Noranda pulls out of eastern U.S.

Toronto-based Noranda Minerals has effectively curtailed exploration activities in the eastern half of the U.S. by putting the brakes on projects in Wisconsin and closing its small North Carolina office.

More than 20 years after establishing itself in northern Wisconsin, Noranda announced recently that it will close its exploration office there by year-end. The Rhinelander division, which had an annual budget of about $6.8 million as recently as 1990, is the nerve centre for grassroots projects in the Carolinas, Michigan, New York and particularly Wisconsin. The decision will affect eight full-time and four contract employees. Three other employees were laid off when the 5-year-old branch office in North Carolina was closed in September.

“Our decision is part of an overall effort to focus our exploration activities on those states with a proven and predictable permitting environment and regions that encourage mineral development,” says Mike Donnelly, manager of U.S. Exploration. “There are other, better opportunities elsewhere.”

More than 24,000 acres of mineral leases along the Rhinelander-Ladysmith greenstone belt in northern Wisconsin will be dropped or optioned to other companies when the Rhinelander office is closed.

Donnelly said exploration funds will be redirected to other projects, particularly base metal plays, in the U.S. and other countries. He will move to Denver.

Behind the decision to flee Wisconsin is the environmental headache that has plagued Noranda since it discovered the 6-million-ton Lynne zinc deposit in 1990. After spending $8 million on exploration and permitting at Lynne, Noranda hit a roadblock when Wisconsin’s Department of Natural Resources determined that the four wet areas surrounding the proposed mine site are actually “lakes.”

Under state law, mining under lake beds is forbidden. But some argue that the “lakes” are more like bogs and, therefore, should fall under county, not state, jurisdiction.

Tom Evans, manager of mineral resources for the Wisconsin Geological Survey, says it is critical to the future of mining in the state that the jurisdictional issue be resolved as soon as possible.

Meanwhile, Noranda has suspended all baseline studies on the Lynne project. “If we get a successful resolution, we’ll make a business judgment whether or not to proceed,” says Donnelly. “We are not committed one way or the other.” But by curtailing its exploration, Noranda has dealt a blow to Wisconsin’s image as a prospective state for both gold and base metals.

“To see them (Noranda) leave as an exploration arm is very depressing,” says Evans. “Other companies are looking at the Lynne project and saying `does this kind of uncertainty apply to other projects?'”

He said Noranda’s decision will likely have an impact on Phelps Dodge (NYSE), which recently signed an agreement to study the regulatory hurdles associated with developing Exxon’s nearby Crandon deposit. Discovered in 1977, Crandon contains reserves of 61 million tons grading 5.6% zinc and 1.1% copper. Partners Asarco (NYSE) and Cyprus Gold will also be taking a second look at the Jump River joint venture, although the mineralization there occurs on high ground and is, therefore, unlikely to affect any major water resource, says Evans.

Meanwhile, construction continues at Kennecott’s 25-year old Flambeau copper deposit, where more than $20 million has been spent on environmental issues and permitting to date.