PolyMet Mining Corporation: 2018 June – MD&A

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For the three and six months ended June 30, 2018

PolyMet Mining Corp.

Management Discussion and Analysis

As at June 30, 2018 and for the three and six months ended June 30, 2018

Tabular amounts in thousands of U.S. Dollars, except for shares and per share amounts


The following information, prepared as at August 9, 2018, should be read in conjunction with the unaudited condensed interim consolidated financial statements of PolyMet Mining Corp. and its subsidiaries (together "PolyMet" or the "Company") as at June 30, 2018 and for the three and six months ended June 30, 2018 and related notes attached thereto, which are prepared in accordance with IAS 34, Interim Financial Reporting and in conjunction with the audited consolidated financial statements for the eleven months ended December 31, 2017 prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB"). All amounts are expressed in United States ("U.S.") dollars unless otherwise indicated.

Change of the Financial Year End

On December 7, 2017, the Company's Board of Directors approved a change of the financial year end from January 31 to December 31. The Company's transition year consists of an eleven-month period ended on December 31, 2017. The Company's reporting for the remainder of the year ended December 31, 2018 will consist of the following:

Length of

Audited Annual Financial


Period Period Ending of Period

Comparative Period

Filing Deadline

Interim financials (3rdQuarter) 9 months Sep. 30, 2018

9 months ended

Nov 14, 2018

Oct. 31, 2017

11 months ended

Apr 1, 2019

Dec. 31, 2017

12 months Dec. 31, 2018

For additional information see the Notice filed on SEDAR on December 7, 2017.

Forward Looking Statements

This Management Discussion and Analysis ("MD&A") contains statements that constitute "forward-looking statements" within the meaning of Section 21E of the United States Securities Exchange Act of 1934, as amended (the "US Exchange Act"). These statements appear in a number of different places in this MD&A and can frequently, but not always, be identified by words such as "expects", "anticipates", "believes", "intends", "estimates", "potential", "possible", "projects", "plans" and similar expressions, or statements that events, conditions or results "will", "may", "could" or "should" occur or be achieved or their negatives or other comparable words. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause PolyMet's actual results, performance or achievements to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements. Forward-looking statements include statements regarding the outlook for the Company's future operations, plans and timing for PolyMet's exploration and development programs, statements about future market conditions, supply and demand conditions, forecasts of future costs and expenditures, the outcome of legal proceedings, and other expectations, intentions and plans that are not historical fact. The Company's actual results may differ materially from those in the forward-looking statements due to risks facing PolyMet or due to actual facts differing from the assumptions underlying the Company's predictions.

The forward-looking statements contained in this MD&A are based on assumptions, which include, but are not limited to:

  • Obtaining permits on a timely basis;

  • Raising the funds necessary to develop the NorthMet Project and continue operations;

  • Execution of prospective business plans; and

  • Complying with applicable government regulations and standards.

Such forward-looking statements are subject to risks, uncertainties and other factors, including those listed or incorporated by reference under "Risk Factors" in the Annual Information Form. These risks, uncertainties and other factors include, but are not limited to:


PolyMet Mining Corp.

Management Discussion and Analysis

As at June 30, 2018 and for the three and six months ended June 30, 2018

Tabular amounts in thousands of U.S. Dollars, except for shares and per share amounts

  • Changes in general economic and business conditions, including changes in interest rates and exchange rates;

  • Changes in the resource market including prices of natural resources, costs associated with mineral exploration and development, and other economic conditions;

  • Natural phenomena;

  • Actions by governments and authorities including changes in government regulation;

  • Uncertainties associated with legal proceedings; and

  • Other factors, many of which are beyond the Company's control.

All forward-looking statements included in this MD&A are based on information available to the Company on the date of this MD&A. The Company expressly disclaims any obligation to update publicly, or otherwise, these statements, whether as a result of new information, future events or otherwise except to the extent required by law, rule or regulation. Readers should not place undue reliance on forward-looking statements. Readers should carefully review the cautionary statements and risk factors contained in this and all other documents that the Company files from time to time with regulatory authorities.

