Glencore ups stake in Polymet to 82% through US$195M rights offering

PolyMet Mining (TSX: POM) says it has completed one of the largest rights offering on the market. Under the offering, PolyMet shareholders had the right to acquire roughly 0.91 of a common share at US$2.11 per share for each share held.

Starting on Mar. 13 and up until its expiry on Apr. 4, the company issued a total of 92.6 million common share for gross proceeds of around US$195 million, representing the full allotment. Glencore (LSE: GLEN), PolyMet’s largest shareholder, fully backed the rights offering.

This financing was initially announced last summer in conjunction with PolyMet’s joint venture agreement with Teck Resources (TSX: TCK.A/TCK.B; NYSE: TECK) to develop the NorthMet and Mesaba projects, which represent one-half of the known 8-billion-tonne Duluth Complex resource in northeastern Minnesota.

To kickstart PolyMet and Teck’s newly formed 50-50 owned NewRange Copper Nickel JV, Glencore committed to support PolyMet’s portion of the initial US$170 million work program and about US$100 million in other expenses. For this, Glencore agreed to fully backstop a rights offering by PolyMet to raise additional funding.

Glencore also agreed to exercise its basic subscription right in full and purchase all unsubscribed common shares — 87.8 million — under the rights offering pursuant to a standby commitment. Glencore now owns 159.8 million common shares, representing 82.2% of PolyMet’s share capital.

The proceeds of the rights offering and standby commitment have been used to repay all of PolyMet’s unsecured and secured and convertible debt owed to Glencore, as well as costs related to the rights offering.

As mentioned, they are also intended to fund the company’s portion of the NewRange JV, which the partners hope will become the first to commercially mine copper, nickel, cobalt and other platinum group metals from Minnesota’s Duluth Complex.

“We now have a balance sheet free of debt and a strong cash position to support our interest in NewRange Copper Nickel as it progresses towards a sanctioning and construction decision for the NorthMet project and further assesses the Mesaba resource,” said PolyMet chairman and CEO Jon Cherry in a release.

The NorthMet project has received its permits, and the JV partners are working through litigation towards development, construction and operation of a 32,000-tonne-per-day mine and mineral processing facility. The nearby Mesaba deposit is in early stages of design, engineering and evaluation, and will be assessed for potential future development based on a thorough set of social and environmental baseline studies, PolyMet said.