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We are pleased with governor’s 2 mine visits

Mesabi Daily News (Daily) Editorial Board Oct. 15, 2015

We are extremely pleased that Gov. Mark Dayton will be traveling to visit the copper/nickel/precious metals Eagle Mine in Michigan that began production in the fall of 2014 and the former gold and silver Gilt Edge Mine in the Black Hills that was abandoned in 1999.

Those mine tours are part of his personal due diligence in advance of the final Environmental Impact Statement being released for the proposed nonferrous PolyMet Mine near Hoyt Lakes in November.

The final decision on adequacy of the EIS will follow in February — that‘s when construction can begin — and then the permitting process will kick into high gear.

The Department of Natural Resources, which is a co-lead agency in the PolyMet review process, and its commissioner, Tom Landwehr, are the final arbiters in determining whether the state’s first copper/nickel/precious metals project will move into production on the Iron Range.

But Gov. Dayton, who distanced himself from the project and process since he was first elected governor in 2010, has now taken a very visible and vocal role in the project and environmental review process.

That’s good to see. We wish it would have happened sooner and he would have chastised opponents of the project for spewing misleading and simply incorrect statements, all the while trying to wrap themselves in the false cloak of superior knowledge about the science of the issue.

The two mines that will receive the high-level tours should show the governor just how stuck in the past are copper/nickel opponents in waging their anti-mining folly. They can really only be seen in the rear view mirror of 2015, and even then they are barely visible.

The Gilt Edge Mine was operating decades ago, without the benefit of today’s technology and also our current stringent environmental rules and regulations.

The Eagle Mine and processing plant began production in September 2014 and is a very clean operation with the latest of technological advances in place and its staff quite proud, very understandably so, of its environmental record.

No matter how loud and obnoxious and deceitful the tactics of some PolyMet opponents, that game plan can’t win against modern day facts and science and strong public support on the Range for the project.

We welcome the governor’s journeys to the Eagle and Gilt Edge mines, which we hope will help allay any doubts or fears of some of those who have bought into the frenzied and irrational opposition.

Despite lower copper prices, PolyMet’s mine still has financial appeal

By LEE SCHAFER , STAR TRIBUNE
October 15, 2015 – 9:42 AM
Opponents of copper and nickel mining in northeastern Minnesota have turned hopeful that declining prices for those metals mean PolyMet Mining’s project no longer makes financial sense, even if it gets its permits to mine.

They are going to be disappointed.

In the 11 years and counting of the permitting process so far, the prices of copper and other metals have surged and slumped, but they have never declined to the point investors have lost interest in PolyMet’s project.

A recent announcement from the company about financing is just a 155-word news release, but it said a lot about the about the financial viability of PolyMet’s project.

That’s because this new money came from PolyMet’s financial partner in the deal, a global giant in the mining business called Glencore. That company is under so much pressure to pare down its debt that everything it owns is thought to be for sale at the right price. And it still went ahead and put an additional $6 million into PolyMet.

“I actually met with Glencore in the last week,” said PolyMet CEO Jon Cherry, in a conversation this week in his St. Paul office. “They expressed their full support for the company. They still like the project, and they still want it to go forward.”

PolyMet recruited Glencore into this project because that’s more or less the way projects come together for so-called junior mining companies like PolyMet Mining, today still more of a prospector than a miner.

The typical business plan of juniors is to drill into rocks to find ore and do a lot of the early work to get the site ready to mine if they find it, including seeking permits from regulators. There’s a lot of risk in this work, but it also takes a fraction of the capital it does to actually build a mine and processing plant.

Generally when the juniors are successful in moving along high-potential projects, they can count on financial support or even being acquired by bigger mining companies.

PolyMet struck up its relationship with Glencore in 2008. Glencore has since put more than $160 million into PolyMet, both debt and equity, which could give Glencore about one-third of the company on a fully diluted basis.

Switzerland-based Glencore turns out to be a fascinating company, even among the global mining giants. It started as the commodities trading business of the controversial financier Marc Rich, and only more recently got very big in traditional mining operations.

