It looked good on paper. A small Canadian company would mine copper, nickel and other valuable minerals in northern Minnesota. They vowed an innovative process to meet some of the most rigorous mining regulations in the world. Moreover, this company promised jobs for a rural region that needed them, a place that boasted a workforce intimately familiar with mining.

For Dr. Bob Friedman, a private investor from Palm Springs, Florida, PolyMet seemed a good bet. He read the positive comments from Iron Range leaders and citizens. He researched markets for copper and nickel. Like many, he believed in the idea.

Unlike most on the Iron Range, however, Friedman put real money into PolyMet. Friedman said over 12 years he invested more than $1 million in PolyMet stock. So when the company announced last November that it had received air and water permits from the State of Minnesota he became elated.

But last week, Friedman learned his investment wouldn’t pay off, not even if PolyMet opens its mine. In fact, his stock was now worth pennies on the original dollar.

“I realize no one feels sorry for the investors,” said Friedman in a phone interview. “They take risks. But I watched this company for 12 years. I rejoiced in their permits. Then we got slaughtered.”

This happened because on May 7, PolyMet announced a deal to convert a $251 million debt to the Swiss-based international mining company Glencore into equity. In other words, they diluted the value of the stock in a deal that would not only clear the debt, but give Glencore a remarkable opportunity to take over the company.

I asked PolyMet spokesperson LaTisha Gietzen about this. She said the publicly-traded company can’t comment on its stock price.

“However,” said Gietzen, “what we tell shareholders who call us is that the fundamentals of the company have not changed: we have an attractive ore body, we are fully permitted, the rights offering allows us to clean up our balance sheet by removing our debt thus clearing a pathway to construction financing. Glencore continues (as they have for the last ten plus years) to be a strong financial supporter and to lend its technical expertise. We sincerely appreciate and value all of our shareholders and we continue to believe in the long-term value of the project.”

To be clear, PolyMet still promises environmentally sound metal mining in our region. But we may dispense with the naive notion that a small Canadian company with local offices will run the show. Soon enough, we’ll deal with Glencore.

And Glencore is different than anything we’ve seen on the Mesabi Range.

Glencore is the world’s largest commodities company by revenue. Its 2018 revenue approached $220 billion. That’s three times the revenue of the world’s largest steelmaker ArcelorMittal, owner of the Minorca mine and co-owner of Hibbing Taconite. That’s five times more revenue in 2018 than Brazil’s BHP, the next largest commodities company.

In 2018, Glencore outpaced the revenue of U.S. Steel by 18-1. They own MinnTac, Keewatin Taconite, and co-own Hibbing Taconite. Glencore generated 100 times more revenue in 2018 than Cleveland-Cliffs. Cliffs owns Northshore Mining in Babbitt and Silver Bay, United Taconite in Eveleth, and co-owner of Hibbing Taconite.

In 2018, Minnesota’s mining industry reported one of its best revenue years in modern memory. Still, all of these companies fit snugly in the shadow of Glencore, which operates on all six populated continues of the Earth. By sheer scale, our region hasn’t dealt with a mining company this big since the formation of U.S. Steel as the world’s first steel trust in 1901.

Clearly, Glencore knows how to mine. But they’ve also left a wake of environmental violations and labor conflicts all over the world. In 2014, the United Steelworkers — bulwark of the American labor movement — declared Glencore the worst company in the world for labor relations. This came from a decision to lock out Steelworkers and use replacement workers at mills acquired by Glencore in the United States and Canada.

“You look at their employment history, how they treat unions and I don’t know how people in Minnesota could think this would turn out well,” said Friedman.

Private investors like Friedman have until Tuesday to exercise their rights to buy back their share of the company. Friedman, speaking for himself, said he thinks many will be tapped out — either unable or unwilling to throw more money after the losses suffered as a result of the debt restructuring. Under the terms of the deal, Glencore would then absorb company equity in lieu of cash. In fact, Friedman thinks Glencore could end up with up to 75 percent of the shares for as little as $245,000 in new investment.

What does this mean? A company like Glencore would have the ability to ramp up the mine very quickly. However, current copper prices wouldn’t justify the cost of production detailed in PolyMet’s permit applications.

So Glencore could simply put a pin in the map, waiting to go after these resources years later. Or they could use this region as leverage in negotiations with some other source of copper and nickel, driving a harder bargain with people in another part of the world.

Gietzen said the PolyMet project’s construction will be determined by “timing and the outcome of [the] financing process.” This was true before Glencore had a shot at acquiring the company. In this, nothing changed.

For the people of Minnesota, supporters and opponents of nonferrous mining alike, this project enters a new phase. Demand for the steadfast enforcement of the best environmental and collective bargaining practices won’t come from the world’s largest mining company. Rather, it must come from the people of Minnesota.

If it doesn’t, we’ll be left holding the bag.

Aaron J. Brown is an author and community college instructor from Northern Minnesota’s Mesabi Iron Range. He writes the blog MinnesotaBrown.com and hosts the Great Northern Radio Show on Northern Community Radio (KAXE.org).

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