DULUTH, MN — Three hundred million shares – that’s the current amount issued by PolyMet Mining. But now, the company is looking to triple that by offering shareholders a discounted rate in an effort to clean the balance sheet.
It’s called a rights offering.
“The way the rights offering works is that for every share somebody currently owns they will get a right, one right, to purchase a little more than two additional shares at a discount,” said PolyMet President and CEO Jon Cherry.
The goal is to raise $265 million that will go toward paying off the company’s debt which is owed to the international mining company Glencore.
“It’s kind of the first step in the overall project financing,” said Cherry. “It cleans up our balance sheet, it increases our capacity to help finance the project including obtaining additional debt to build the project with.”
So what does this mean for shareholders?
“If all of the shareholders participated at 100 percent of what they’re entitled to do then they wouldn’t be diluted or there would be no change in the ownership for anybody,” said Cherry. “If they chose not to participate than they would be diluted about one-third.”
Whatever shares are leftover, Glencore, which already owns about 28 percent of the company’s shares, has agreed to purchase them which has raised questions about what that could mean for the project.
“PolyMet will still be a publicly traded company with a board of directors and the permits are assigned to PolyMet so there should be no change in the permitting that would be required,” said Cherry.
Although PolyMet’s permits are in hand, the company’s stock has recently tumbled.
Five months ago it was sitting at 74 cents per share, now, it’s sitting at less than 40 cents per share.
While Cherry said he can’t speculate about the stock prices, he told us nothing has fundamentally changed with the project.
“All of the metal, which is where all the value resides for the project, is still in the ground. It hasn’t been mined yet. So all of that value is still out there.”
When asked for an update on a timeline for the project Cherry said right now PolyMet’s focus is to get the rights offering done and then they will take the next step of completing the overall project financing.
You can find more information on the rights offering here.