PolyMet draws on debt to feed NorthMet

In tight credit markets it’s good to have deep pockets in your corner.

Vancouver-based PolyMet Mining (POM-T, PLM-N) does, and it’s not afraid to draw from them.

The company is taking the second tranche of $7.5 million from its debt facility with Baar, Switzerland-based Glencore to help push it towards the development of its NorthMet project in Minnesota.

The debt deal with Glencore was closed at the end of October for a total of $50 million in convertible debt that is due at the end of September in 2011.

PolyMet pays Glencore a floating rate based on 12-month LIBOR – which is currently 2.08% — plus 4% and the debentures can be exchanged into shares of PolyMet at US$4.00 per share. Together with the warrants associated with the first tranche, Glencore can hold 10 million shares or 6.8% of the company.

Polymet shares were trading for 96¢ in Toronto on Dec. 24.

At the beginning of September the two companies announced a strategic partnership that would see Glencore take an active role in PolyMet’s marketing and financings as well as on its board.

The funds from the latest tranche are set to go towards finishing both key engineering work and the environmental impact study at NorthMet.

PolyMet has a 100% stake NorthMet – a project that hosts a copper, nickel and precious metals ore body in northeastern Minnesota. The company also owns the Erie Plant — a processing facility that sits just 10-km from the ore body.

Proven and probable mineral reserves for the project are 274.7 million tonnes grading 0.28% copper, 0.08% nickel, and 0.4 grams precious metals (which includes gold, platinum and palladium.)

The company says reserves represent 43% of the measured and indicated resources and were calculated using a US$1.25 per lb. copper price, a US$5.60 per lb. nickel price and  precious metal prices of US$210 for palladium, US$800 for platinum and US$400 per oz. for gold.

PolyMet has already finished a feasibility study on the project and now just needs to secure environmental and operating permits before it can go into production.

Privately held Glencore has worldwide activities in the smelting, refining, mining, processing, purchasing, selling and marketing of metals and minerals, energy products and agricultural products.