by Steve Timmer

Oct 29, 2015, 10:30 AM

The numbers guys win a Spotty ™

Graphic by Tild

Criticizing the Pride of the Business Press

In a column in the Strib on October 15th, business columnist Lee Schafer penned a rosy picture of the prospects of PolyMet Mining to open and operate a copper sulfide mine. His sources for the story were Jonathan Cherry, the CEO of the company, who had just dumped a large quantity of PolyMet stock, and a group of investment brokers with an apparent history of working with PolyMet for compensation.

I called Schafer “Pollyanna” (should it have been PolyAnna?) — no, sorry; I called him “Dr. Pangloss” — for relying on the unexamined blandishments of a couple of obviously biased parties.

Ron Sternal, Alan Thometz and John Gappa conducted a pretty thorough blandishment examination that was published in the Strib today as a Counterpoint: PolyMet’s Minnesota copper-nickel project is risky business. It wins a Spotty™.

A few of the highlights:

Using publicly available data for PolyMet’s return calculation and standard investment analysis methodology, we were able to update PolyMet’s financial model with today’s costs, metal prices and financial assurance requirements. The results show the project’s return is now negative at -3.3 percent.

And here’s something that ought to sober everybody in view of the recent field trip to the Gilt Edge Mine disaster in South Dakota. PolyMet doesn’t seem like a great candidate for “bankruptcy proofing.”

Our modeling also shows that PolyMet will struggle to provide an upfront financial trust fund sufficient to protect Minnesota taxpayers. Just using the remediation cost estimates provided by the company, PolyMet will need to establish an upfront trust fund of at least $350 million. This estimate provides only the funds necessary to remediate and maintain the site as estimated by PolyMet. It does nothing to insure us against a tailings dam collapse or other disaster, such as occurred last year at the Mount Polley mine in Canada. Even if PolyMet never turns a shovel at its proposed mine site, the shuttered plant it bought from Cliffs has $72 million in unfunded cleanup costs that PolyMet would be responsible for the moment it receives a permit.

When Jon Cherry sold all that stock, he probably knew some things we didn’t. At the time.

Remember, kids, a Spotty™ is awarded for an op-ed piece, a letter to the editor, or a blog post or comment that I wish I had written myself. The Spotty™ has been recognizing memorable advocacy writing for almost ten years.