Having a trading operation was supposed to have insulated Glencore investors from the earnings volatility caused by big swings in commodity prices, but as the stomach-churning ride in the past few months has shown, that’s anything but the case.

At a recent price of about $2.40 per pound, the price of copper has declined by nearly half since early 2011, and the price of nickel has declined sharply since then, too. It’s meant that Glencore’s adjusted operating income for the first half of 2015 declined 61 percent from the same period of 2014, putting pressure on a balance sheet that had swollen during Glencore’s debt-financed acquisition spree.

As summer turned to fall Glencore promised to cut capital expenditures, suspended its dividend, raised equity and has pursued asset sales, including news just this week that two small copper mines would be sold.

At PolyMet’s St. Paul executive offices they certainly read this news, but it doesn’t have much to do with PolyMet’s plans. Cherry said he hopes Glencore remains a partner for the long term, but if Glencore has further problems of its own making, they are not going to derail his project.

Glencore is only a minority shareholder in publicly held PolyMet, with its executives holding two of the eight seats on PolyMet’s board of directors. And, Cherry added, “there are other people just as interested in us as Glencore is.”

Cherry also pointed out that 2015 metals prices aren’t nearly as important as what prices will be in 2017 or 2018. There are bullish cases by analysts now in the market along with bearish ones, but it is interesting to note that International Copper Study Group just put out its new forecast, this time looking for a copper production deficit next year.

“Right now is actually a great time to permit and build a mine,” Cherry said.

PolyMet’s own price expectations for metals are stuck in a kind of time warp. The PolyMet mine plan is years old by now and hasn’t changed, as amending it would mean the permitting process starts over.

PolyMet plans to produce much more copper than any other metal, and the copper price estimate in PolyMet’s plan is $2.90 per pound. That price for copper helps make the mine project as solidly profitable in its plan, with earnings before interest, taxes, depreciation and amortization, or EBITDA, of more than $217 million per year.

Financial analysts who have looked at PolyMet don’t have to just stick with the company’s plan, of course. Chris Krueger of Minneapolis-based Lake Street Capital Markets assumes far lower metals prices in his financial model, but it still shows a consistently profitable operation with annual EBITDA of about $176 million.

That’s the kind of financial picture that will be shown to investors if regulators permit PolyMet to mine, as the company tries to raise the hundreds of millions of dollars required to finish the project.

It has a great head start compared with the other companies seeking to mine copper and nickel in Minnesota. It acquired an old taconite mill and other mining infrastructure about a decade ago for a fraction of its replacement cost, adjacent to the mine site near the town of Hoyt Lakes.

The real asset value here, though, is what lies below the ground. At $3 per pound, just the 3.6 billion pounds of copper to be mined under its existing plan is worth nearly $11 billion. The total ore body is thought to be more than 15 billion pounds of copper, plus nickel and other metals.

Raising the remaining capital required to get all of that value out of the ground seems like it should be one of the easier challenges PolyMet has had to face.

PolyMet Support Visible on Range

Posted: Tuesday, October 13, 2015 8:49 pm | Updated: 8:52 pm, Tue Oct 13, 2015.

AURORA — As anti-PolyMet protesters marched in St. Paul on Tuesday, Iron Range mayors threw their counterpunch with a rally supporting the project.

With a few hundred in attendance, local officials handed out PolyMet signs and rallied supporters during a loosely-organized pep rally at the Aurora Community Center. Students from Mesabi East High School marched together down the street to the ceremony, carrying a large “We support mining” banner as the Iron Range looked to stand together against the environmental protest at the state capital.

Aurora Mayor Mary Hess opened the rally speaking about the area being unified in its support of PolyMet and the jobs it would create. Overlooking her city’s downtown, the prospects of jobs is more important than ever as a cornerstone business closed its doors.

“I want you to look around and — this is kind of hard for me to say — the biggest slam for me was recently when we lost our drug store in town,” she said. “But if you look around our main street, it’s pretty sad to see all of the empty storefronts in this city.”

