PolyMet faces big step, but copper mine not yet guaranteedIt’s $150 million down for PolyMet, $650 million or so to go. PolyMet plans to mine about 32,000 tons of rock just north of Hoyt Lakes every day, yielding about 76,000 tons of copper each year. But the company first needs tons of cash to get there.
By: John Myers, Duluth News Tribune
It’s $150 million down for PolyMet, $650 million or so to go.
On Friday, when the PolyMet Mining Corp. Supplemental Draft Environmental Impact Statement is released for public review, it will mark a major steppingstone for a new age of Minnesota mining.
PolyMet plans to mine about 32,000 tons of rock just north of Hoyt Lakes every day, yielding about 76,000 tons of copper each year.
But the company first needs tons of cash to get there.
The company — which has been around in one form or another since the 1980s, trying to develop Minnesota’s first-ever copper mine — already has spent $150 million to pinpoint where the copper is, conduct an environmental review, design the mine and get to the permitting stage.
But even as its plan moves through the environmental review process, the company still must find another $450 million to begin constructing the mine and restart a raw-ore processing plant that’s already there, said Jon Cherry, PolyMet’s CEO.
To get through the planning and environmental review stages, PolyMet has depended on investors — especially an infusion of cash from Swiss-based Glencore Xstrata, which now controls more than 28 percent of the company’s stock. Now, PolyMet will turn to banks for loans.
“We believe we’ll be able to finance the majority of the construction costs with debt financing. We’re talking to banks now,” Cherry said.
He said financing shouldn’t be difficult because PolyMet already has sizeable assets, including the mine site, the raw ore processing plant (which is an old LTV Steel taconite plant) and the mineral rights to a huge untapped deposit of copper, nickel and other valuable metals. Banks, he says, should be eager to get on board once permits are in hand.
Delay for hydrometallurgical plant
Despite the progress, however, PolyMet already is pushing back part of the project.
At least initially after the mine opens, the copper and nickel concentrate won’t be refined in Minnesota. Instead, after basic processing in the old LTV plant, the ore will be moved by train to smelters, probably in Ontario, Utah or Arizona, company officials said. The $450 million doesn’t include a so-called hydrometallurgical processing center PolyMet plans to build later.
That hydromet plant, PolyMet’s Phase II, would cost another $200 million, which means the company needs $650 million total to reach its planned project potential and full employment at the site. To get there, PolyMet will need to generate income from selling copper and nickel, Cherry told the News Tribune.
“We’re hoping to finance Phase 2 with operating revenue from Phase 1,” Cherry said last week in a meeting with News Tribune reporters and editors.
The hydrometallurgical plant is slated to provide about 60 of the proposed 360 jobs. At least one investment analyst firm, however, doubts whether it will ever be built.
A report released Nov. 21 by U.K.-based Edison Investment Research, commissioned by PolyMet to study the project, said: “We do not expect Phase II to be built based on current economic assumptions.”
A third tier of on-site processing, where the copper and nickel would be made into a highly pure form, was part of the project a decade ago, but has since been dropped from PolyMet plans, at least for the foreseeable future.
Aimed at potential investors, the Edison report also predicts that PolyMet, if approved, will almost immediately apply for permits to triple its daily production from 32,000 to 90,000 tons of raw ore. That would require another $400 million, Edison estimates, but also would need an entirely new environmental review.
Based on its analysis, Edison predicts that PolyMet “could complete its expansion” to 90,000 tons daily by the second quarter of 2018.
“We assume PolyMet would begin working on permitting the expansion to 90,000 (tons per day) within six months of receiving its permits for Phase 1,” the Edison report concludes.
PolyMet spokesman Bruce Richardson said that expansion isn’t part of the company’s current plan.
But Paula Maccabee, an environmental attorney following the project, said the Edison report, commissioned by PolyMet, raises serious questions on why expansion isn’t mentioned or even considered in the current environmental review.
“The environmental impacts are much different if you are mining and processing 90,000 tons per day rather than 32,000 tons,” she said. “If that expansion is already being contemplated, it’s a connected action or a cumulative impact. And it needs to be part of the original Environmental Impact Statement.”
Maccabee and others also speculate that PolyMet also may end up processing raw ore for other proposed copper mines, such as Twin Metals, the company proposing a massive underground copper mine near Ely. Neither company has suggested such plans and that potential has not been considered in the PolyMet environmental review.
