PolyMet inks deal with North in NSW

Cash-strapped PolyMet Mining (POM-V) has signed a letter-of-intent with Australia’s North Limited that would provide the capital and technical assistance necessary to advance the NorthMet polymetallic deposit in northeastern Minnesota.

North can earn a 60% interest in the project by financing a final feasibility study and making certain cash investments in PolyMet. To retain its 40% interest, PolyMet will have to fund its share of the equity portion of the capital costs.

Alternatively, PolyMet could allow North to fund all capital costs in return for an 87.5% interest, leaving PolyMet with a 12.5% carried interest.

The NorthMet deposit contains 808 million tonnes of material averaging 0.43% copper and 0.11% nickel, plus 0.44 gram palladium, 0.12 gram platinum and 0.06 gram gold per tonne.

The junior has spent the past eight months trying to verify and upgrade the resource (calculated in 1991). In the process, it completed 10,500 metres of reverse-circulation and core drilling in 60 holes. Also, a small pilot plant has been built for metallurgical testing.

“Positive results from NorthMet have brought us to a point where significant infusions of cash are necessary to advance the project through prefeasibility and final feasibility studies, mine development and ultimately production,” says PolyMet President Donald Gentry. “The joint venture will enable PolyMet to clear these hurdles, while minimizing risk and avoiding significant shareholder dilution.”

As part of the agreement, North will complete a US$2.2-million private placement in PolyMet in two tranches.

In the first tranche, North will buy US$500,000 in units, each of which consists of one share valued at $1 per share, and one share purchase warrant valued at $1.20.

The second tranche, valued at US$1.7 million, will occur within 90 days of the completion of the first tranche and after the pilot plant tests (now in progress) are reviewed.

PolyMet has contracted Ontario’s Lakefield Research to produce more than 50 tonnes of flotation concentrate from cuttings of the latest drilling program. The concentrate will undergo pressure oxidation, with platinum group elements removed by a leaching circuit. Copper extraction would be achieved by solvent extraction-electrowinning (SX-EW), followed by nickel-cobalt extraction in a second SX-EW circuit.

After the tests are completed, in late July, North will have 30 days in which it can terminate the joint venture. If the company chooses to continue with the joint venture, it will be required to complete the prefeasibility study (already under way) within one year.

PolyMet would contribute US$1.2 million from the private placement to the prefeasibility study; North would cover all expenses above that, to a minimum of US$1.8 million.

After it completes the study, North will have 60 days in which to terminate the agreement and relinquish all rights, interest and obligation, or else proceed to a bankable feasibility study. North would then be required to complete a second private placement in PolyMet for US$500,000 and bear all costs of the 2-year study.

Prior to the North deal, PolyMet had 25.9 million shares outstanding, or 29.5 million fully diluted.