Cautionary note to U.S. investors: The terms "measured and indicated mineral resource", "mineral resource", and "inferred mineral resource" used in this MD&A are Canadian geological and mining terms as defined in accordance with National Instrument 43-101, Standards of Disclosure for Mineral Projects ("NI 43-101") under the guidelines set out in the Canadian Institute of Mining, Metallurgy and Petroleum (the "CIM") Standards on Mineral Resources and Mineral Reserves. U.S. investors are advised that while such terms are recognized and required under Canadian regulations, the SEC does not recognize these terms. Mineral Resources do not have demonstrated economic viability. It cannot be assumed that all or any part of a Mineral Resource will be upgraded to Mineral Reserves. Under Canadian rules, estimates of inferred mineral resources may not form the basis of or be included in feasibility or other studies. U.S. investors are cautioned not to assume that any part of an inferred mineral resource exists, or is economically or legally mineable.

Summary of Business

PolyMet is a TSX and NYSE American listed Issuer engaged in the exploration and development of natural resource properties. The Company's primary mineral property and principal focus is the commercial development of its NorthMet Project ("NorthMet" or "Project"), a polymetallic project in northeastern Minnesota, United States of America, which hosts copper, nickel, cobalt and platinum group metal mineralization.

The NorthMet ore body is at the western end of a series of known copper-nickel-platinum group metal deposits in the Duluth Complex. An updated technical report and feasibility study published in March 2018 confirmed the technical and economic viability, positioning NorthMet as the most advanced of the four advanced projects in the Duluth Complex: namely, from west to east, NorthMet, Mesaba, Serpentine and Maturi.

The Erie Plant is located about six miles west of the NorthMet ore body and comprises a 100,000 ton-per-day crushing and milling facility, a railroad and railroad access rights connecting the Erie Plant to the NorthMet ore body, tailings storage facilities, 120 railcars, locomotive fueling and maintenance facilities, water rights and pipelines, administrative offices and lands to the east and west of the existing tailings storage facilities.

Upon completion of the land exchange on June 28, 2018, PolyMet now controls surface rights to approximately 19,050 acres or 29.8 square miles of contiguous surface rights stretching from west of the Erie Plant to east of the proposed East Pit at NorthMet.

See additional discussion below.


PolyMet Mining Corp.

Management Discussion and Analysis

As at June 30, 2018 and for the three and six months ended June 30, 2018

Tabular amounts in thousands of U.S. Dollars, except for shares and per share amounts

Summary of Recent Events and Outlook

Recent Highlights

PolyMet made significant progress during 2017 and 2018 to date. Notably the state of Minnesota issued draft air, water, permit to mine, dam safety, and water appropriations permits for public comment, the United States Forest Service ("USFS") transferred title to the surface rights over and around the NorthMet mineral rights to PolyMet in exchange for certain other lands owned by PolyMet, an updated technical report was released which also included an assessment of higher production scenarios, and additional financing was secured to complete permitting, final engineering and certain early works that will facilitate the transition to construction upon receipt of final permits.

More specifically:

  • In June 2018, the Company and USFS exchanged titles to federal and private lands, completing the land exchange giving the Company control over both surface and mineral rights in and around the NorthMet ore body and consolidating the Superior National Forest's land holdings in northeast Minnesota;

  • In March 2018, the Company issued an Updated Technical Report under NI 43-101 incorporating process improvements, project improvements, and environmental controls described in the Final EIS and draft permits. The update also included detailed capital costs, operating costs, and economic valuations for the mine plan being permitted as well as potential future production opportunities;

  • In March 2018, the Company and Glencore agreed to extend the term of outstanding debentures until March 31, 2019, reduce the interest rate on the outstanding debentures, and make available up to $80 million in additional funding. Proceeds are being used to complete permitting, purchase wetland credits, advance detailed engineering and perform certain early works to prepare the site for construction;

  • In January 2018, the MDNR released the draft Permit-to-Mine for a public review and comment period, which has now closed;

  • In January 2018, the Minnesota Pollution Control Agency ("MPCA") released the draft water quality permit, draft section 401 water quality certification, and draft air emissions permit for public review and comment periods, which have all closed; and

  • In August and September 2017, the Minnesota Department of Natural Resources ("MDNR") released six draft water appropriation permits and two draft dam safety permits for 30-day periods of public review and comment which have all closed.

