REGIONAL— PolyMet Mining now has a permit to mine, but it will likely be months, or even years, before construction of the planned copper-nickel mine near Hoyt Lakes actually gets …
REGIONAL— PolyMet Mining now has a permit to mine, but it will likely be months, or even years, before construction of the planned copper-nickel mine near Hoyt Lakes actually gets underway.
Nonetheless, the announcement by DNR Commissioner Tom Landwehr on Thursday that it would issue several relevant permits, including the all-important permit to mine, was a milestone for the company.
“We look forward to building and operating a modern mine and developing the minerals that sustain and enhance our modern world,” said Jon Cherry, PolyMet president and CEO. “Responsibly developing these strategic minerals in compliance with these permits while protecting Minnesota’s natural resources is our top priority as we move forward.”
The permit to mine authorizes the company to build and operate open pit mining operations that the company believes will yield approximately 1.2 billion pounds of copper, 170 million pounds of nickel, 6.2 million pounds of cobalt and 1.6 million troy ounces of precious metals over a 20-year mine life.
A number of hurdles remain, however, before that can happen. The project is still waiting for a number of additional permits, including air and water quality permits from the state’s Pollution Control Agency and a wetland permit from the U.S. Army Corps of Engineers.
The company also faces ongoing litigation on two separate fronts as well as the challenge of attracting investment to a project that the DNR’s own financial consultant acknowledges “fall[s] below the values expected in most mining projects.”
The timing of the DNR’s announcement appeared rushed, and reporters at a Nov. 1 press conference questioned whether it was timed to come out ahead of the Nov. 6 general election. A financial assessment from the DNR’s consultants EOR, obtained by the Timberjay, is dated Oct. 31, just one day before the DNR’s surprise announcement, raising the question of whether agency officials had adequate time to review the detailed document.
When asked about the timing, Landwehr said the DNR was committed to issuing its permits as soon as the work was completed. “We were in final discussions up to this morning,” he said at the Thursday briefing. The agency had issued a press statement by noon the same day.
In addition to the permit the mine, the DNR issued six water appropriation permits, two dam safety permits, a public waters work permit, and an endangered species takings permit for the project. “With these permits, the DNR has completed its process for review and decision-making for the PolyMet project,” Landwehr said.
The details of the permits were not immediately available, but Landwehr said that the company had posted $74 million in financial assurance in order to receive the permit to mine. Ten million dollars of that is in cash with the remainder in the form of surety bonds and irrevocable letters of credit.
Only $16.5 million of that funding actually pertains to the proposed copper-nickel mine. The remaining $57.5 million is to fund the cost of clean-up of legacy pollution from the former LTV taconite operation. With the issuance of the permit to mine, PolyMet assumes the full liability for that clean-up from Cleveland-Cliffs.
Reaction is swift
The announcement drew immediate reaction from both critics and supporters of the highly controversial project.
“We commend the DNR for its rigorous process and for issuing the Permit to Mine to PolyMet following a thorough review,” said Minnesota Chamber of Commerce president Doug Loon, who also serves on the board of the group Jobs for Minnesotans. “This decision represents a commitment to invest nearly $1 billion in the state’s emerging nonferrous industry, bringing new wealth to the state and furthers Minnesota’s global position as a leading minerals producer, supplying critical minerals to our economy.”
Congressman Rick Nolan, who has been a strong backer of the project for during his six years in Congress, also lauded the decision. “While there are still more steps to go, this positive development gives us even more reason to be optimistic that PolyMet will bring hundreds of high-paying union jobs and millions of dollars in economic growth to the Iron Range. I will continue to work with the appropriate agencies to ensure that the proposed project moves forward in an efficient manner.”
Environmentalists, meanwhile, questioned whether the permit would ever lead to an actual mine, at least of the scale proposed, and suggested that the agency’s issuance of a permit under the financial terms announced Thursday is a violation of state rules. “The permits announced today are based on a bait and switch,” said Kathryn Hoffman, CEO of the Minnesota Center for Environmental Advocacy right after the announcement. “PolyMet’s financial study released in March clearly shows the version of the mine the DNR has reviewed will never be built. If a mine is built on the site, it will be a mega-mine described in that financial study that the DNR has refused to review. That’s why MCEA has appealed the DNR’s failure to study PolyMet’s mega-mine proposal, and that appeal is pending.”
Paula Maccabee, of Duluth-based Water Legacy, contends that the DNR is in violation of the state’s administrative rules, which require companies to post financial assurance equal to the estimated cost of mine remediation and closure during the first year of operation— and do so prior to obtaining a permit to mine. “Using DNR’s calculations, that financial assurance number is more than half a billion dollars,” said Maccabee. “It would be very troubling if the DNR was allowing PolyMet to circumvent the rules and low-ball financial assurance to make PolyMet’s economically marginal sulfide mining project appear financially feasible,” she added.
The DNR and PolyMet have previously agreed that the financial liability in the first year of operation would total $588 million. Maccabee said by issuing the permit to mine without that much funding in hand, the DNR is in violation of state rules.
The Timberjay has sought clarification of that issue with the DNR, but the agency had not responded prior to posting of this story.
While taconite mining has a longstanding presence in the region, PolyMet’s proposed NorthMet mine would be the first sulfide-based copper-nickel mine in Minnesota. Sulfide mining has a checkered past throughout the world, including in the U.S., where acid drainage from mining operations has left longstanding legacies of toxic water pollution. Landwehr acknowledged that the project will have environmental impacts, but he said if the mine operates under the terms of its permit, it should meet state pollution standards. He noted that ensuring that would require the political will of future state leaders and regulators.
It remains unclear, however, if PolyMet will actually build the mine, at least as currently envisioned, and the state’s financial consultant concludes that PolyMet, by itself, would likely have difficulty obtaining debt financing for construction or for bonds and letters of credit it will need for financial assurance. “PolyMet alone would probably not be able to obtain the necessary financing and required financial assurance instruments without the backing of Glencore or another large company,” conclude the consultants.
Glencore currently holds a one-third stake in PolyMet and the consultants expect the Swiss-based commodities conglomerate to be the project’s primary funder. If debt-financed, the consultants conclude that the project would be financially risky.
The DNR, however, is not requiring that Glencore add its name to the permit to mine, despite calls by some environmentalists to do so. The company is currently under federal investigation for violations of the Foreign Corrupt Practices Act.