2008 Interview with: PolyMet Mining Corp. (POM-TSX, PLM-AMEX), CFO, Douglas J. Newby - featuring: their NorthMet copper-nickel-precious metals ore body project and Erie Plant, a large processing facility located approximately six miles from the ore body in the established mining district of the Mesabi Range in northeastern Minnesota.
|PolyMet Mining Corp. (POM-TSX, PLM-AMEX)|
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PolyMet Is In The Right Place At The
Right Time With Their Copper-Nickel-Precious Metals Project In Minnesota,
With Demand In China, India, Russia, Latin America And Africa, Off Setting
Slowdowns In The United State
Douglas Newby has 25 years of
experience in the evaluation and financing of mining companies and projects
around the world. He started his career with James Capel & Co. in London,
where he was a top-ranked mining analyst. He subsequently worked with Morgan
Grenfell & Co. in London and New York and S.G. Warburg & Co. in New York.
Mr. Newby is also president of Proteus Capital Corp., a corporate advisory
business based in New York that is focused on the natural resource industry,
which he formed in the early 1990s. His primary responsibilities with the
company are to structure and arrange financing to place the company's
NorthMet project into production.
PolyMet Mining Corp. is a publicly-traded mine
development company that controls 100% of the NorthMet
copper-nickel-precious metals ore body through a long-term lease and 100% of
the Erie Plant, a large processing facility located approximately six miles
from the ore body in the established mining district of the Mesabi Range in
northeastern Minnesota. PolyMet has completed its Definitive Feasibility
Study and is seeking environmental and operating permits to enable it to
commence production in the second half of 2009. The NorthMet Project is
expected to require approximately one million man hours of construction
labor and create at least 400 long-term jobs, a level of activity that will
have a significant multiplier effect in the local economy.
CEOCFO: Will you tell us about the basics of the project today?
Mr. Newby: “There are two aspects of the project. It is a large copper/nickel/platinum group metals project located in northeastern Minnesota on the Mesabi Iron Range. We have a large ore body and we were able to acquire a very large processing facility, just before metal prices started to take off. Therefore, we were able to do an extremely attractive deal, which gives us a great deal of the infrastructure that we need to move into production and much of the project is a Brown Fields development which simplified the environmental permitting process.”
CEOCFO: Where are you in the process and are there any pitfalls that you need to watch out for?
Mr. Newby: “Minnesota actually does the permitting process differently from most if not all other states in that the state is responsible for bearing the Environmental Impact Statement (EIS). That tends to mean that getting to publication of the EIS is a little frustrating because the project sponsor, who is us, isn’t in charge of driving the process forward. The advantage is that once that process is completed, the same agency is then responsible for actually issuing permits as preparing the EIS and so the technical staff is fully up to speed once we get to that point. Minnesota has a very good track record once a good EIS is published of moving rapidly to permitting. However, getting to the EIS is slow and frustrating. We have stated that we hope that the final stages of the slow and frustrating process - the EIS – will be completed in the second half of August of this year.”
CEOCFO: Is there much mining in Minnesota and is the state generally favorable towards it?
Mr. Newby: “The mining industry in Minnesota is somewhat overlooked, but it is actually a very major mining state. Historically, most of the iron ore that has been used to produce most of the steel that has ever been made in the US has come from Minnesota. It is still a very major mining state in terms of the amount of material mined each year although being iron ore it is of less value than precious metals. We will be the first non-ferrous metal mine in the state. However, the overall political environment is supportive. We have a lot of active support from the local community, local politicians, and pretty much the whole political spectrum in Minnesota is supportive of what we are doing.”
CEOCFO: You recently announced a phase start-up; what is involved?
Mr. Newby: “The original plan was to build out the whole metal processing out of the project although we acquired a large processing facility that was built originally for processing iron ore. However, we need to basically build a new backend to the plant. What we have been looking and we recently announced is that what we were confidant that we could do is to start off selling an interim product, a metals concentrate that will be shipped offsite for processing. Then we can use the cash flows from those sales to build out the metal plant that will produce high-grade copper inaudible and upgraded nickel product, and an upgraded precious metals product.”
CEOCFO: What is the demand for the metals that you will be producing?
