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Glencore assumes majority control of PolyMet

Swiss-based company has a troubled track record around the world

Marshall Helmberger
Posted 6/27/19

REGIONAL—The Swiss-based international commodities broker and mine operator Glencore is now the majority owner of the proposed NorthMet mine near Hoyt Lakes. Glencore, which is currently under …

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Glencore assumes majority control of PolyMet

Swiss-based company has a troubled track record around the world


REGIONAL—The Swiss-based international commodities broker and mine operator Glencore is now the majority owner of the proposed NorthMet mine near Hoyt Lakes. Glencore, which is currently under investigation by the U.S. Justice Department for international money laundering and corrupt practices, now holds just under 72 percent of the outstanding shares of PolyMet Mining, the company that led development of the copper-nickel mine proposal for the past 15 years.
PolyMet announced Glencore’s effective takeover of the mine project in a release issued June 27. The move came at the conclusion of a “rights offering” by PolyMet, which allowed existing shareholders to acquire additional shares in the company at a discounted rate.
PolyMet issued the offering in hopes of repaying an outstanding debt to Glencore of $265 million that helped pay for development, environmental review, and permitting of the mine plan. Glencore had agreed to backstop the offering and, in the end, it was Glencore that acquired the vast majority of the stock, offered by PolyMet, at 38.8 cents per share.

“We thank all of our shareholders for their interest in and support for this project and are grateful to those who participated in this offering,” said Jon Cherry, PolyMet president and CEO. “The issuance of the federal wetlands permit in March, which brought the project to a fully permitted status, and clearing our balance sheet of debt with this rights offering, puts us in a much stronger position to obtain construction financing for the project. We could not have achieved either one of these major milestones without Glencore’s longstanding technical and financial support.”
Implications vary

Glencore’s takeover does not mean that PolyMet will disappear as the public face of the NorthMet project. Company spokesperson Bruce Richardson notes that PolyMet will remain a publicly-traded company and will continue to be led by the existing team, at least for now. “Glencore has provided technical and financial support for the project for about a decade and has been supportive of the steps we have taken to move this project forward all along the way, which would include meeting Minnesota’s strict environmental standards and the Project Labor Agreement,” said Richardson.
Nonetheless, Glencore’s newly-acquired majority stake is likely to raise political complications for the planned mine. Glencore, a company founded by former fugitive financier Marc Rich, has frequently been described as “notorious” in the international press.
Critics of the company have gone much further in their denunciations. “Glencore’s worldwide record of environmental disasters, violations of human rights and disregard for workers and labor rights speaks for itself,” said Kathryn Hoffman, CEO of the Minnesota Center for Environmental Advocacy. “With former BP CEO Tony Hayward at the helm of Glencore, Minnesota may soon face our own version of the Gulf oil spill. The terrible record of Glencore and its leaders should concern every Minnesotan.”
Unions representing Glencore also had harsh words for the company after it closed the Sherwin Alumina plant in Texas in 2015 as workers pressed the company for better pay and conditions there. Ruben Garza, District 13 Director of the United Steelworkers, called Glencore “one of the most irresponsible companies on the planet,” noting that the company’s questionable behavior was not limited to the Texas facility. “Glencore has mistreated workers and harmed communities on nearly every continent. When a company that generates hundreds of billions in revenue each year consistently engages in this kind of reckless behavior, there must be consequences,” said Garza.
In a related development, Reuters reported that at least 36 illegal miners were killed June 27, 2019, when a copper mine owned by Glencore collapsed in a southeast Congo, according to the provincial governor there. The accident occurred in the KOV open-pit mine at the Kamoto Copper Company concession, in which Glencore owns a 75-percent stake.
While the politics of Glencore’s newfound majority status on the NorthMet project could prove problematic, the financial implications are likely to be considerably more positive. Glencore, collectively owned by some of the world’s richest individuals, has annual revenues in excess of $200 billion, which would seem to make the $1 billion price tag to build and open the NorthMet mine relatively modest. “The NorthMet project would be a minor part in Glencore’s overall portfolio,” noted the consulting firm EOR, which has been reviewing the mine plan’s finances for years under a contract with the Minnesota Department of Natural Resources. “In this regard, there would be no economic reason for this project not to be successful so long as Glencore guarantees the financing and the financial assurances, especially when there are unexpected dips in the cash flow.”
While Glencore’s financial heft is clearly an advantage for the NorthMet project, the project’s currently marginal economics could put the project lower on the priority list for a company with vast global holdings in the sector. While a small start-up like PolyMet might be eager to get mining underway, since it has no other source of revenue, Glencore is primarily a commodities broker, which benefits when metal supplies are tight and prices are high. Adding new production capacity at a time when flat demand for both copper and nickel has left prices relatively low, would seem counter-intuitive for Glencore. The company clearly could afford to sit on a deposit like NorthMet, possibly for years, until an increase in the price of metals or a new mine plan makes the project more economically viable.
Both copper and nickel are currently trading at well below the prices that PolyMet assumed in its most recently financial update, issued in March 2018. That financial projection substantially downgraded the project’s prospects from earlier estimates, which led the company to explore changes to the mine plan that would improve profitability.
PolyMet spokesperson Bruce Richardson cautioned against speculation on what might happen in the future. “We also won’t speculate on Glencore,” said Richardson. “We are focused on financing and building the project subject to the terms and conditions of the state and federal permit that have been issued to us.”
Permit faces questions
At least one of PolyMet’s recently-issued permits is under increasingly intense scrutiny over revelations that top officials at the Minnesota Pollution Control Agency urged political appointees at the federal Environmental Protection Agency to withhold written comments from the agency’s professional staff, who had expressed concerns that the water discharge (NPDES) permit that the MPCA proposed to issue for the mine, did not comply with the Clean Water Act.
Environmental and tribal opponents of the mine won a court victory in a lawsuit over the NPDES permit on June 25, when the Minnesota Court of Appeals sent that case to the Ramsey County District Court for further discovery into the allegations that the MPCA tried to keep EPA’s concerns out of the official record that the court would review.
The EPA’s Inspector General has also launched a probe of the allegations as has Minnesota’s legislative auditor.
MPCA spokesperson Darin Broton said the agency has no plans to suspend PolyMet’s NPDES permit, although environmental groups are expected to ask for a stay on the permit until the various issues surrounding the permit can be fully resolved.

Glencore, PolyMet, NorthMet, copper-nickel, sulfide, Hoyt Lakes, Ely, Minnesota