Glencore increases its bet on PolyMet

Glencore International (GLEN-L) is betting that PolyMet Mining’s (POM-T, PLM-X) NorthMet 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 that gets it another 5 million shares of PolyMet for US$2.00 per share.

But that is not the sum of its investment in the junior mine developer.

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$1.4233 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 represents the second tranche of a PolyMet offering, and gives Glencore 28.6 million common 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 also has warrants for another 3 million shares at strike price of US$2.00 per share.

Lastly, Glencore can acquire another 5 million common shares as part of the recent offering.

If all of those events occur Glencore would hold a total of 43.7 million common shares which would give it a 24.95% stake in PolyMet.

In London on July 15, 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 roughly 9.5 km from the orebody and both are located in the mining district of the Mesabi Range in northeastern Minnesota.

The company has updated a prior feasibility study on the project in 2008 and is now looking to secure the environmental and operating permits it needs to get into production. The feasibility study estimated capex of US$602 million for the project.

Glencore is one of the world’s leading integrated producers and marketers of commodities and recently went public after building a reputation over many years as being one of the most dominant and opaque company’s in the resource industry.