Rio Tinto released today a 38-page press release which discusses the company’s 2008 fiscal performance.   Buried in one paragraph on page 10 of the release, the company states that the “development of the Kennecott Eagle Minerals Company nickel and copper mine on the Yellow Dog Plains has been “deferred until market conditions recover.”

See http://www.riotinto.com/media/5157_17102.asp and click on the Press Release (pdf) at the bottom.

Jon Cherry of Kennecott Minerals hastily prepared a statement which reads,

“It is important to note that the Eagle project is one of many projects that add value to Rio Tinto. As market conditions continue to impact all industries, the Eagle team remains focused on realizing the inherent value of the project. We are continuing to work on our permits, litigation, and engineering design so that when the opportunity presents itself we will be poised to evaluate economic conditions and our next steps. The roughly 25 employees that are part of the Eagle project are integral to the ongoing activates in the U.P. These positions remain unchanged as we continue to focus on efforts and activities related to Eagle mine, Humboldt mill, and ongoing exploration activities.”

The fact is Kennecott finished their drilling activities for 2008 in December and laid off the young drill crew and security personnel indefinitely. Their plans for ‘full steam ahead’ have been slowed not only by the weather, but by Rio Tinto’s uncertaintly to proceed as planned.

The Eagle permit application has been criticized by experts in the field as being ‘worthless’ and should be thown out. The testimony given in the contested case against the Michigan DEQ and DNR proves that these agencies did not follow the law when evaluating and approving the mine permit. Thousands of citizens have signed petitions, written letters, and testified before the DEQ in efforts to bring attention to this project. Rio Tinto has not responded to the overwhelming public protest against Eagle project and remains isolated in London from these real issues surrounding Eagle.

The following are excerpts from John Pepin’s article published on the Mining Journal website, February 12, 2009 further explains Rio Tinto’s economic situation.

…[Though Rio Tinto reduced its net debt by $6.5 billion last year, posted underlying earnings of 38 percent above 2007 and had record 2008 production in iron ore, bauxite, U.S. coal, hard coking coal, alumina and borates, net earnings totaled $3.7 billion, half what they were the previous year, according to the release.

In December, Rio Tinto announced it would eliminate 14,000 jobs, cut capital spending from $9 billion to $4 billion for the coming year and expand the scope of assets targeted for divestment, including “significant assets” not previously up for sale.

At that time, Rio Tinto Chief Executive Tom Albanese said the measures were being taken in “response to the unprecedented rapidity and severity of the global economic downturn, which has caused sharp falls in commodity prices and a significantly weaker outlook.”

Albanese said Rio Tinto remained committed to an exploration and development strategy. But Albanese also said the company’s capital expenditure reductions would result in “impacts on projects across the board. Some projects will be canceled and others deferred until markets recover.”

Rio Tinto said then those projects would be announced today.]

[Some financial analysts speculated the $300 million Eagle Project could have made Rio Tinto’s canceled projects list because of faltering nickel prices and delays in starting the mine due to legal challenges over permits, which are continuing.

Even if legal challenges were soon resolved in the company’s favor, construction on the mine would take two years to complete before operations would begin.

This could mean the project deferment may not end up having much of an impact on the company’s plans for the Eagle Mine. But depending on how long it takes for the markets to rebound, the deferment might also pose big problems for Kennecott.

When asked what the company would do if it was legally able to begin construction in April, Cherry said, “We’d have to wait and see how things looked then. We’ll just have to see how it all fits together.”

Meanwhile, the Michigan Department of Environmental Quality has scheduled meetings and public hearings next Wednesday to take public input on Kennecott’s plans to reuse the Humboldt Mill.

The $80 million project would be expected to process ore from the Eagle Mine before it is shipped by rail to Canada for further processing. The facility is also eyed by Kennecott because there is room to expand processing there if additional Kennecott mining prospects in the area pan out.

Cherry said today’s project deferment announcement would not affect the sessions.

Kennecott officials said about 100 construction jobs and 50 full-time jobs in operation would be created at the Humboldt Mill. The Eagle Project, situated in northern Marquette County, would mine a six-acre underground deposit expected to yield 250 million to 300 million pounds of nickel and about 200 million pounds of copper.]