PolyMet hires new CEO, plot thickens
Thursday, PolyMet Corp. announced they’ve hired Jon Cherry as their new CEO and moved current CEO Joe Scipioni to the position of Chief Operating Officer. The choice of Cherry, may portend the continuation of a consolidation and acquisition trend that began when Franconia Minerals was purchased by neighboring Twin Metals in 2011. Or, it might just be that PolyMet went out and got a CEO who’s been successful in advancing mine proposals toward production in the United States.
There are two possible stories here. The straightforward version, reflected in PolyMet’s press release announcing the move, is that PolyMet went out and hired a CEO who has actually moved American mines from exploration to development. Cherry has taken a lead role in the opening of the Eagle mine in the UP of Michigan, the closure of the Flambeau mine in Wisconsin, and the development of the Resolution mine in Arizona. The Eagle mine, under construction, is the newest American copper mine and confronts many of the same environmental and regulatory issues that PolyMet faces in Minnesota. The Flambeau mine is frequently cited by the industry as an example of a successful copper mine closure. However, environmentalists disagree, and have sued Kennecott over high levels of heavy metals being discharged into the adjacent Flambeau River.
Another version of this story is that Cherry may be the advance man for a Rio Tinto/Kennecott purchase of PolyMet. Kennecott is familiar with the area, and Cherry’s been their go to guy for new mine development. Kennecott has been quietly exploring several potential mine sites in Minnesota, including properties in Aitkin and Carlton counties that yield titanium. They also sent an representative to testify against a 2010 bill in the Minnesota legislature that would have increased financial assurance regulations for non-ferrous mines in Minnesota.
Swiss commodities trading firm Glencore, which owns a 25% stake in PolyMet with options to purchase up to 35%, may be looking for an exit strategy for its investment. Glencore is in the middle of a complicated merger with Xstrata, a large mining company. Xstrata is trying to sell a $1 billion mine in Papua New Guinea in an attempt to generate some liquidity, in an environment where many of big mining companies are suffering from “capital incontinence.” A steep drop in the price of copper has caused ripple effects throughout the mining sector, as many mining companies are scaling back expansion plans and looking to sell assets.
Of course, Rio Tinto is also suffering for the same cash crunch, so it’s hardly assured that they would have the capital to acquire PolyMet at this time. But the hiring of Cherry, which happened out of the blue, should be watched to see what impact it has on the ownership of PolyMet. Also, if copper prices continue to slide, all of the copper-nickel sulfide mine projects in northeastern Minnesota may slow down as mining companies, concerned with overproduction, cut back on development.
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