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Ex-Montana gov, others seek money for mine access; mining company chief calls it 'extortion'

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BILLINGS, Mont. - A group of investors that includes former Montana Gov. Brian Schweitzer is seeking $10 million from a mining company in exchange for access to a huge copper and silver reserve — a move the company's chief executive said Wednesday was "extortion" and included a threat to stir up negative publicity for the project.

Schweitzer, who has hinted at a 2016 presidential run, rejected the accusation and said he had been making a good-faith effort to resolve the dispute with a cash and stock settlement.

The two-term Democratic governor last year joined a handful of investors to form Optima Inc. That business controls mining rights — known as claims — on underground parcels needed by Mines Management Inc. to access the proposed Montanore mine beneath the Cabinet Mountains Wilderness near Libby.

The mine would tap into underground veins of copper and silver ore valued at more than $8 billion and employ 350 people. A federal judge in April gave Montanore a preliminary condemnation order giving it rights to access the reserves through tunnels passing through Optima's claims.

The order entitles Optima to just compensation. Schweitzer says $10 million represents a "ballpark figure" of what the claims are worth, and it is based on an earlier offer from Optima that was rejected by Mines Management.

Mines Management Chief Executive Officer Glenn Dobbs told The Associated Press that when Schweitzer called him in March to make the offer, the former governor threatened retribution if Optima didn't get its way.

"It was an extortion call," Dobbs said. "They were going to announce to the world that we didn't have access to the project. They would create controversy and depress our share price ... It's really gutter-type gangsterism."

Schweitzer responded Wednesday that Dobbs' accusation was "silly."

"How would it make sense for us to depress the value of the shares if that's the way we were hoping to be paid compensation? These are illogical allegations, and they are not true," he said.

Schweitzer left office last year and now serves as chairman of Stillwater Mining Inc., where he helped engineer a corporate board takeover that ousted the company's former chairman and CEO. Stillwater — Montana's largest mining company — is not involved with Optima or the Montanore mine, Schweitzer said.

A formal compensation claim against Mines Management from Optima is expected to be filed in federal court Thursday. If the two sides cannot agree on compensation, the court will appoint a commission to resolve the matter, according to Montana condemnation laws.

The mining claims at issue were originally owned by another member of Optima, Arnold Bakie, according to court documents.

Spokane-based Mines Management needs the Bakie claims to access a 14,000 foot tunnel and build another that would give it access to the silver and copper reserves, the company said in court documents.

Bakie and others with claims at the Montanore site were sued by Mines Management in an attempt to cancel out their claims.

After a state court rejected the lawsuit, the company filed a separate complaint in U.S. District Court to condemn the claims under Montana's eminent domain law.

A previous $100,000 offer to Bakie was rejected last year.

Schweitzer said he had followed the case as governor, and he got involved once he left office. Optima was incorporated after conversations between Schweitzer and Bakie that the governor said were "mutually" initiated.

"I was familiar with the doings here as governor," Schweitzer said. "I saw what was happening: These guys from MMI (Mines Management) thought they would come in here and strong-arm Arnold Bakie and their big lawyers are going to scare him ... Now he has partners that stand with him."

In March, Mines Management turned down Schweitzer's offer to resolve the claims dispute in exchange for cash and stock worth about $10 million, according to Dobbs and Schweitzer. That's when Dobbs said Schweitzer made his threats.

Dobbs also accused Schweitzer's administration of delaying the project during his two terms in office — another claim that Schweitzer said is untrue.

"Quite the opposite. This is an opportunity to settle this thing and have it over with" so work on the mine can proceed, he said.

Mines Management has been seeking state and federal permits since 2005 for Montanore. Its reserves hold 230 million ounces of silver and 1.7 billion pounds of copper, according to Mines Management.

A permit decision by the U.S. Forest Service and other agencies is targeted for 2015.

That timeline is largely dictated by the federal agencies, not the state, said Kristi Ponozzo, project co-ordinator at the Montana Department of Environmental Protection. She said she was unaware of any involvement by Schweitzer when he was in office.

Other members of Optima are Bruce Ramsey, former U.S. Forest Service Supervisor for the Beaverhead-Deerlodge National Forest; David Elliot, a partner with the Canadian brokerage firm Haywood Securities; mining entrepreneur Frank Duval; and financial consultant Heather Ennis, according to records filed with the Montana Secretary of State and information provided by Optima.

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