The stock price has declined 57 percent, to 12 cents a share, since June 4, 2018, when Aquila received its fourth and final state permit for the project.

What’s going on?

The first place to look for an answer is the price of gold and zinc, experts say. Those two minerals make up 82 percent of the Back Forty’s anticipated metals production.

The price of gold is down 10 percent from its 52-week high. So, gold mining companies aren’t feeling an urgent need to seek new supplies, said investment analyst Dave Forest of Pierce Points (piercepoints.com).

Meanwhile, zinc is down 29 percent from its 52-week high.

The zinc price decline is driven by concerns about a tariff-driven trade war, and a general cooling off of the Chinese economy, which drives much of the market for global minerals, according to Forest and Prof. Gary Campbell, a mining economist with Michigan Technological University in Houghton, Mich. 

There is also a general lack of interest in the mining industry among investors, Forest said.

“Financing of mining projects is not a hot area right now,” Forest said. “There are not as many deals being done as there were five or six years ago.”

Aquila says it needs at least $263 million to open the Back Forty, on top of the $90 million it has already spent on planning and permitting. It is looking for a partner with deep pockets to capitalize the open-pit mine and mill.

So far, no one has committed big money to get the project into the construction phase.  

The lack of an immediate development deal isn’t fatal for the Back Forty project, Forest said. However, it may have disappointed investors who were hoping the project would move forward as soon as the final permit was issued, and that in turn may have affected the stock price.

Finally, investors may be reacting to the many roadblocks that face the Back Forty project, even though all the permits for the mine have now been issued.

Two administrative challenges to the project have been grinding through the hearings process for almost two years. Both target Aquila’s Back Forty mining permit. Final arguments for those contested cases are being drafted now, and administrative law judge Daniel Pulter could issue a decision before the end of the year.

As those proceedings wind down, however, three additional contested case petitions have been filed on Aquila’s recently-issued wetland permit.  The Menominee Indian Tribe of Wisconsin has also challenged the wetland permit in federal court.

And, despite the company’s claims, its permit applications aren’t completely done yet. The site plan in the mining permit must be amended so it matches the layout in the wetland permit. And the wetland permit came with 28 pages of conditions that must be met before the Back Forty gets a final go-ahead from state regulators.

There’s more. Aquila wants to cut a county road that passes through the mine site, but it hasn’t submitted a proposal yet. And Lake Township, where the Back Forty would be located, has implemented zoning-related ordinances that must be addressed at some point, either by negotiations or in a court battle.

These unresolved issues create uncertainty about the prospects for the Back Forty mine. That may be driving investors away from Aquila Resources toward other, more promising investment opportunities.

Aquila Resources did not respond to repeated requests for comment on this report, and has not issued any public statement about its declining stock price.

Let’s correct the record.

 

Ms. Lessard begins her letter by selectively quoting Part 632, Nonferrous Metallic Mineral Mining, of the Natural Resources and Environmental Protection Act (NREPA), presumably to support her claim that Lake Township’s mining regulations are unlawful. While it is true that the statute puts limits on local regulation of mines like the Back Forty, it also expressly allows regulations that do not “duplicate, contradict, or conflict” with the statute (MI Comp L § 324.63203(4)).

 

Furthermore – and this is key – Lake Township does not rely exclusively on Part 632 for its power to regulate mining activities. It also relies on its zoning authority and on its overarching duty to protect the public under the laws of the State of Michigan. This is all documented in the Lake Township Zoning Ordinance, Chapter 14, Special Land Uses, in the township’s Mineral Extraction Ordinance, and in two reports I’ve published on Facebook (“Lake Township Amending Zoning Regulations/Special Land Use” and “Lake Township Clarifies Authority Over Mining Operations,” www.facebook.com/back40film).

 

Ms. Lessard goes on to complain that Lake Township has enacted a resolution that prevents officials from communicating with Aquila Resources. What the resolution actually says is that business with the township shall be conducted in public, on the record and with a quorum of township officials in attendance, not in private meetings between an outside entity and individual town officials (Lake Township Resolution No. 071217A). In other words, in Lake Township the public’s business is to be conducted in public, not in secret, back-room conversations. 

 

Ms. Lessard also states that Lake Township “has turned us away when we have tried to work collaboratively with them to address their concerns” about the Back Forty project. In truth, under the town’s zoning ordinance, if Aquila submits a letter of request, and puts money in escrow to cover the township’s costs, the zoning staff will meet with Aquila and explain, on the record and in detail, what the township is looking for from the company. So far Aquila has chosen not to engage with Lake Township in these first steps toward an official review of its proposed mining project.

 

Finally, in her letter, Ms. Lessard attacks Lake Township officials for “actively opposing” the mine, “making up their own rules based on personal opinion” and violating their “moral obligation” to work with the company in good faith. In fact, the town board has not taken a position on the mine, pro or con. Instead, it has passed laws to protect the township from the potential negative impacts of a huge industrial project. That’s what elected public officials are “morally obligated” to do – regardless of what their personal opinions may be.