Big day on Friday
The Department of Natural Resources and consultants released the first environmental review for the PolyMet project three years ago. It was quickly criticized by environmental groups, tribal resource agencies and the federal Environmental Protection Agency as insufficient.
So many questions were raised that the company and regulating agencies were forced to go back and rework the plan to include several upgrades, such as a reverse osmosis treatment plan that will remove harmful elements from wastewater before it leaves the property. That reworking, which also included extensive computer modeling to determine how water will be affected at the site, added more than two years to the PolyMet timeline.
PolyMet isn’t expecting that kind of trouble this time. Company officials are hoping that the document, now at 1,800 pages and counting, has asked and answered all the big questions — enough to allow the project to advance, although not necessarily to everyone’s liking.
“We understand people may not agree with us. But we at least want everyone working off the same set of facts,” Cherry said.
Company officials say Friday’s release of the environmental statement is an important step because the public will have its first access to the entire document that outlines how PolyMet plans to mine and process copper, nickel, platinum, gold and other valuable metals while abiding by all state and federal environmental rules.
The public also will find out Friday how long it has to comment on the updated project plan, and where and when public meetings will be held — likely after the holidays and likely in Duluth, the Twin Cities and Hoyt Lakes area.
Company officials are quick to note this is not a “decision-making time”; no agency is signing off on the project just yet. Instead, it’s the time for the public to weigh in.
“There won’t be a lot of surprises in there, there’s not much people haven’t already heard about,” Cherry said. “This (project) has already been out there for so long, everything has been gone over.”
Added Jessica Stauber, a public relations consultant for PolyMet: “It’s a great milestone in the PolyMet process, in the long journey they have been on.”
Lori Andresen, of the Sierra Club in Minnesota, said she’s not expecting to find major revelations about the project in the report, noting that much of the information filtered out over the summer through freedom of information requests. She acknowledged, though, that the release of the environmental review document will probably be viewed by supporters of copper mining in Minnesota as a step closer to mining.
“It is a big event for the company, stock-wise,” Andresen said, adding that she expects the environmental review and permits to eventually be approved. “That assumes the project is viable financially, which it may not be.”
Once the review is approved and permits issued, she said, the only thing that could stop the project would be lawsuits.
Kathryn Hoffman, attorney with the Minnesota Center for Environmental Advocacy, said most people following the project already have been reading various chapters of the document. But with the document now final, she expects critics to “buckle down” and read through every detail.
The next key step, she said, will come when the agencies decide if the environmental review is good enough to allow the project to move forward, probably sometime next year.
Both sides are expected to wage a major public relations campaign in coming months, leading to thousands of comments for and against the project submitted to state and federal agencies.
John McGoran was working on a Thunder Bay area mining project in the 1980s when he heard about a possible copper find on Minnesota’s Iron Range.
U.S. Steel had been prospecting north of Hoyt Lakes and discovered, as others had, decent amounts of copper, nickel, silver and gold. They also found platinum, palladium and other valuable metals.
“But the guy they had in charge was an underground mining guy, and he couldn’t get the financials to work out. So U.S. Steel agreed to sell (the mineral rights) to me,” McGoran told the News Tribune in a recent interview. “I came down and looked at their core samples, and it was all about the same age rock I was looking at in Ontario, 1.8 billion years old, and it was clear what they had. But it had to be open-pit.”
McGoran, of Vancouver, formed a new Canadian “junior” mining company in 1983 called Fleck Resources to develop the Minnesota copper-nickel deposit.
It has taken 30 years, but the company McGoran founded, now called PolyMet Mining Co., is inching closer to regulatory approval to start mining the deposits that McGoran thought so promising.
“Having the platinum group metals in there, and a pretty easily accessible copper deposit if you go in with an open pit, it was a very attractive project,” said McGoran, now 77 and still a mining industry consultant.
The News Tribune has been writing about PolyMet, more than 100 stories, since 1999, long before the name became a household word across Minnesota.
McGoran said he’s been watching PolyMet from afar. And he’s glad progress appears imminent. But he said he’s still not bullish on Minnesota’s attitude toward mining.
“I still think there’s potential there. I still own some (PolyMet) stock,” McGoran said. “But the state agencies there have really been an impediment. … That’s one of the reasons I got out.”