PolyMet wants IRRB loan for land

• PolyMet

(2007 file / News Tribune)

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PolyMet Mining is asking the Iron Range Resources Board for a $4 million loan to help buy private property that would be exchanged for U.S. Forest Service land at PolyMet’s planned mine site near Babbitt.

The IRRB will consider the request at its Thursday meeting.

“I think it’s a very good idea,” said Sen. David Tomassoni, board chairman. “It’s a project that will result in hundreds of jobs on the Iron Range.”

If the IRRB approves the loan, PolyMet plans to use the money to buy the 5,272-acre Hay Lake parcel near Biwabik and the 32-acre McFarland Lake parcel in Cook County. The two sites are among five totaling more than 6,700 acres that would become part of the Superior National Forest in exchange for federal property where PolyMet wants to dig Minnesota’s first copper-nickel mine.

If approved, the IRR loan will be secured with a first-priority mortgage on the land.

“We’ll get paid back once the project starts, but if something does happen where the project doesn’t go forward, we will own the land,” Tomassoni said. “It’s a good, collateralized loan.”

If it does loan the money, the IRR also will receive warrants allowing it to purchase 400,000 common shares of PolyMet stock on the Toronto Stock Exchange at $2.50 per share. The stock was trading around $2.10 a share Tuesday.

“If the price goes up to $5 we can get them for $2.50 and cash them in and make quite a bit of money,” Tomassoni said.

While a final loan agreement would have to be worked out, the draft terms in the IRRB agenda call for closing on the loan before July 1, 2011. Outstanding principal and interest would be due by Dec. 31, 2015.

“It will help to create jobs and diversify and expand the economy,” PolyMet Vice President of Public Affairs LaTisha Gietzen said of the loan. “Is it critical for the project? No.”

If approved, the loan will be the second multi-million-dollar infusion of cash into PolyMet in the past few months. On Nov. 12, the company announced that a Swiss natural resources firm will buy $30 million of PolyMet common shares. Glencore will buy 15 million shares at $2 each in three stages, with the last one to conclude when PolyMet receives key permits or by Oct. 15, 2012, whichever comes first.

The project is still in the environmental impact statement phase. The company hopes to receive needed permits in summer 2012, Gietzen said.

PolyMet’s proposed open-pit mine near Babbitt would produce copper, nickel, platinum and other metals. The company would process the ore at the former LTV Steel taconite plant near Hoyt Lakes. The $600 million project would create 400 or more jobs for about 20 years. The project has been praised by Iron Range leaders as a critical step toward diversifying the region’s dependence on iron-ore mining.

Critics say the company and government regulators can’t be sure the mine won’t cause long-term environmental problems years after mining operations cease. In October, federal agencies signaled that it will be nearly another year before they release a revised environmental review on the proposed project.

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