PolyMet Mining's long-awaited plans for a copper-nickel mine in Minnesota's Iron Range received welcome news Wednesday when a Swiss-based commodity trading and mining firm pledged to invest $20 million and help raise another $60 million in new equity financing.
The involvement from Glencore AG, which includes $20 million in bridge loans and up to $60 million in new equity, is expected to be finalized in June, pending regulatory approvals in the United States and Canada.
The investment will allow PolyMet to complete the lengthy environmental review and permitting process that has already been six years in the making at a cost of $50 million to date. Environmental permits and state regulatory approvals are required before mill work and mine construction can begin.
"So this is a pretty exciting day for us," said PolyMet CEO Jon Cherry.
Glencore's financing arrangement will involve the issuance of new stock to existing and new shareholders through a secondary offering process known as "a summary of rights offering." It is not yet known how many PolyMet shares Glencore will ultimately own, but it will not exceed 49.99 percent.
Glencore is no stranger to PolyMet. Over the past five years, it has loaned or invested about $100 million in PolyMet, said Douglas Newby, PolyMet's chief financial officer.
PolyMet ultimately plans to build a large open-pit mine near Hoyt Lakes and a full-scale water treatment plant in Hoyt Lakes.
It also will rehabilitate the ore-crushing mill that was the former site of the LTV Steel taconite plant in Hoyt Lakes. Once finished, the mill will crush rock shipped in from the Mesabi Iron Range near Babbitt and partially extract copper, nickel, platinum, palladium, cobalt and gold.
If successful, the newest influx of cash will help achieve PolyMet's vision of creating 600 construction jobs, 360 factory and mining jobs, $350 million in annual revenues and $200 million in earnings before taxes. Construction of the mine and mill rehab work should begin in mid- to late 2014, with the first metal extracts being produced 15 months later, Cherry said.
While the Iron Range Resources and Rehabilitation Board as well as mining advocates support the project, the PolyMet "NorthMet" project has stirred controversy.
In fact, PolyMet's plans have faced setbacks due to a lengthy environmental review process and concerns from environmentalists. Groups such as Conservation Minnesota, the Minnesota Center for Environmental Advocacy and others have long considered NorthMet risky. To extract copper and nickel and other metals, ore must be crushed, which exposes hidden sulfur inside the rock, they say.
The worry is that the mountains of crushed ore that are left behind after mining and milling would create sulfuric acid, which can leach mercury, arsenic and other heavy metals into groundwater, rivers and lakes. If contaminated, the damage can last for decades even after a mining pit and plant have closed, environmentalists say.
Cherry insisted that PolyMet is addressing those concerns.
Last year, the company built a water treatment pilot plant and it plans to build a full-scale plant that would extract all metal from any water that comes in contact with its operations. The pilot plant has already processed 2 million gallons of water, Cherry said.
In February, PolyMet announced that it had improved its environmental impact statement and re-engineered plans so that any sulfur dioxide, mercury and gas emissions would be reduced by 50 percent. And that's before any water treatments. Those changes were on top of environmental impact improvements announced in January, officials said.
PolyMet must complete its supplemental and its final environmental impact statements. And there are future public hearings and regulatory reviews. Cherry said that PolyMet is committed to complying with all environmental rules and that it expects to begin construction next year.
Dee DePass • 612-673-7206