PolyMet, Hess continued, would help improve Aurora’s quality of life after it was battered by recessions and idled mines. But special interest groups out to shut the new mine down before it goes into operation aren’t looking at the economic impact of a project Hess believes took all the proper steps to be environmentally sound.

An impassioned Hoyt Lakes Mayor Mark Skelton rallied the crowd with an emotional appeal for the project and its meaning to the Iron Range residents and workers.

“At this moment, there are people who oppose our right to earn a living, work hard, raise our families here on the Range, headed over to the Department of Natural Resources in St. Paul to protest PolyMet” he said. “I ask every one of you, are we going to let a vocal minority dictate our future?”

The crowd responded with a resounding “No” all three times Skelton proposed the question.

He trumpeted the Range as the place where people live and work, and a place where those same people care about their rivers and lakes, all while producing iron for American steel.

“Our voices will be heard — our way of life — we will protect our way of life,” Skelton continued.

He recently visited the Eagle Mine in Michigan’s Upper Peninsula, which is a copper/nickel/precious metals mine in operation. He said he was impressed with the company’s safety, environmental record and surrounding communities.

“Modern copper/nickel mining is the future,” he said. “We can do this right. We can have great jobs. We can have healthy communities and we can have a quality environment. Copper/nickel mining is the opportunity our community has been waiting for. It’s time to move PolyMet forward”

Hibbing Mayor and local leader Rick Cannata said the project was important to the entire Iron Range’s future of revitalizing and re-energizing the communities.

With mines closing all around, the prospects of a new mine is an exciting time. He added there is support for the process of approval from the communities, and assurances from the governing bodies that it will be fine.

But the final word was to get PolyMet going so the local communities can benefit, and avoid more empty downtowns.

“On the Iron Range, we all stick together, from Ely down to Aurora to Hibbing, Chisholm and Keewatin,” Cannata said. “Mining effects all of us.”

DNR opens auction of mineral leases

The Minnesota Department of Natural Resources announced Wednesday that it is opening another auction of state mineral leases — plots of central and northern Minnesota land that mining companies can bid on to explore for copper, nickel, gold and other valuable metals.

The DNR is offering 88,572 acres in Aitkin, Carlton, Itasca, Kanabec, Koochiching and St. Louis counties where the state holds the mineral rights.

That’s less acreage than was included when the DNR published a list of potential lease areas in June. The agency said that “based on public input, company interest and other factors,” it removed 13,474 acres in St. Louis and Cass counties from the lease sale.

The largest concentration of sites proposed for minerals exploration is about 30 miles north of Duluth, between Island and Whiteface lakes in the Cloquet Valley State Forest. Maps of the leases and other information about the auction is available at dnr.state.mn.us/lands_minerals/leasesale/index.html.

The highest bidder gains exclusive rights to exploration, usually for five years, and can later negotiate mining rights for that parcel. Revenue from the mineral leases goes to public schools, local taxing districts and the state’s general fund.

In most cases the state also owns the surface land in addition to the mineral rights below. But in some cases the state owns mineral rights under private land — and that’s caused problems in recent years as landowners opposed mineral exploration on their property.

The issue boiled over between 2011 and 2013, when the state Executive Council at first delayed but ultimately approved mineral exploration contracts for several leases, especially in Lake County, where some landowners said they were unaware of the rights of mining companies to access their property.

Because of that public outcry, Minnesota Gov. Mark Dayton ordered the DNR to make its mineral lease process easier for the public to understand and access.

DNR officials said earlier this year that they incorporated a new process “designed to increase transparency, provide better access to information and afford an opportunity for public input.”

This is the first mineral lease auction under the new system.

The DNR noted that acquiring a mineral lease is far from actual mining or even test drilling. Only about 2 percent of the mineral lease sites ever see actual test drilling, the agency said. So far, none have been mined. Before a state-owned parcel can be mined, the leaseholder must comply with all legal requirements for environmental review and permitting.

This is the DNR’s 34th nonferrous mineral lease since the program began in 1966.

