigan Eagle Project

By Jack Parker*
Submitted to Keweenaw Now on June 14, 2013

Here they are -- my personal opinions.

1. We, the general public, have no reason to accept pronouncements by Rio Tinto as completely truthful, despite their claim to be open and transparent in their dealings with the public. We must expect trickery, even outright lies, as evinced in court proceedings over the last seven years. The present announcement of a sale of the Eagle project to a Canadian corporation, Lundin Mining -- a binding agreement already made -- unbeknownst to the people of Upper Michigan, is not atypical.

2. This is not the first such deal. Rio has already sold two other mining properties to Lundin. Keep that in mind.

3. The press release put out by Lundin contains much more information than those released by Rio Tinto to be published locally. Please click on it and read it before proceeding further. You will probably enjoy it:

Note that Lundin trades on the Toronto Stock Exchange and is thus subject to regulation by the Ontario Securities Act, which is much stricter than our own. But note at the same time that they are also listed and traded over the counter in this country.

4.  Selling price. This comes as a big surprise -- nominally $325,000,000 for an ore body originally valued at around $4,700,000,000, i.e., less than 10 percent! That can be explained in part by a re-evaluation of the ore reserves to suit Canadian practices and in part due to diminished metal prices. On the other hand Rio announced a finding of 20 percent more ore less than a month ago and now the Lundin version adds considerable hope for three additional ore bodies close to the Eagle, namely Eagle West, Eagle East and Eagle Deep. The selling price appears to be very generous.

5.  Rich Parents? Have you heard of these special corporate deals wherein Corp A sells something dirt cheap to Corp B, which then makes good profits while Corp A reports a loss -- but Corp A holds a controlling interest in Corp B. One of the best was when McDonalds spun off Chipotle (not a direct competitor) and made a bundle on both! But Rio Tinto, No. 3 in the world, wouldn’t sell three mining properties to Lundin, a lesser competitor, for reasons like that, would they?

I don’t even know how Eag­­le is related to Rio any more. Who does? Liabilities? Who will Superior Watershed report to? Who will pick up their tab?

6.  I don’t know enough to like or dislike the proposed (but binding) sale.

7.  My hope is that Ontario Securities will investigate and will discover that the Eagle Project is based on fraud and is thus out of bounds for Lundin to purchase for their shareholders.

8.  Years ago I got a hot tip from a mining client who told me to buy into a Canadian gold property -- and Paine-Webber, the US broker, told me they could not touch it. Too hot. That is why I’m still working 20 years past retirement age!

* Editor's Note: Guest writer Jack Parker of Toivola, Mich., is a semi-retired mining engineer/geologist, who specializes in practical rock mechanics. See our Dec. 6, 2010, article on his reports about the Eagle Mine, "Mining expert Jack Parker says Eagle Mine likely to collapse."

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