Mining in Penokee Hills was artificially inflated
To the Editor:
Gogebic Taconite closed its doors, it says because of the abundance of wetlands and fear of the EPA. Throughout the past four years other culprits blamed have been oppressive state laws and local zoning ordinances, the DNR, environmentalists, protestors and the Native Americans. But to get at the primary reason, follow the money.
From 1985 to 2005, iron ore traded at fixed prices, hovering between $11 and $16 per ton for that 20-year period. As demand for iron increased because of growth in China, prices doubled, and in early 2008 foreign investment companies got the idea of trading the commodity at spot prices rather than fixed. The result was heavy speculation by investors causing prices to increase exponentially to peak in February 2011 at $187 per ton. However, major steel producers, like US Steel, Tata and Posco, never paid those inflated prices because they either had long term fixed price contracts or they owned their own mines.
About the time G-Tac appeared in Hurley in 2010 spot prices had already reached $160 per ton. In the following four years, the company made an attempt to look like a real mining company. Step No. 1 was to procure the lease from Iron County and step No. 2 was to buy a new mining law in an effort to pump up the value of a very marginal ore deposit. Getting the conditional use permit from Iron County and the permit to mine from the DNR would have enhanced that value even more.
But the Penokee project never was real. For so many reasons, including the abundance of wetlands, there is no orebody, which by definition is ore that can be mined for a profit. Had this proposal been a genuine mining project, many more than three staffers would have been working on it, and a lot more would have been accomplished in four years.
When the speculators cashed in about a year ago, possibly because of an increase in production, many investors were left holding inflated futures, and the speculation market fell apart. Taconite is now heading back to its pre-2007 price — the real price steel mills pay. Game over. G-Tac is gone.
Nobody in the taconite business or related suppliers and regulators ever believed it was anything else.
— Dick Thiede