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TABLE OF CONTENTS Aug 8 - 14, 2011 Volume 97 Number 25 - 0 comments

Glencore ups ante on PolyMet

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2011-08-08

Glencore International (GLEN-L) is betting that PolyMet Mining's (POM-T, PLM-X) NorthMet polymetallic project in Minnesota has the stuff that profitable mines are made of.

The giant metal trader and miner closed the latest round of a private placement, earning another 5 million shares of PolyMet for US$2 per share.

But that's not all.

The Swiss-based commodity giant is also buying 9.2 million shares of PolyMet from Cliffs Natural Resources (clf-n), at a discounted price of US$1.42 per share.

Cliffs acquired those shares between 2004 and 2006 as payment for the Erie Plant facilities, where PolyMet plans to process copper, nickel, cobalt, gold, platinum and palladium from the nearby NorthMet orebody.

The latest investment by Glencore is the second tranche of a PolyMet offering, and gives Glencore 28.6 million shares of the company, representing 17.89% of its outstanding shares.

It also holds debentures of PolyMet, with principal tallying up to US$28.2 million. Glencore can exchange that debt into another 7.05 million common shares, and it has warrants for 3 million more shares at a strike price of US$2 per share.

Glencore can acquire an additional 5 million PolyMet shares as part of the offering.

If all of those events occur, Glencore could potentially hold 43.7 million common shares, giving it a 24.95% stake in PolyMet.

In London on July 15, the day the tranche closed, Glencore shares were up 3.21 pence to 495.21 pence, on 3.07 million shares traded. In Toronto, PolyMet shares were up 2%, or 3¢, to $1.83.

PolyMet's key assets are its wholly owned NorthMet copper-nickel-precious metals orebody and the Erie Plant. The plant sits 9.5 km from the orebody, and both are located in the Mesabi Range mining district in northeastern Minnesota.

The company updated a feasibility study on the project in 2008. It is now looking to secure environmental and operating permits to get into production. The feasibility study estimated a capital expenditure of US$602 million for the project.

Glencore is one of the world's leading integrated producers and marketers of commodities. It went public this year after building a reputation as a dominant but opaque company in the resource industry.



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