Who's your sugar daddy? (www.sugardaddyfail.com).
by Steve Timmer
Sep 24, 2015, 10:00 PM

What do you do when your Sugar Daddy is out of sugar?

Please see the updates below.

This is no doubt the question on the minds of all of the bright lights at PolyMet Mining at the moment. You see, PolyMet recently released its second quarter financials, and it made just as much money in the last quarter as it has ever quarter of its existence, going back to 1981.

None. Zero. Zip. Zilch. That’s thirty-six years of solid financial performance. That’s because PolyMet has never been a miner and has never operated a mine. All hat and no cattle, except without the hat.

Remember, PolyMet is the company that Executive VP Brad Moore said was “a real company” at a Minnesota House hearing in January of 2014.

These people have a operating loss tax-carryforward to the moon, Alice.

In summary, PolyMet spends about US$8 million US per quarter, and it has about US$10 million in current assets.

The holiday bonuses promise to be thin at PolyMet this year, with a cash bar at the party!

PolyMet is, to put it bluntly, up against the wall. It has to raise more money, and soon. Because it has never earned a dime — either US or Canadian — it is entirely unbankable. It can raise money two ways, well, three if you count bake sales.

First, it could sell stock to the public, perhaps including to long-time shareholder and former Lieutenant Governor candidate, Karin Housley. Seriously, though, even if Sen. Housley buys a lot, this is not likely to be successful. Why? Here’s why:

3 mo polymet stock chart

(The legend at the top just shows the day’s movement.) The stock has been on a skid, no doubt at least in part because the price of copper is on a skid. This is not a price trend on which to try to raise money in public markets.

That just leaves prominent underworld figure Glen Core to loan shark PolyMet out of the jam. After all, he’d done so several times in the past. But dealing with Glen Core always has a price: loss of equity by other shareholders, including Sen. Housley, because Glen always gets an equity spiff.

Glen Core is, of course, Glencore PLC. Glencore is the largest shareholder in PolyMet, and it is PolyMet’s Sugar Daddy, too. It has PolyMet tied up six ways till Sunday; it has loaned PolyMet millions and has a first lien position on everything that PolyMet owns.

But sadly, even the Sugar Daddy has fallen on hard times. The Business Insider reports that Glencore’s stock is on a skid, too, and that its credit rating is imperiled. Glencore stock is way off for the last year:

glencore year

It is reported in the Financial Times (behind a paywall) that Glencore is going to shutter two African copper mines that it owns that would have had nearly 400,000 tons of production during the planned 18 month shutdown. For context, that’s the equivalent of 11 years of PolyMet’s proposed production, and more than half of the total amount that PolyMet would produce during proposed life of mine operations.

Frankly, Glencore needs PolyMet like it needs a hole in the head. But PolyMet really, really, really needs Glencore. But Glencore is waking up and smelling this coffee:

Copper is still high relative to historic trends. But don’t expect that to last and don’t assume that mines like the one PolyMet is proposing in upper Minnestoa will remain financially viable. And don’t be surprised if any new or existing Iron Range ventures go through even more financial restructurings. And not just in Minnesota. The entire global iron ore and steel sectors are going to take a deep-knee bend.

And the truly amazing thing is that anyone at the Land and Minerals Division of the Minnesota Department of Natural Resources thinks (and they do) that PolyMet is a responsible party to deal with in assuring the maintenance of PolyMet’s grave for 500 years after the mine closes.

Hell, these people may not be able to keep the lights on come January.

Update: At the same hearing referred to above, DNR Land and Minerals Division Director Jess Richards testified that he had a reverse osmosis water treatment system (proposed for water cleanup at PolyMet) in his house, and it “works great.” How well it would work if he died and left the system unattended for a few hundred years he didn’t say.

Further Update (9/28): The past couple of days haven’t been kind to Glencore PLC, either. On Monday, it reached a record low:

The company’s shares dropped to a new record low of 73p at 15:00, helping push the FTSE 100 down 2%.

Analysts warned slumping metal prices could leave Glencore shares almost worthless because of its heavy debts.

Fears over Glencore’s £20bn debt pile have seen its shares drop more than 30% in the past month.

It is tedious, but nevertheless important, to repeat that Glencore PLC and its pet rabbit PolyMet Mining are not financially responsible parties to be given stewardship of Minnesota natural resources like the St. Louis River Basin and the Boundary Waters Canoe Area Wilderness.

PolyMet continues to sink (10/4):

PolyMet 10-2

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