PolyMet Mining’s stock offering could result in Glencore majority ownership

May 8, 2019

In March, the U.S. Army Corps of Engineers granted PolyMet the last major permit it needs to proceed with its proposed Northmet copper-nickel project on the eastern Iron Range of Minnesota, but the company still faces legal and financial hurdles before it can begin construction on the mine.

To meet some of those financial obligations, PolyMet Mining plans to raise $265 million in a stock offering to existing shareholders. The Minneapolis Star Tribune reported that it’s a move that is mainly intended to pay off debt to the company's longtime backer, mining and commodities giant Glencore.

Depending on how the offering shakes out, Glencore may end up with majority ownership of PolyMet. Switzerland-based Glencore already owns 29 percent of PolyMet.

PolyMet still faces several legal challenges to the mine and processing plant, and it must raise money for the $1 billion project. The company filed a preliminary rights offering prospectus with securities regulators in the United States and Canada.

Under the rights offering, PolyMet stockholders would receive the right to buy one common share for every share they own. Final pricing has not been determined, but the rights price will represent a 20 percent discount off the “volume weighted average price” for the five trading days before the final prospectus is filed.

Glencore has agreed to backstop PolyMet’s rights offering. It will buy all of the shares that it is allotted, and then purchase any stock remaining if other shareholders don't exercise their rights. Glencore would get a $7.7 million standby fee for backstopping the offering after it is concluded.
The rights offering is subject to regulatory approval.

Glencore has been financing PolyMet since 2008, through equity and debt. At the end of 2018, PolyMet owed Glencore $178.4 million in secured, nonconvertible debt and another $57 million in secured debt convertible to equity, according to a filing with Canadian securities regulators.

If the latter debt is fully converted — along with about 14 million warrants to buy PolyMet shares — Glencore would own 40 percent of the company.

The rights offering would further boost Glencore's stake — if Glencore ends up buying a lot of shares beyond its own rights allotment.
Glencore is one of the world's largest companies engaged in mining and the marketing of metals and agricultural commodities. It generated $3.4 billion in net profits last year.


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