July 31--PolyMet Mining will get more time to pay off part of its debt in a deal that will see Swiss commodities giant Glencore assume more than one-third of all PolyMet stock.
Under the deal announced Friday, PolyMet will extend a deadline to repay nearly $35 million in debt and interest to Glencore from a Sept. 30 deadline to March 31, 2016, or whenever PolyMet receives permits to build its proposed copper mine -- whichever comes first.
Polymet, which has been in the effort to open Minnesota's first copper-nickel mine for more than a decade, the company's only project, has been living off credit from Glencore and other investors as the process moves forward.
Glencore currently has 28.5 percent ownership which is 78.7 million shares. When they convert and exercise their warrants under the new deal, then they would have 113.3 million shares totaling 36.4 percent ownership in PolyMet, Bruce Richardson, PolyMet spokesman, said Friday.
Glencoe, which has been criticized by environmental and worker rights groups for activities in developing nations, first began investing in PolyMet in 2008.
As both the state and federal environmental review of the mining project wind down by the end of 2015, PolyMet officials hope to secure permits to open and build the mine and processing center outside Hoyt Lakes sometime early in 2016 -- assuming the review is considered adequate and PolyMet can meet the terms of those permits, including financial security requirements.
"Extending the maturity date to the earlier of permits and construction finance or March 31, 2016'' fits with the Minnesota Department of Natural Resources prediction that it will have a decision on the environmental review by then, said Jon Cherry, PolyMet CEO, in announcing the debt restructuring. The changes "also demonstrate Glencore's continued support for PolyMet and the NorthMet Project as we progress through completion of the environmental review and permitting into construction and operations."
PolyMet also will need to raise hundreds of millions of additional dollars to actually build-out the facility -- so-called construction finance -- in addition to the money it has already borrowed to get this far. So far the money has gone to pay staff as well as develop the extensive and expensive environmental plan and several variations of engineering plans for the mine, utilities, rail service, tailings basin and retooling of the old LTV Mining processing center from a taconite facility to handle copper.
In 2014 Forbes listed Glencore as the world's 10th largest corporation and the world's third largest family-held company. It was the largest company in Switzerland and the world's largest commodities trading company, with a global market share of 60 percent in the internationally tradeable zinc market, 50 percent in the copper market, 9 percent in the international grain market and 3 percent in the international oil market.
PolyMet, a so-called Canadian junior mining company based in Toronto with offices in Minnesota, is working to build its first-ever copper mine at a time when the mining industry is taking a hit from a glut of production and decreased demand, especially Chinese demand. The latest dive in commodities -- from ores to oil -- is killing metal prices. Gold, silver, copper, iron ore, aluminum, platinum, palladium, tin and nickel have all declined this year, rapidly in recent weeks. Gold recently fell below $1,100 for the first time in five years.
Copper prices on Friday stood at about $2.36 per pound, nearly half its 2011 peak of $4.50 per pound.
"It's something we obviously watch. But it doesn't affect how we move forward with the project,'' Richardson said of the current copper price downturn. "It's part of the business, the ups and downs. It's something you build into your business plan. Cycles are a way of life in mining."
PolyMet stock was trading at about 93 cents per share on Friday, down from a peak of $2.50 per share in 2011 and $4.70 in 2006.
PolyMet plans to build an open-pit mine that would also produce gold, platinum, palladium and other valuable metals with initial processing on site and material shipped to smelters in either Canada or the western U.S. for finishing. The company would employ more than 300 people for more than 20 years, the first non-iron mine in Minnesota history.
Supporters say the project will help diversify the regional economic that's tied to the currently depressed taconite iron ore industry.
But skeptics say the mine may be environmentally unsafe, with acidic runoff leaching pollutants out of rock and producing byproducts that could damage water quality and wild rice beds. Supporters say the mine's water treatment technology can prevent ecological damage.
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