Mine to inject $4 billion locally
HUMBOLDT – A recent in-house economic report projects the Eagle Mine and Humboldt Mill will directly and indirectly inject a total of $4 billion into the Marquette County economy over a 15-year period.
From 2011 through 2025, the Eagle Mine project -which includes the underground nickel and copper mine in Michigamme Township and the Humboldt Mill processing center in Humboldt Township- is expected to have a total positive economic impact of $4.3 billion on Michigan.
In addition to the $4 billion projected to impact Marquette County, $10 million will benefit Baraga County, $179 million for the rest of the Upper Peninsula and $169 million for the Lower Peninsula.
“Marquette County’s economy is expected to be nearly 20 percent greater by 2016 when Eagle Mine’s economic contribution peaks than it otherwise would have been without Eagle Mine,” the report stated.
In addition to the economic forecasting, the “Eagle Mine: Economic Impact Assessment” report -which was produced by former project owner Rio Tinto and released Oct. 17 by new owner, the Toronto-based Lundin Mining Corp.- also provides information on employment, purchase of goods and services, government revenue and risks.
“Community members asked us to report on our economic impact to the region,” said Lundin spokesman Dan Blondeau. “The assessment, which was written under the guidance of three Michigan Tech professors, demonstrates how Eagle strengthens the local economy.”
Those professors, who composed a steering committee, included economics professor Mark Roberts, associate economics professor Paul Nelson and Gary Campbell, a professor of natural resource economics.
The employment figures in the report were increased since the report was first created. The projected economic impact modeling used an average of 250 employees during construction and operation.
Lundin officials said the model does not reflect the new estimate of more than 500 total Eagle Mine and Humboldt Mill employees and contractors during construction and more than 330 workers and contractors during operations.
Blondeau said the revised figures makes the Eagle Mine project the 10th largest employer in Marquette County.
The analysis stated that on average, over the 15-year time frame, Marquette County is expected to benefit from 1,500 additional jobs each year. This is includes full-time and part-time employment and represents new jobs, including on-site employment, indirect employment of spin-off jobs in the area and induced employment, which might not exist without the mining project.
In addition to that projected job increase average for Marquette County, an additional 150 jobs are expected for the rest of the U.P. and 115 for the Lower Peninsula.
“The economic model suggests every job created on site at Eagle Mine is expected to support an additional five jobs in Marquette County over the period,” the report stated.
Last year, the Eagle Mine project spent an estimated $50 million in the U.P. on goods and services, including catering, cleaning, accommodations, flights, transportation, security, radio advertising, cement and construction.
Over the projected life of the mine, Lundin expects to spend more than $1.5 billion on procurement, including capital expenditures. About 38 percent of all procurement is expected to be from the U.P, and 90 percent of the procurement is expected to be from the United States.
“Over the course of the mine’s life, Eagle expects to spend over $750 million on goods and services in the U.P.,” Blondeau said. “Today, we’re spending nearly $40 million a month to bring Eagle into production in late 2014.”
The Eagle Mine project is also expected to generate a good deal of money through severance tax revenues for the state, schools, local governments and an rural economic development fund.
“State and local government revenue generated by Eagle is estimated to be $240 million,” Blondeau said.
The report writers said risks to an economy -which include mining as a significant role- often come from exposure to price volatility and changes in the mine’s production schedule and fiscal revenue.
“The Marquette economy should not be exceptionally vulnerable to price shocks,” the report said.
Nickel and copper price assumptions made in January 2013 -based on the consensus of 12 independent price forecasts and financial institutions- predict the average price of nickel per pound in 2014 to be $9.17 and $3.55 for copper.
The average nickel price is forecast to peak at $10.14 per pound in 2016 and drop back down to $9.38 in 2017 and 2018.
Average copper per pound prices are expected to continue to decline from $3.55 next year to $3.42 in 2015, $3.40 in 2016 and $2.65 in 2017 and 2018.
The report said changes in the production schedule would present a new risk through impacts within the local supply chain.
“Eagle Mine is aware of the impact of changes in its production schedule for the wider community, and will have to be mindful of mediating that impact,” the report said.
The report said schools and township budgets will be “heavily exposed to price volatility and budgets” because the benefit from the Eagle Mine’s severance tax payments.
“Support may need to be given to the schools and townships to manage the temporary and fluctuating revenue stream generated by Eagle Mine and encourage them to invest for the future,” the report read.
“Eagle’s economic legacy and reputation in the local community will be shaped by how local governments manage tax windfalls expected in the foreseeable future,” Blondeau said.
The report said the closure of the mine is expected to have a short-lived negative impact on the economy, which would be expected to rebound the following year and be on a higher growth trend path due to the mine’s presence, even after closure.
“However, an effort should be made to help unsure suppliers are not completely dependent upon Eagle Mine and have a wide customer base,” the report said.
The study did not include any potential additional economic benefit from ongoing exploration, which could extend the life of the mining project beyond eight years. The mine is expected to close in 2022, after beginning production next year. After that, reclamation activities are projected to create economic opportunity until 2025, according to the report.
John Pepin can be reached at 906-228-2500, ext. 206. His email address is firstname.lastname@example.org.