PolyMet Mining Corp., which is developing Minnesota's first copper mine, is running so low on cash that it may not be able to continue without outside financing, according to an independent audit report of its books.
Chartered Accountants of Vancouver, British Columbia, looked at three years of PolyMet's financial statements and found that the company had $779,000 in working capital and net current assets as of Jan. 31, 2011, The Duluth News Tribune reported Wednesday.
PolyMet, a publicly traded company incorporated in Canada, had $16.3 million on Jan. 31, 2010. PolyMet disclosed the audit report on Tuesday.
The report concluded the cash shortage could "cast significant doubt about the company's ability to continue as a going concern." The accountants wrote PolyMet would need additional financing in order to meet its obligations by Jan. 31, 2012.
However, outside financing could be on the way from the Swiss firm Glencore, which said in November it would buy 15 million shares of PolyMet at $2 each in three stages. The last stage was to conclude when PolyMet receives key permits or by Oct. 15, 2012, whichever comes first.
PolyMet spokeswoman LaTisha Gietzen said the companies were in talks to accelerate that investment. If it doesn't happen, "then we will raise additional funds elsewhere," Gietzen said. "We have done that in the past."
Glencore had $145 billion in revenues in 2010. It has more than 57,000 employees in more than 40 countries and interests in several publicly traded companies.
Frank Ongaro, executive director of MiningMinnesota, an industry-supported group that promotes mining for precious metals, said joint ventures and partnerships were common during the expensive development phase of mining projects.
"This is an example of where there is a strong, global mineral investor that is participating at a greater and greater level with PolyMet," he said. "That should be seen as a positive thing."
PolyMet's proposed open-pit mine near Babbitt would produce copper, nickel, platinum and other metals. If built, the operation would create 360 or more jobs for about 20 years. Environmentalists have opposed the mine and have questioned whether PolyMet had enough money to protect taxpayers from the clean-up costs after the mine had run its course.
The Iron Range Resources and Rehabilitation Board, which has approved a $4 million loan to PolyMet, is watching what happens with the company, said IRRRB Commissioner Tony Sertich.
"It sounds like that they are optimistic about getting (early financing) from Glencore by June 30," Sertich said.
The IRRRB voted in December and April to loan PolyMet $4 million to help buy private property that would be exchanged for U.S. Forest Service land at PolyMet's planned mine site near Babbitt. The loan will be secured with a mortgage on the land.
"If there are any issues [with PolyMet] we get access to the land," Sertich said.
Sertich said the loan probably will be finalized by the end of the month.
Information from: The Duluth News Tribune
(Copyright 2011 by The Associated Press. All Rights Reserved.)