May 22, 2024
Dear WRPC Member and Friends of the Menominee River,
The Gold Resource Corporation’s (GORO’s) Back Forty Project is on indefinite hold. After spending over $10 million on mine permitting for the Back Forty Project, GORO has suspended any further investment in the permitting process. GORO’s cash on hand dropped from $33.7 million at the end of 2021 to $6.3 million in May 2024. The longer the project remains on hold, the less likely GORO will be able to raise sufficient capital to revive the project. “In light of the continued challenges facing the Company,” GORO told its shareholders, “the Company’s Board of Directors has decided to initiate a formal review process…to evaluate strategic alternatives for the Company…including a potential sale of the Company.” (GORO 2023 Annual report, p. 5).
What are the prospects that another mining company will acquire the Back Forty Project?
In 2009 Aquila Resources entered into a joint venture with HudBay Minerals, a major Canadian mining company with a 51% ownership in the Back Forty Project. David Garofalo, HudBay’s president and CEO was enthusiastic with the partnership. “The Back Forty Project is an excellent fit with our strategy of acquiring and developing volcanic massive sulfide (VMS) deposits with strong exploration potential in mining friendly jurisdictions.”
The HudBay partnership encouraged Tom Quigley, Aquila’s President and CEO, to promote a “psychology of inevitability” to discourage the organized opposition to the project. In July 2009, Quigley told the Lake Township Board (site of the proposed mine) that his company expected to receive permits for the Back Forty mine in 2010 and begin production in 2012 (Lake Superior Mining News, July 14, 2009). Rather than discouraging their opposition, Quigley’s prediction inspired the township to enact zoning protections against unwanted mining in March 2011. The Lake Township ordinances came as an unwelcome surprise to HudBay Minerals. Quigley had not informed HudBay about the significant local opposition to the project.
In July 2012, HudBay Minerals said it was suspending work on the Back Forty Project and had no plans for further investment in the project. The company’s decision was based upon capital commitments at three other projects – two in Canada and one in Peru. HudBay retained the option of reestablishing majority control at a later date.
Citing HudBay’s capital commitment to a project in Peru as a rationale for withdrawing from the Back Forty Project was puzzling in light of community protests at HudBay’s Constancia copper mine where local residents said the company was polluting the area. In November 2016, HudBay temporarily suspended operations at its Constancia mine when 1,000 local residents took over the mine and two open pits (Engineering and Mining Journal, December 2016).
HudBay’s sudden withdrawal from the Back Forty Project left Aquila without the financing to continue the permitting process. The project was on hold until January 2015 when Aquila secured financial support from Orion Mine Finance, a New York-based investment fund. The agreement with Orion provided $20.75 million for the next stage of development at the Back Forty. In return, Orion would acquire 75% of Aquila’s life of mine silver and gold production at a discounted rate. “This transaction will be transformative for Aquila, and will help us get Back Forty shovel-ready by the end of 2016,” said Barry Hildred, CEO of Aquila.
Mr. Hildred’s optimistic prediction for a “shovel ready” project did not mention that Aquila still needed to raise more than $300 million to construct the mine. He also did not acknowledge the strong resolution of the Menominee Nation opposing the project or the commitment of resources and technical support “to protect the Tribe’s cultural and historical resources within its historical range.” (Menominee Indian Tribe of Wisconsin Resolution No. 15-93, December 3, 2015). The alliance between the Menominee Nation and local groups like the Front 40 Environmental Fight, the Coalition to SAVE the Menominee River and Tom Boerner, successfully challenged Aquila’s wetland permit in January 2021. Aquila went bankrupt and had to withdraw from the mine permit process.
GORO acquired ownership of Aquila Resources and the Back Forty Project in December 2021. When GORO acquired Aquila, the company acquired HudBay’s 51% interest in the Back Forty Project and future milestone payments tied to the development of the Back Forty Project. GORO had initially planned to pay $3 million in 2023 to prevent HudBay’s 51% buy-back option in the Back Forty Project. GORO later decided that HudBay was unlikely to exercise its buy-back option and thus did not pay the $3 million. At the end of January 2024, by the contractual deadline, HudBay did not exercise its buy-back option, thus passing on 51% of this project and avoiding the financial liabilities of Aquila’s gold and silver streaming agreements with Orion and other investors.
HudBay’s decision to give up its buy-back option for the Back Forty Project sends a powerful message to other potential investors. A major Canadian mining company with a prior history with the Back Forty Project would rather invest in a risky project in Peru than a controversial project in the Upper Peninsula.
Aquila Resources withdraws its lease application for mineral rights in Menominee County
The April 16, 2024 informational public hearing on Aquila’s application for 406.67 acres of metallic mineral lease rights in Menominee County was canceled when Aquila withdrew its application without any explanation. One possible reason is that Aquila is a bankrupt company that was acquired by GORO. Aquila’s assets are now controlled by GORO. Aquila has no legal standing to apply for mineral rights. GORO has ceased to fund the Back Forty Project and is looking for another company to acquire GORO or enter into a joint partnership to rescue a cash-poor company.
In Memoriam: Bill Boerner, 96 years old, Environmental Advocate and Friend of the Menominee Nation
William “Bill” Boerner was a longtime protector of the Menominee River and an honorary Menominee Indian Warrior. He recently attended the November 11, 2024 Peaceful Awareness Walk amongst the Ancestors of the Menominee People at Sixty Islands and wrote a speech that was read for the occasion.
In Memoriam: Ada Deer, 88 years old, a Menominee champion for tribal rights and Indigenous communities. Deer was a leader in restoring federal recognition for the Menominee tribe in 1973 after Congress ended federal recognition in 1961. Deer was the first woman to head the Bureau of Indian Affairs after being appointed by President Bill Clinton in 1993. She was a strong voice against the Back Forty Project.
Stay tuned,
Al Gedicks, Executive Secretary
