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Major Trump backer increases interest in gold mine under US government review

A major fundraiser for U.S. President Donald Trump increased his interest in a controversial gold development in Idaho that is under review by the U.S. government, prompting questions from environmentalists about whether the political support from the backer could translate to more favorable treatment of the planned mine.

Paulson & Co. Inc. is a former hedge fund run by billionaire John Paulson, who outlined plans in July to convert the firm into a family office. Paulson & Co. declared Aug. 26 that it would take a majority stake in Midas Gold Corp., a mineral exploration company heading the feasibility-stage Stibnite gold-silver-antimony project in Idaho.

As a result, Paulson & Co. increased its interest in Midas Gold to 40.4% from 3.52%, assuming full conversion of convertible notes. Paulson & Co. partner Marcelo Kim joined Midas Gold as a director in 2016 and was appointed chair of the board in March.

Paulson served on the economic team of Trump's 2016 presidential campaign and has hosted big-dollar fundraisers for Trump as recently as August. The billionaire has taken a keen interest in mining and gold over the years, but the timing of his interest in this particular company led environmentalists to question whether it could play a role in the U.S. government's advancement of the project.

Paulson & Co. first purchased convertible notes in Midas Gold in March 2016 and then again in March 2020. Midas Gold CEO Stephen Quin told finance newsletter Outsider Club that before the fund's initial C$55.2 million investment, the company was stuck for years in a holding pattern on developing the Stibnite project. Paulson & Co.'s investment was "definitely the driver" that allowed the project to move forward, Quin told Outsider Club.

Months later, the company filed initial documents with the U.S. Forest Service and Idaho state regulators to begin the process of getting approvals for the mine. Since then, the mine and its federal environmental review, which has almost entirely taken place under the Trump administration, has attracted pointed criticism from environmental groups, local tribal communities and Democrats in Congress.

Environmentalists said the support from Paulson may have benefited the project as it moved through the regulatory process. The August release of the mine's federal draft environmental impact statement may be an indication the administration is seeking to clear regulatory hurdles before the November election, according to Nic Nelson, executive director of Idaho Rivers United.

"I don't think the relationship between John Paulson and Donald Trump is insignificant in that regard," Nelson said in an interview.

Public records obtained by environmental group Earthworks revealed that in October 2018, the Forest Service was letting Midas Gold take the lead on authoring a key government document known as a biological assessment, which evaluates how the Stibnite mine would impact endangered species. House Democrats responded to the records by rebuking the Forest Service, urging the agency in a letter to "reinstate public confidence" in the endangered species review by revoking the company's authority to complete the biological assessment.

The documents were first reported by the Associated Press and shared with S&P Global Market Intelligence. Midas Gold has defended its role in working on the documents as normal and said it is only working on its draft version. All authority to create the "final document remains in the hands of federal regulators," the company said in a statement responding to the Associated Press report.

Midas Gold was sued in 2019 by the Nez Perce Tribe under the Clean Water Act for its alleged role in illegal discharges of arsenic, cyanide, mercury and other toxic pollutants at the Stibnite project site. In January, the judge overseeing the case denied a request by Midas Gold to stay the case, and legal proceedings are ongoing.

Suggestions that Paulson's involvement in the project have impacted its progress are "not based in fact but rather inflammatory rumors by special interests with a clear agenda," Midas Gold representative Mckinsey Lyon said in an email. "While some activist groups would like to see our project never move forward, or any mining in general, the project is not being fast-tracked."

Lyon noted that final approval for the project is expected in fall 2021, after the November election. "We still have many more steps to go before we receive final approvals on the project, and it is completely unfounded to say we are trying to rush the project with the current administration," Lyon said.

A representative for Paulson & Co. declined to comment.