After gaining permits, PolyMet leaves some investors in the cold

PHOTO: Nazir Amin, Flickr CC
Aaron J. Brown

Aaron J. Brown is an Iron Range blogger, author, radio producer and columnist for the Hibbing Daily Tribune.

It looked good on paper. A small Canadian company would mine copper, nickel and other valuable minerals in northern Minnesota. They vowed an innovative process to meet some of the most rigorous mining regulations in the world. Moreover, this company promised jobs for a rural region that needed them, a place that boasted a workforce intimately familiar with mining.

For Dr. Bob Friedman, a private investor from Palm Springs, Florida, PolyMet seemed a good bet. He read the positive comments from Iron Range leaders and citizens. He researched markets for copper and nickel. Like many, he believed in the idea.

Unlike most on the Iron Range, however, Friedman put real money into PolyMet. Friedman said over 12 years he invested more than $1 million in PolyMet stock. So when the company announced last November that it had received air and water permits from the State of Minnesota he became elated.

But last week, Friedman learned his investment wouldn’t pay off, not even if PolyMet opens its mine. In fact, his stock was now worth pennies on the original dollar.

“I realize no one feels sorry for the investors,” said Friedman in a phone interview. “They take risks. But I watched this company for 12 years. I rejoiced in their permits. Then we got slaughtered.”

This happened because PolyMet announced a May 7 deal to convert its $251 million debt to the Swiss-based international mining company Glencore into equity. In other words, they diluted the value of the stock in a deal that would not only clear the debt, but give Glencore a remarkable opportunity to take over the company. Glencore currently owns between 35-40 percent of PolyMet.

I asked PolyMet spokesperson LaTisha Gietzen about this. She said the publicly-traded company can’t comment on its stock price.

“However,” said Gietzen, “what we tell shareholders who call us is that the fundamentals of the company have not changed: we have an attractive ore body, we are fully permitted, the rights offering allows us to clean up our balance sheet by removing our debt thus clearing a pathway to construction financing. Glencore continues (as they have for the last ten plus years) to be a strong financial supporter and to lend its technical expertise. We sincerely appreciate and value all of our shareholders and we continue to believe in the long-term value of the project.”

To be clear, PolyMet still promises environmentally sound metal mining in our region. But we may dispense with the naive notion that a small Canadian company with local offices will run the show. Soon enough, we’ll deal with Glencore.

And Glencore is different than anything we’ve seen on the Mesabi Range.

Glencore is the world’s largest commodities company by revenue. Its 2018 revenue approached $220 billion. That’s three times the revenue of the world’s largest steelmaker ArcelorMittal, owner of the Minorca mine and co-owner of Hibbing Taconite. That’s five times more revenue in 2018 than Brazil’s BHP, the next largest commodities company.

In 2018, Glencore outpaced the revenue of U.S. Steel by 18-1. They own MinnTac, Keewatin Taconite, and co-own Hibbing Taconite. Glencore generated 100 times more revenue in 2018 than Cleveland-Cliffs. Cliffs owns Northshore Mining in Babbitt and Silver Bay, United Taconite in Eveleth, and co-owner of Hibbing Taconite. *

In 2018, Minnesota’s mining industry reported one of its best revenue years in modern memory. Still, all of these companies fit snuggly in the shadow of Glencore, which operates on all six populated continues of the Earth. By sheer scale, our region hasn’t dealt with a mining company this big since the formation of U.S. Steel as the world’s first steel trust in 1901.

Clearly, Glencore knows how to mine. But they’ve also left a wake of environmental violations and labor conflicts all over the world. In 2014, the United Steelworkers — bulwark of the American labor movement — declared Glencore the worst company in the world for labor relations. This came from a decision to lock out Steelworkers and use replacement workers at mills acquired by Glencore in the United States and Canada.

“You look at their history, how they treat unions, and I don’t know how people in Minnesota could think this would turn out well,” said Friedman.

Private investors like Friedman have until Tuesday to exercise their rights to buy back their share of the company. Friedman, speaking for himself, said he thinks many will be tapped out — either unable or unwilling to throw more money after the losses suffered as a result of the debt restructuring. Under the terms of the deal, Glencore would then absorb company equity in lieu of cash. In fact, Friedman thinks Glencore could end up with up to 75 percent of PolyMet’s shares for as little as $245,000 in new investment.

What does this mean? A company like Glencore would have the ability to ramp up the mine very quickly. However, current copper prices wouldn’t justify the cost of production detailed in PolyMet’s permit applications.

So Glencore could simply put a pin in the map, waiting to go after these resources years later. Or they could use this region as leverage in negotiations with some other source of copper and nickel, driving a harder bargain with people in another part of the world.

Gietzen said the PolyMet project’s construction will be determined by “timing and the outcome of [the] financing process.” This was true before Glencore had a shot at acquiring the company. In this, nothing changed.

For the people of Minnesota, supporters and opponents of nonferrous mining alike, this project enters a new phase. Demand for the steadfast enforcement of the best environmental and collective bargaining practices won’t come from the world’s largest mining company. Rather, it must come from the people of Minnesota.

If it doesn’t, we’ll be left holding the bag.