The deadline for bids is Nov. 13. After bids are opened on Nov. 16 and reviewed by the DNR, the state’s Executive Council — the governor, lieutenant governor, attorney general, secretary of state and state auditor — will make a final decision about whether to approve the new state mineral leases.

The auction is for nonferrous minerals such as copper, nickel, platinum, palladium, gold, silver, cobalt, chromium, zinc, lead, bismuth, tin, tungsten, tantalum and niobium.

 

Strong vote for copper/nickel mining

Posted: Saturday, October 3, 2015 5:38 pm

3A: Strong vote for copper/nickel mining Our Views Mesabi Daily News

Last Tuesday’s House 3A special election was clearly a referendum for DFL voters in that district on copper/nickel/precious metals mining on the Iron Range.

And support for the PolyMet nonferrous project near Hoyt Lakes cleared that electoral hurdle with ease.

It did so even though anti-copper/nickel forces had several things going for them on Election Day:

• It was a four-candidate contest, with those opposed to the PolyMet venture and other future nonferrous projects on the Iron Range able to unite behind a single person, preservationist Bill Hansen of Tofte.

• There were three candidates — Rob Ecklund of International Falls, who won the DFL nomination on Election night, and Ely City Councilor Heidi Omerza and International Falls businessman Eric Johnson — who split the copper/nickel/precious metals vote.

• There was very little time for campaigning in the special election primary in a district that is larger in size than the state of Maryland. Former DFL Rep. David Dill of Crane Lake died on Aug. 8, and a few weeks later Gov. Mark Dayton called for a Dec. 8 general election and a Sept. 29 primary.

• Hansen had solid name identification in 3A. He had sought the legislative House seat twice before, losing to Dill in 2002 and 2004.

• Voter turnout is historically low in special elections when there is only one race to decide on the ballot.

• House 3A is a district with a hard-core contingent of preservationists who support all the environmental groups that are so against all responsible mining, including copper/nickel/precious metals. And they had their candidate in Hansen, someone who shamefully would have fit right in with a metro liberal DFL anti-mining caucus.

Yet despite all that going for Hansen, Ecklund won an impressive victory of 3,083 to Hansen’s 2,637, with Omerza and Johnson tallying a total of 1,333 votes.

We congratulate the blue collar Boise Cascade worker and Koochiching County commissioner on his victory.

Omerza and Johnson were also strong nonferrous mining supporters, as long as any project meets state and federal environmental rules and regulations, which, of course, will be required before any permits for construction and production can be granted.

Therefore, the 3A DFL vote for copper/nickel/precious metals mining was 4,416; against, 2,637.

That’s an important message from the House 3A district in support of responsible nonferrous mining and the hundreds and thousands of jobs it will create.

A strong majority of 3A DFLers voted to better the area’s struggling economy and help workers, families, schools and communities in a strong show of support for our traditions and way of life.

The election results honored the legacy of former Rep. Dill. And that’s a very good and important thing to have witnessed.

PolyMet has continued support: $6 million from Glencore AG

by Bill Hanna Mesabi Daily News – Hibbing Daily Tribune

ST. PAUL — PolyMet Mining Corp. reported Thursday that Glencore AG has funded on schedule the $6 million Tranche I secured debenture that is part of a previously-announced $30 million loan facility due on March 31, 2016.

That gives PolyMet approximately $10.3 million in cash.

“Funding of this tranche of debentures demonstrates Glencore’s continued support for PolyMet and the NorthMet Project,” said PolyMet President and CEO Jon Cherry.

“PolyMet continues to expect the NorthMet final Environmental Impact Statement to be published in the Federal Register and the Minnesota Environmental Quality Board Monitor in November 2015 with the state’s Adequacy Decision in early 2016, as previously reported on the Minnesota Department of Natural Resources’ website.”

PolyMet has full control of the NorthMet copper/nickel/precious metals ore body and nearby Erie Plant located near Hoyt Lakes.

The project will create 350 permanent positions and hundreds more spin-off jobs along with more than 2 million hours of construction.