Minnesota locked in global dilemma: More copper and nickel are needed, but mine development slow

HOYT LAKES, Minn.— Not much has changed in the more than two decades since the LTV Steel plant here was shuttered. It's not for lack of trying.

Since 2005, the mining company PolyMet has been trying to open a copper mine a few miles away that would send ore here for processing and waste disposal. But the project recently lost a key permit and now, 18 years on, has no official opening date.

The saga of PolyMet and two other hardrock mines proposed in Minnesota highlights a dilemma playing out globally.

Demand for copper and nickel is surging thanks to a worldwide transition to clean electricity and electric vehicles, which is driven by government policy and improving economics. But the mineral supply is not keeping up: No one, it seems, wants a hardrock mine as a neighbor.

"I call this the paradox of green growth," said Chris Berry, a minerals analyst in Washington, D.C.

Environmental groups and tribal bands in Minnesota — as in other states and countries — challenge mining projects such as PolyMet because of potential pollution. Mine companies, meanwhile, are left with years of permit delays and legal challenges.

"We are terrible and very slow at building infrastructure of any kind," said Morgan Bazilian, a professor of public policy at the Colorado School of Mines. But given the mining industry's history, tribes and environmental groups have reason for skepticism.

"You have an industry with lots of bad examples and very few good examples," Bazilian said. "My take is that we probably have a once in millennium opportunity to change the narrative on mining."

PolyMet is starting to refurbish LTV's old processing facility regardless of the delays. On a visit earlier this month, a few dozen contractors were finally trucking away the crushed taconite LTV left behind when it closed and laid off 1,400.

"There's more people working on this site, working right here on this building, than have worked here in 20 years," said Bruce Richardson, spokesman for PolyMet and a partnership it has formed to run the mine, NewRange Copper Nickel.

Geologists and miners have been poking around in northern Minnesota for decades, but only in the 21st century have hardrock mines become economically feasible.

Minnesota holds some of the only mineable nickel deposits in the U.S.

Talon Metals, which just began the regulatory process in Minnesota, plans a nickel mine in Tamarack, Minn., which also would produce copper. NewRange and Twin Metals plan mines that would primarily produce copper, but also nickel and other minerals.

Nickel is a critical ingredient in many EV batteries. Copper is the metal of electricity conduction. About three times more copper is used in EVs than in gasoline- or diesel-powered light vehicles.

In all, green energy in 2022 accounted for 7% of world copper consumption, a number expected to rise to 20% by 2030, said Erik Heimlich, Santiago, Chile-based head of base metals supply with CRU, a mining researcher and consultancy.

This year, the global mining industry is set to produce 22.4 million tons of copper. With current supply-demand trends, CRU sees a global copper shortfall of 6.7 million tons by 2033.

The U.S. is a significant copper producer. Still, the country imports almost as much refined copper as it produces, according to the U.S. Geological Survey.

The U.S. also imports its nickel, save for a lone mine in Michigan's Upper Peninsula. Nickel today is primarily used to make stainless steel. But green energy — and particularly EV batteries — is expected to consume a much bigger share of the nickel market in coming decades.

"The energy transition movement will be the single most important driver of nickel demand globally for the next 30 years," said Adrian Gardner, a nickel analyst for Wood Mackenzie. "We will need more mine projects to become operational, and we will need to see rising recycling rates."

The U.S. gets the largest share of its nickel from Canada, a friendly trade partner. Still, Canada and other U.S. trade partners also have growing demands for green energy minerals.

"I would argue they would compete for the same resources," Berry said.

The U.S. government has deemed nickel a critical mineral, and the Biden administration has targeted building a nickel supply chain in the U.S.

Last year, the U.S. Department of Energy (DOE) granted Talon $114 million to build a nickel processing plant. Talon plans to build the plant in North Dakota, where permitting typically is less stringent than in Minnesota.

But generally, the ballyhooed clean energy and power legislation of 2022 — known as the Inflation Reduction Act — "has not done anything to boost domestic" copper-nickel mining, Gardner said. And Biden administration decisions have slowed several mining projects.

The administration has thrown up the biggest roadblocks to the Twin Metals project within the watershed of the protected Boundary Waters Canoe Area Wilderness. First, the administration canceled the mine's mineral leases. Later, it withdrew a huge swath of land, including the project site, from any mining at all.

Heimlich, the CRU copper analyst, said the projected copper shortfall is driven not only by increasing demand, but by lengthy mine permitting.

Take PolyMet. The project's timeline is more uncertain than ever in part because the Army Corps of Engineers revoked a key permit last month, saying the massive mine's plan would damage too many wetlands.

Environmentalists and the Fond du Lac Band of Lake Superior Chippewa successfully argued for the permit to be yanked based on the tribe's own water quality standards, which are stricter than Minnesota's. The case was the first to test the concept of tribal sovereignty in this way.

In Tamarack, the nearby Mille Lacs Band of Ojibwe is closely scrutinizing the Talon Metals nickel mine proposal submitted last month.

Often, but not always, tribes have suffered from resource extraction on their lands — including mining — both from environmental damage and unfair revenue arrangements, Bazilian said. "They don't have any reason to believe this will be different."

Timber and minerals in Ojibwe territory — including what is now northeastern Minnesota — played a big role in the U.S. government's demand for land cessions in the 19th century, said Frank Bibeau, a lawyer, treaty rights expert and member of the White Earth Nation.

Miners looked for copper and gold in Minnesota in the 1900s, but they struck it big with iron ore. A new wave of hardrock mines, though, could pose far greater environmental costs for the Ojibwe than iron mining, he said.

"How much is the cost to make these investments in the green revolution? It is it worth it to compromise the waters up here?" Bibeau said.

In a recent report, the International Energy Agency stressed that while new mineral projects have been announced, there still may not be enough metals available to transition to net-zero carbon energy by 2050.

"We're going to run into material constraints," said Linda Gaines, an analyst at DOE's Argonne National Laboratory. "So can we use other materials, [or] less materials?"

Reuters reported this week that re-engineered vehicles might require less copper than before. Some EV makers also are moving to new battery formulations that require fewer expensive metals such as nickel, said Sam Abuelsamid, a principal analyst at Guidehouse.

Lithium iron phosphate, or LFP, batteries already are common in China. The nickel-free batteries are cheaper and more durable but have a shorter range.

Ford is building an LFP battery factory in Michigan, and the company says the batteries could work well for companies that need fleets of vehicles. Even Tesla, which struck a supply agreement with Talon in Minnesota for nickel, uses some LFP packs.

"Will it take over completely? Probably not," Abuelsamid said, guessing that 30% to 40% of the North American market would one day be run on LFP.

As the EV market matures, there also will be opportunities to recycle.

Gaines said the battery industry estimates that 5% to 20% of the material going into a plant ends up as scrap. That excess will help establish a recycling industry.

"We're not going to be supplying a lot of our demand with recycled material for a long time, and certainly not until well into the 2030s," Gaines said.

One thing is clear, experts agreed: More metals have to come out of the ground.

"What's missing in this whole debate is pragmatism from mining companies and stakeholders," Berry said. But then he added: "I'm sitting here in Washington, D.C., not worrying about a mine being built next door."