Mr. Newby: “The real drivers for metal demand and most natural resource demand is coming from the developing economies of China, India, Russia, Latin America, and Africa. It has been in the headlines in terms of energy markets and the oil market but the metal markets are in similar situations. Despite a slowdown or even recession in the US, and sharp declines obviously in construction activity in the US which typically would have a major impact in the metal prices, the demand from China and India is vastly more than compensating for that. Therefore, metals prices are remaining generally very firm. China for example consumes about 50% more copper each year than the US, and it is growing at well over 10% a year.”
CEOCFO: Is it difficult with so much activity going on in your industry to get the personnel and equipment; how do you plan for what you are going to need as development continues?
Mr. Newby: “Generally, the industry is enormously challenged both in terms of getting equipment and skilled labor from the operating level and all the way through to the more senior operational management. I do not want to pretend it is not a challenge, but we are seeing a much easier situation than I think most of our competitors because of our location in an established mining district, there is a large skilled labor force. With the decline until the last few years in the iron ore industry, many people have either moved away or moved into other jobs and are keen to come back into the mining sector. We are perceived locally as being potentially a more stable employer than some of the iron ore operations that have been extremely cyclical and volatile. We are not seeing any insurmountable challenges in terms of bringing people on. The senior management of the company is very much Minnesota focused. Joe Sciponi, who was recently appointed president and CEO, is from a third generation mining family from northern Minnesota. Therefore, he and many of the crew that we already have onboard know their way around the industry extremely well. On the equipment side, the most challenging equipment to obtain is the sort of facilities that we were able to acquire when we bought the plant.”
CEOCFO: Do you have 100% control of the project?
Mr. Newby: “The mine site is a lease hold interest, but it is a 100% control for us and we own 100% of the plant.”
CEOCFO: Do you expect to continue that way?
Mr. Newby: “Absolutely!”
CEOCFO: What is the financial position of the company today?
Mr. Newby: “We have about $12 million of cash. We are in advanced negotiations for a long-term marketing and off-take marketing agreement with a major metals trading group and anticipate that will bring with it some upfront money. That combination we anticipate will comfortably fund us through the completion of the permitting process. In parallel with completing the permitting process, we will be negotiating a construction finance package and we are working actively with various groups on that at the moment. We are expecting that to be all debt and therefore not anticipating an equity offering.”
CEOCFO: You mentioned foreign markets but what is the demand in the US and where are they currently getting copper and nickel?
Mr. Newby: “We all talk about US dependence on foreign oil and energy, but most of the metal markets are in a very similar position. The US imports 40% of its copper. According to a statistic, it imports 60% of its nickel but there is currently no nickel production in the US. Therefore, the 40% that is attributed to domestic production is recycling of nickel that was previously imported; so that is really imported as well. The platinum group metals, which are essential for catalytic converters to clean up car exhaust emissions, depending on the particular metals between 80 and 95% of those are imported. Therefore, the US is very dependent on imported metal so we see some strategic value to what we are doing. The US demand has softened somewhat with the economic slowdown although there are signs that many of the metals fabricated in the US benefiting from the weaker dollars and replacing some imports. It is not as soft as you might expect for the economic slowdown.”
CEOCFO: Address potential investors; why does PolyMet stand out?
Mr. Newby: “Given the amount of infrastructure we have in place we are far more advanced than most development projects. We are located in a politically stable part of the world with excellent infrastructure and support. There is the potential for in the future building a significant non-ferrous mining industry in northern Minnesota, which could be comparable in size and importance to the iron ore mining industry.”
CEOCFO: What should people take away from this interview?
Newby: “We are
moving rapidly towards production and we anticipate over the next 18 months
to become a quite significant US based base metal mining company.’
“The mining industry in Minnesota is somewhat overlooked, but it is actually a very major mining state. Historically, most of the iron ore that has been used to produce most of the steel that has ever been made in the US has come from Minnesota. It is still a very major mining state in terms of the amount of material mined each year although being iron ore it is of less value than precious metals. We will be the first non-ferrous metal mine in the state. However, the overall political environment is supportive. We have a lot of active support from the local community, local politicians, and pretty much the whole political spectrum in Minnesota is supportive of what we are doing.” - Douglas J. Newby
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