County antes up for mine

By Roberta Forsell Stauffer of The Montana Standard

Commissioners OK $2 million loan request for Montana Resources to restart mining

Calling it the "critical catalyst required for the resumption of mining operations," Butte-Silver Bow Chief Executive Judy Jacobson spelled out a three-point plan at Wednesday night's council meeting for how the county can help Montana Resources start up again.

The plan includes a $1 million grant, an initial property tax break and application for a state loan on the company's behalf.

"I believe this plan is aggressive but prudent, when viewed in the context of the realizable economic benefits and the current dire straits of our local economy," Jacobson said.

Commissioners gave the go-ahead for the county to apply for a $2 million loan from the Montana Board of Investments that would be used to replace electric transformers and install new power lines at the mine. Only Commissioner Mike Sheehy voted no.

MR itself is not eligible to apply for the loan, but would pay it back over three years through a monthly user fee the county would pass on to the state.

Butte-Silver Bow secured this type of infrastructure loan for both MSE Inc. and Advanced Silicon Materials Inc., and there's no risk involved to the county, Jacobson said.

Commissioners are expected to take action on the other two items at their Aug. 27 meeting following a required public hearing on the tax abatement plan.

MR's Continental Pit mining operations were suspended in June 2000 due to high electricity prices. Resumption of operations would add 354 more employees to the skeleton crew of five there now. The mine has an estimated 23 years worth of reserves left, according to President Steve Walsh.

To qualify for tax relief, MR would be treated as a new business. It would pay roughly 50 percent of its tax bill for the first five years of operation, and then increase by 10 percent each year after that until it's paying in full.

Walsh said the company paid about $664,000 in property taxes this past year, but that didn't include any gross proceeds taxes since the mine wasn't running. Even with the tax relief, Butte-Silver Bow would start collecting considerably more tax money than it is now. The average annual county tax bill when the mine was running was $3.6 million.

And the third piece Jacobson mentioned — the $1 million grant — would come from the county's hard rock mine trust reserve. It would be used to upgrade engines on the mine's haul trucks.

The trust contains about $6 million, according to county Budget Director Mike Shea, and was created with proceeds from metal mines tax payments MR was required to pay the state back when it was operating. Shea said that 24 percent of that tax goes to the county in which the mine is located, and roughly a third is required to go into a trust fund to be used to mitigate the impact of a mine shutdown.

Jacobson said the final grant amount is still "fluid," and also in the works is a plan to recoup part of the grant in the event MR doesn't operate for at least 10 years. The county is thinking of requiring MR to repay $100,000 for each year it closes early. For example, if the mine stayed open only five years, it would be required to pay back $500,000.

Walsh told commissioners that if copper were to sell for 85 cents a pound and molybdenum for $4 a pound, the company would easily put $1 million back into the trust fund after 10 years.

Company officials intend to make a decision on reopening by month's end, and things are looking positive, Walsh said.

MR is in negotiations for power contracts this week, and also is talking with other suppliers such as Continental Lime. Walsh said he's confident that at least 50 percent of the former work force would return, and with that the core group back and possible training funds available, the mine could be at full production by year's end.

"It's real doable," Walsh said.