PolyMet Mining Corp.

Right idea, right place, right timeKeith Regan learns how PolyMet Mining plans to refurbish the large processing facilities and add new modern technology to help meet worldwide demand for a range of metals such as copper, nickel, cobalt, platinum, palladium and gold. Mining has long been a part of the economy, landscape and culture of the Mesabi Range area of northeastern Minnesota, with six iron ore mines remaining in active production today. Historically, the mining activity has been focused on iron ore. PolyMet Mining Corp. aims to change that. In the 1950s, a consortium of steel companies invested about $350 million to build a taconite ore crushing and processing facility, known as the Erie Plant, which helped fuel blast furnaces at American steel mills for years until it was idled in 2001. PolyMet, which is headquartered in Hoyt Lakes, Minnesota, believes that idled plant is an asset waiting to be leveraged. The company is in the late stages of environmental review and permitting for what could become the first non-ferrous ore mining operation in Minnesota, utilizing a nearby ore body of copper, nickel and precious metals such as gold, platinum and palladium. PolyMet has already spent some $14 million on permitting and environmental studies and stands ready to invest another $600 million in the area, an investment that will revive the former taconite plant and put hundreds of highly skilled mine workers back on the job. PolyMetÔÇÖs plans call for it to produce high-grade copper cathode, nickel-cobalt hydroxide, and precious metals precipitate. PolyMet plans to add new modern flotation and hydrometallurgical processing technology to the existing investment in the plant. The existing infrastructure will greatly reduce start-up time, says CEO Joe Scipioni, who worked in the iron mining industry for 30 years before joining PolyMet. ÔÇ£The plant is in very good shape. It has a very robust design, thanks to the 1950s-style engineering, and was literally built to last 100 years. If you look at the plant today, itÔÇÖs almost like itÔÇÖs at mid-life or not even to that point. It still has the potential to be very productive.ÔÇØEqually important is the location of the facility and the mine to which PolyMet controls the lease rights, which is in the middle of a region that has been engaged in active mining for a century. ÔÇ£You have all this tremendous infrastructure in place because mining is so important to the economy,ÔÇØ Scipioni says. High-voltage power lines, railroad lines and spurs and water linesÔÇöall amenities that would have to be added to create a new mineÔÇöare already in place. ÔÇ£You also have all the suppliers that you need to get a plant running and keep it running, as well as the skilled labor base to draw from.ÔÇØ The three-year environmental permitting timeframe is not unheard of for large-scale projects, says LaTisha Gietzen, vice president of public, government and environmental affairs for PolyMet. A draft environmental impact statement (EIS) is now being finalized. Once itÔÇÖs released by environmental regulatorsÔÇöincluding the Minnesota Department of Natural Resources and the Minnesota Pollution Control AgencyÔÇöas well as federal counterparts, public comments will be solicited and then a final document produced, with a shorter public comment window at that point. The company remains hopeful that work could begin late in early to mid-2009. ÔÇ£ItÔÇÖs been a very intensive, very comprehensive process,ÔÇØ Scipioni says. ÔÇ£The regulators are being very careful, very thorough, which is good and which should lead to good environmental outcomes.ÔÇØ PolyMet will take advantage of the existing plant by coming online in stages. During the first stage, the company plans to use the existing crushing and grinding capacity, along with a new flotation process, to produce concentrate initially and begin generating revenue. In the second stage, the hydrometallurgical autoclave process and the finishing facilities will be completed, which will enable the production of finished copper and semi-finished nickel-cobalt and precious metals.┬á PolyMetÔÇÖs economic modeling for the plant assumes conservative prices for metals, and the company is confident that worldwide demand will keep growing over time. ÔÇ£The fact is that demand is not driven so much by the US economy as it is by worldwide demand. YouÔÇÖve got China and India in the lead and Africa right on their tails. As the heavily populated areas of the world start moving up the ladder in terms of economic development, that creates enormous pressure in terms of demand for all types of commodities,ÔÇØ notes Scipioni. ÔÇ£Everyone is focused on energy right now, but the same thing is happening for all types of metals as well. China alone will create enough demand so that we need to produce four percent more copper worldwide just to keep even with ChinaÔÇÖs demand, much less India or the rest of the world.ÔÇØÔÇ£Demand continues to grow, so supply is going to have to come from someplace,ÔÇØ adds Gietzen. ÔÇ£If we donÔÇÖt do it here, it will likely come from places with fewer controls and protection for the environment. Our argument is, why not do it here, so we can get the benefits of the jobs and help bring some prosperity back to this mining district while still preserving the local and global environment.ÔÇØ As it winds its way through the permitting process, PolyMet has found strong support from the rural communities in Minnesota that will host the operation and supply its workforce. For one thing, some 1,400 people lost their jobs when the former plant was closed in 2001 due to bankruptcy. ThatÔÇÖs a huge impact, given that many of the communities in the area are small towns of 2,000 people, notes Scipioni. Six active iron ore mines remain in operation in the 110-mile-long mining district, which means that a good base of skilled employees remains in place. Reviving the dormant Erie Plant will not only give hope to the current generation of miners but also help give younger people who are just learning the trade some motivation for staying in or returning to the region. ÔÇ£A lot of young people moved away in the last 10 to 15 years, and they want to come back. ItÔÇÖs a great place to liveÔÇöthereÔÇÖs a very high quality of lifeÔÇöand many young people would like the opportunity to stay rather than move away to find a good job,ÔÇØ states Scipioni.A sign of the interest and enthusiasm for the project was a recent planned presentation and tour of the PolyMet site that the company scheduled, only to have to postpone it because more people expressed interest than could be accommodated all at once. ÔÇ£ThereÔÇÖs a lot of real strong local support. People understand the importance of mining to this area,ÔÇØ says Gietzen. The $14 million spent to date on permitting and related studies is just part of the $40 million thatÔÇÖs been invested in research and development and to prove the feasibility of the project. ÔÇ£WeÔÇÖre doing it right, doing it the right way to minimize environmental impact and maximize the values of the metals we can extract from the ground. In the process, weÔÇÖll create long-term, high-paying jobs that will help diversify and expand the economy of northeastern Minnesota,ÔÇØ Gietzen says.ÔÇ£We have a very unique opportunity to be able to tap into an established mining area,ÔÇØ says Scipioni. ÔÇ£All the utilities are in place, the vendor support is there, and the community is supportive of our efforts and knows it can be done in such a manner as to be able to meet the stringent environmental requirements that Minnesota has in place. ItÔÇÖs a unique project and a unique opportunity, the likes of which just doesnÔÇÖt come around very often.ÔÇØ ┬á