CFO: Douglas Newby
PolyMet Mining Corp. is a publicly traded company exclusively focused on developing the NorthMet copper-nickel-precious metals project, through its wholly owned subsidiary, Poly Met Mining, Inc. The NorthMet Project is located in the established Mesabi Iron Range mining district in northeastern Minnesota.
WSA: Good day from Wall Street. This is Juan Costello with the Wall Street Analyst and joining us today is Douglas Newby, the Chief Financial Officer of PolyMet Mining. The company trades on the New York Stock Exchange, their ticker symbol is PLM and on the Toronto Stock Exchange, ticker symbol is POM. Thanks for joining us today, Douglas.
Douglas Newby: Thank you, Juan.
WSA: Great. Now, starting off, give us a brief history and overview of the company for some of our listeners that are new to your story.
Douglas Newby: Absolutely. PolyMet Mining is a Canadian company, but we are focused on developing a very large copper, nickel and platinum group metals project in northeastern Minnesota. We’re located very close to the eastern end of the Mesabi Iron Range, which produced most of the iron ore that produced most of the steel that literally built industrial America, so in a very strong mining community, although completely separate from the iron range geologically.
WSA: And can you give us a overview of the NorthMet project and some of the recent results you had there?
Douglas Newby: Sure. There are two aspects to the project. We were able to acquire a large processing facility that was originally built to process iron ore so we will convert to copper and nickel and we have the ore body located about six miles away and connected by an existing railroad. So the challenge for any mine development in the US is completing the environmental review and permitting process and for any large project that takes a lot of time and is an expensive process, we’ve been working on it for about eight years now. We’ve had some real progress however in the last 12 months or so. Juan, you reminded me that we did an interview about a year ago. At that point, we had just appointed a new CEO, Jon Cherry, who joined us from Rio Tinto. Jon’s background is an environmental engineer. He has made a lot of progress working with the rest of the team and making some changes to the team to make some huge strides forward. So we’re expecting the state of Minnesota to publish a new environmental impact statement this summer and then it will go out for public review. The study makes it clear that the project meets state and federal regulatory standards.
WSA: Excellent. And can you talk a little bit about your recent rights offering?
Douglas Newby: Indeed. A couple of weeks ago we closed the $60 million rights offering. This is obviously not a very common way of financing these days in the US, is a little more common in Canada and still fairly well known in Europe. So, basically, we gave all our shareholders the right to buy one new share for every two shares they owned. We have a strategic investor with Glencore out of Switzerland. Glencore took up its rights. Management took up our rights. We had a total of over 80% of the shares, was subscribed directly by the existing holders.
So of the 60 million we raised, 40 million came from non-strategic investors and about 20 million from Glencore, which I think in the current market environment for development stage mining company was a really tremendous demonstration of support by the broad shareholder group. What the $60 million does for us is that it gets us very well financed; complete the permitting process, it also gives us the funds to be able to complete pre-construction engineering and potentially make some down payments on long lead-time equipment if needed so that once we are permitted, which we think will be about this time next year, we’ll be able to move very rapidly into the construction phase and we expect to be able to build projects in about 15 months, again, once we’re permitted.
WSA: Well, good and what are some of the trends that you’re seeing right now in the sector and how are you positioning the company to capitalize on some of the copper, nickel and precious metal trends?
Douglas Newby: As your listeners and readers probably know that the metal market has been under a lot of pressure recently as a combination of concerns about economic slowdown in China and some inventory build, so metal prices have been under a lot of pressure. The industry as a whole is going through a fairly major change. Companies have been focused on developing very large projects, often in difficult parts of the world where massive infrastructure is needed. There have been changes in senior executives of the big mining companies and a lot of regrouping within the industry. I think what we’re beginning to see is China maybe bottoms out, if you can call 7% growth bottoming out, so fairly high-class problem to have, but as China stabilizes it will begin to rebuild metal inventories and the rest of the world continues to grow albeit fairly slowly. So, some of the big-picture changes are going on in the industry. Some new projects are getting deferred. Some high-cost old mines are getting shut down, so while the industry has been through a fairly challenging couple of years, we think over the next two to three, five years there will be prospects where metal prices looks pretty good and we are optimistic that PolyMet will be starting up in a couple of years’ time into a fairly healthy commodity cycle.
WSA: And what are some of the factors, Douglas, that you feel makes PolyMet unique from some of the other players in your sector?
Douglas Newby: The amount of infrastructure we have in place with the existing plant. The fact that we’re in the US. The challenge in the US, as I said earlier is the time getting through the permitting process, but clearly skilled labor, infrastructure, rule of law are all very strong in the US once you get through that process. I think the fact that we’re able to look to develop a major asset producing metals to support US industry is going to be pretty significant and as we move forward and get some recognition, the progress we’re making with the project and then we can build out the project over the next couple of years.
WSA: Excellent. And you talked a little bit about the background of your CEO, Jon Cherry. Perhaps you could walk us through our background and experience, Douglas, and talk a little bit more about the management team there.
Douglas Newby: Sure. I come from the mine finance sector. I was top-ranked mining analyst in London and then New York and then moved into corporate and project finance in New York. I’ve spent the last 10 years in corporate management. I was chairman and CEO for a while of a company called Western Goldfields, which subsequently became New Gold, which has become a pretty successful gold producing company. I’ve been with PolyMet for eight years. The rest of the team, we’ve got a pretty strong team of environmental engineers, people with lot of experience in environmental permitting, management, operating experience, construction experience, so it’s a pretty strong bunch of people.
WSA: And what are some of the goals and milestones that you and the team are hoping to accomplish over the course of the next year?
Douglas Newby: Juan, the main focus is on environmental review and permitting with the draft environmental impact statement this summer and permits in about a year from now. The other key areas will be completing construction finance so that we can build the project rapidly once we have permits and preparing for construction and then operations.
WSA: As far as investors in the financial community are concerned, Douglas, do you believe that the PolyMet story and your message as well as the company’s upside are completely understood and appreciated by them and if not, what do you wish investors better understood about the company or your sector?
Douglas Newby: I think the biggest misunderstanding is where we are on the permitting side, frankly because we and others have had some setbacks in the past, there is a great deal of skepticism about the ability to get new mines permitted in the US. I think what we’re seeing is that if you do it properly, if you work with regulatory agencies and try to solve problems as opposed to fighting them, you can make progress and succeed. So, I think if we are able to demonstrate the support and agreement on the permitting side then the investment community will begin to realize that mining is still possible in US and we’ve got a great opportunity to both establish best practice for environmental purposes and create jobs and create good return for our investors.
WSA: Excellent and once again joining us today is Douglas Newby, the Chief Financial Officer of PolyMet Mining. The company trades on the Toronto Stock Exchange, ticker symbol is POM and on the New York Stock Exchange, ticker symbol PLM. Currently trading at 80 cents a share, market cap is now close to 200 million and before we conclude here, Doug, to briefly recap some of your key points. Why do you believe investors should consider the company as a good investment opportunity today?
Douglas Newby: Thanks. The key points are that we’re working through the completion of the environmental review and permitting process, expecting some significant good news over the next 12 months. The company is well financed for the next stage of the project. We’ve got a very strong management team and I think we may be somewhere near the bottom of the commodity cycle at this point. So, hopefully, we’ll be making project progress in a good overall market environment.
WSA: Well, we look forward to continue to track the company’s growth and report on your upcoming progress and we’d like to thank you for taking the time to join us today, Douglas, and update our investor audience on PolyMet Mining. It’s always good to have you on.
Douglas Newby: Thank you, Juan. It was a pleasure. Thank you.