Aaron J. Brown is an author and college instructor from northern Minnesota’s Iron Range. He writes the blog and hosts the Great Northern Radio Show on Northern Community Radio. This piece first appeared in the Sunday, May 26, 2019 edition of the Hibbing Daily Tribune.

* NOTE TO READERS: You might remember from my post earlier this month that I compared the size of Glencore to these same companies. The ratios looked different. The reason is because I was looking at different sources for revenue for that post and had conflated some 2015 numbers for current ones. I used 2018 revenues in this piece. Revenue is only one of several ways to understand mining companies. 


  1. Joe musich says

    I often have conversations with a person I work out with at a local Y here in Mpls. The person reports they have stock. I will have to gently broach the topic. The person could be one of the losers. I am pretty sure lose cannot be quickly absorbed. It could be tragic. Interestingly enough I do not see coverage of this side anywhere. However I am not a regular reader of the business section so I cannot really say with any kind of accuracy if the losses are being underreported. What you describe happening contributes to my cynicism-There trouble in Iron City…

  2. Lee Peterson says

    Most folks who own Polymet stock don’t like to talk about it because it’s a loss. Most bought the stock based on emotion, rather than on common sense. Rest assured, Glencore will come out on top, one way or another. Nobody likes to be cannon fodder for the big boys.

  3. “If it doesn’t”. The absurdity of pretending the people of this continent won’t pay for this for time out of mind is somewhat a betrayal of reason.

  4. Movie recommendation for this particular issue would have to be: Promised Land (2012) starring Matt Damon, Francis McDormand, and John Krasinkski. Mostly written by Krasinkski and Damon.

    Internet Movie Database Synopsis: A salesman for a natural gas company experiences life-changing events after arriving in a small town, where his corporation wants to tap into the available resources.

    Also a relevant story for recovering organizers. This is a great movie for anyone interested in the issues. More so, the movie is actually funny in parts. Plus the story provides a good examination of personal relationships within the tension of community issues. Motive versus results. Self-interest bla bla bla…

  5. Aaron Letisha gave my church men’s group a tour of Polymet 2 weeks ago. I was impressed. Lurking in the back of my mind was Glencore. They seem to represent the nexes between profitability and amorality. Letisha told us of her decade working hard to open Polymet and add new mines to the Range. I guess she risks betrayal of that long work as well.

  6. Bill Hansen says

    Glencore is under indictment in at least seven countries where they operate. The Panama Papers revealed that Glencore paid right wing militias in Columbia, presumably to murder labor organizers. They are largely responsible for chaos in central Africa. They are, without a doubt, a criminal organization disguising itself as a corporation. Their cheating of PolyMet shareholders is perfectly in character with their well documented history of pollution, human rights violations, tax evasions and anti-labor action.

    Minnesotans are too smart to allow these scam artists into our state.

  7. Aaron: Perhaps you are inching towards a recognition that Polymet is just as much of a scam, only on a larger scale, politically and economically, as Tom Michelletti’s coal plant (“Mesaba Project,” etc.).

  8. Polymet stock dropped below one dollar a share in early 2015. At that point it became a penny stock and no longer considered investment worthy. Anyone who thought they were investing vs. gambling on Polymet were fools. Unfortunately we are all gambling now.

  9. Elanne Palcich says

    As part of this scam, the U.S. Forest Service has turned 6,650 acres of Superior National Forest land over to PolyMet/Glencore.

    • Kathleen says

      thank you for mentioning this.
      This is and has been a first class boondoggle from day one.
      The DNR and local and state politicians are also culpable.
      Anyone who has followed the path of mining locally or globally always sees the same thing:pandering to local desperation and hope with the ultimate goal of megabucks to a small handful of international thugs.
      same playbook. same outcome.
      same Scam.

      • Kathleen… the same is what’s happening with Mesabi Metallics/Essar bankruptcy. There is a coordinated international effort to steal the natural resources (or at least hinder development) out from under us. These payoffs to politicians are happening in ways much like those in Peter Schweizer’s book “Secret Empires”… I wish I had the time to follow these stories. Our ABC bureaus are not protecting us.

        • independant says

          Elanne, The land received by the citizens from Polymet in the land swap is of greater value and has public access vs. the land that was exchanged to Polymet. Regardless of what you think of the project itself the citizens came out ahead with the addition of more net acres to the superior national forest and it is land the public can actually use.

  10. Everyone familiar with the business knew that Polymet would not be the eventual operator, and that once permits were secured it was likely thzt someone big would step in and buy the project, either to proceed or hold in their vest pocket.

    The only question would be how it would happen. One of two ways, they could buy the shareholders out or they could assume the debt. The latter is what’s happening.

    I bought a very small stake in Polymet that I knew from the start was like buying a lottery ticket. It might pay, it probably wouldn’t. It was money I could afford to loose. I don’t like it but I can’t get too angry over it. I could have bailed at any time.

  11. Ran across your article recently . This is inevitable in the mining industry. Nobody but a huge investor with $billions in the bank can afford to develop a mine. With the number of government ‘hoops’ now required to even get past the permit stage, this is more true than it has ever been. Essar and Polyment are just the latest examples, although it’s become so expensive in today’s regulatory environment that they never get to the point where they actually can dig a shovelful of ore.

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