Schweitzer behind play for Montanore Mine

Former Montana governor Brian Schweitzer is one of the primary investors behind a private company that owns mineral rights situated between Mines Management and an ore body worth an estimated $8 billion.

Schweitzer, chairman of the board of directors of Stillwater Mining Company, and a hopeful for the 2016 Democratic presidential nomination, announced Tuesday his involvement with Optima Inc., which is wrapped in a pair of legal battles with Mines Management concerning access to the mine. The mine could potentially employ hundreds in Lincoln County, where unemployment is greater than 16 percent.

“My interest in the project began during my first few months as governor,” Schweitzer said. “I grew aware of Revett and Montanore because they are important for jobs in northwest Montana. I’ve been interested in the project for nearly 10 years.”

Glenn Dobbs, CEO of Mines Management, said he had a meeting with Schweitzer to discuss the Montanore project within a month of Schweitzer’s election in 2005.

“He said he wanted to get the project permitted as quickly as possible,” Dobbs said. “But his administration inflicted delay after delay after delay, and eight years later it still was not permitted. Here’s a man responsible for extensive delays in the permitting of the project, and shortly after he leaves office injects himself into a possible venture as chairman of a publically traded company.”

Dobbs said conversations with Schweitzer were rekindled in January when Dobbs discussed a possible joint venture between Stillwater Mining, which reports a $2 billion market cap, and Mines Management, which reports a $33.5 million market cap. Dobbs said Schweitzer called him March 24 and represented himself as one of Optima’s directors.

“He said he would make the claims issues go away in return for cash and shares,” Dobbs said. “He demanded $50,000 a year for the lifetime of the mine for Arnold Bakie. He wanted $500,000 for four years to be paid to Optima. He wanted six million shares, which equates to 21 percent, in

 Mines Management. He said if I did not accept his demands he would create controversy around the project. It is not often I take a call from someone threatening to damage my company if I do not give them money.”

Schweitzer said he made a personal investment in Optima. Stillwater Mining is not involved with Optima or Montanore Mine, he said.

A U.S. District Judge in Missoula ruled May 5 that Mines Management may access the 14,000-foot adit, or underground tunnel, into the mine. The condemnation ruling, barring appeal, gives Mines Management right of way to pass through claims held by Optima. Similar to when the government uses eminent domain, Optima and Mines Management were ordered to begin arbitration to determine the value of fair compensation that Mines Management will pay Optima for crossing its claims.

While the federal case does not question the validity of Optima’s claims, a lawsuit in state court between the two sides does. In March 2013, District Court Judge James Wheelis ruled Optima’s claims were valid and granted summary judgment preventing Mines Management from trespassing on those claims. The ruling was appealed to the Montana Supreme Court.

“Dobbs is like a football coach who goes 0-9 on the season and then runs around claiming victory because he won three coin tosses,” Schweitzer said. “Despite what Dobbs told investors, these were not favorable rulings to Mines Management.”

The mine is estimated to hold 230 million ounces of silver and 1.7 billion pounds of copper. During the past eight years, however, Mines Management has been unable to access the ore due to delays in the federal permitting process.

While Mines Management’s stock price has nearly doubled in the past year to $1.15 per share from 65 cents per share, its cash and liquid assets have been depleted significantly. Earlier this month, Mines Management reported $4.7 million in cash equivalents. At the end of 2012, the corporation had $11.8 million in cash equivalents. The downward trend was noted in Mines Management’s quarterly report that was released May 16, 2014.

“We do not currently have enough cash on hand to fund ongoing operating expenses beyond 2014,” according to Mines Management’s quarterly report. “Additional financing will be required to continue operations as a going concern and to complete the evaluation drilling program and a bankable feasibility study.”

Schweitzer said conversations between Optima and Mines Management are ongoing. While not addressing specifics, Schweitzer said Optima made a proposition to Mines Management a few months ago that was rejected. Schweitzer said Dobbs’ reaction was absurd.

“If you have a listing for a van on Craigslist at $10,000 and someone gives you an offer below that, do you call the police? What’s that?” Schweitzer said. “Mines Management’s hand has been substantially weakened with the ruling from a federal judge that we enter a compensation phase. Remember, according to Dobbs, access to the tunnel is worth $40 million.”

Dobbs said fair compensation to Optima would be somewhere between “zero and a few thousand dollars.” He also said the net value of the project has no relevance in relation to the valuation of the court-ordered easement.

“The value of the easement is equal to the damage inflicted on the property that is crossed,” Dobbs said. “Any suggestions otherwise is made of daydreams.”

An Optima newsletter obtained by The Western News indicates the company was formed in June 2013. For almost a year the members of Optima have been a mystery. Along with Schweitzer, directors include: Bruce Ramsey, former forest service supervisor of Beaverhead-Deer Lodge National Forest; David Elliott, part owner and vice president of Haywood Securities, Inc., a Canadian brokerage firm; Frank Duval, former president of Sterling Mining; certified public accountant Heather Ennis; and Idaho claimholder Arnold Bakie.

Disputes between claimholders such as Bakie, whose family first staked claims 10 miles south of Libby in 1984, and Mines Management have gone on for years. Bakie and others argue that their claims are situated across the adit that leads into Montanore Mine.

Noranda Inc. controlled the Montanore Mine before Mines Management. Noranda made annual payments to Bakie and other claimholders for access to the adit leading into the mine. Mines Management gained control of the project in 2006 and has not made any payments to claimholders since.

“I became involved with Arnold Bakie because he is a salt-of-the-earth guy who was being kicked around by big shots with New York money holding a club over his head,” Schweitzer said. “But Bakie would not back down.”

In February 2013, Schweitzer worked with a New York hedge fund, the Clinton Group, to conduct a takeover of Stillwater Mining’s board of directors.