Net cash used in operating and investing activities during the six months ended June 30, 2018 was $13.867 million. Primary activities during the period were related to permitting the NorthMet Project, including reimbursement to the state of Minnesota for its internal staff and contractor costs. Other spending related to engineering and studies, maintaining existing infrastructure, financing, and general corporate purposes.

Goals and Objectives for the Next Twelve Months

The permitting process is managed by the regulatory agencies and, therefore, timelines are not under PolyMet control, however, decisions by the MDNR and MPCA are expected by the end of the year. Given these circumstances, PolyMet's objectives include:

  • Favorable decision by the U.S. Army Corps of Engineers ("USACE") on the Final Record of Decision ("ROD") and 404 wetlands permit under Clean Water Act;

  • Favorable decisions on final state permits (Permit to Mine, air, water, and dam safety permits);


PolyMet Mining Corp.

Management Discussion and Analysis

As at June 30, 2018 and for the three and six months ended June 30, 2018

Tabular amounts in thousands of U.S. Dollars, except for shares and per share amounts

  • Completion of project implementation plan; and

  • Execution of a construction finance plan, subject to typical conditions precedent such as receipt of key permits.

Following the agreement reached with Glencore to make available additional funding at the Company's option as described in the "Financing Activities" section below, subject to permitting progress, PolyMet expects to spend up to $80 million during the year ended December 31, 2018, with $30 million to complete the permitting process and maintain existing infrastructure and up to $50 million to purchase wetland credits, advance detailed engineering and perform certain early works to prepare the site for construction.

The Company is in discussions with commercial banks and other sources of debt and equity construction finance and aims to secure commitments sufficient to fund project requirements corresponding with receipt of key permits. Construction and ramp-up to commercial production is anticipated to take twenty-four to thirty months from receipt of key permits.

See additional discussion in the "Liquidity and Capital Resources" section below.

Detailed Description of Business

Asset Acquisitions

In November 2005, the Company acquired the Erie Plant, which is located approximately six miles west of the NorthMet deposit. The plant was managed by Cliffs Erie LLC, a subsidiary of Cleveland-Cliffs Inc. (together "Cliffs") for many years and was acquired by Cliffs from LTV Steel Mining Company ("LTV") after LTV's bankruptcy, at which time the plant was shut down with a view to a potential restart. The facility includes crushing and milling equipment, comprehensive spare parts, plant site buildings, real estate, tailings storage facilities and mine workshops, as well as access to extensive mining infrastructure including roads, rail, water and power.

Plans are to refurbish, reactivate and, as appropriate, update the crushing, concentrating and tailings storage facilities at the Erie Plant to produce concentrates containing copper, nickel, cobalt and precious metals. Once commercial operations are established, the Company may install an autoclave to upgrade nickel concentrates to produce a nickel-cobalt hydroxide and a precious metals precipitate. The autoclave circuit is included as an option in the Final EIS and draft permits.

In December 2006, the Company acquired from Cliffs, property and associated rights sufficient to provide a railroad connection linking the mine development site and the Erie Plant. The transaction also included 120 railcars, locomotive fueling and maintenance facilities, water rights and pipelines, administrative offices and land to the east and west of the existing tailings storage facilities.

PolyMet indemnified Cliffs for reclamation and remediation associated with the property under both transactions. In April 2010, Cliffs entered into a consent decree with the MPCA regarding short-term and long-term environmental mitigation. Field studies were completed in 2010 and 2011 and short-term mitigations approved by the MPCA were initiated in 2011. In April 2012, long-term mitigation plans were submitted to the MPCA and in October 2012, the MPCA approved plans for pilot tests of various treatment options to determine the best course of action. Although there is substantial uncertainty related to applicable water quality standards, engineering scope, and responsibility for the financial liability, the October 2012 response from the MPCA, subsequent communications amongst the MPCA, Cliffs and the Company, and closure plans reflected in the Permit to Mine application provide increasing clarification of



PolyMet Mining Corporation published this content on 09 August 2018 and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on 10 August 2018 05:47:02 UTC