Financial assurance pays for physical processes that are required to protect the environment in case of occurrences such as spills and releases or unexpectedly premature mine closure due to bankruptcy, falling metal prices, or other causes. When determining financial assurance it is important to consider that PolyMet as a corporate entity exists only for the exploitation of the copper nickel deposit at the proposed mine site and has neither the reputation, resources nor the responsibility as a limited liability corporation for providing ongoing protection of the environment.
PolyMet Capital Structure
According to PolyMet’s web site, PolyMet has 275 million shares outstanding with warrants and options for 58 million additional shares. As of October 31, 2013, Glencore owned 110 million shares (40%) and has options and warrants to obtain another 31 million. In the fully diluted corporation, Glencore will own a 42% share and can easily control PolyMet with minimal cooperation from minority stockholders and insiders. Being able to control the corporation with less than 50% ownership allows Glencore to walk away after bankruptcy since PolyMet is a limited liability corporation.
Aside from being the most prominent owner of PolyMet, Glencore is also first in line for production from the mine and will own the first five years of mineral production if the PolyMet mine is allowed.
Glencore was founded in 1974 as Marc Rich & Co. by American businessman Marc Rich. Before being pardoned by U.S. President Bill Clinton in a controversial move on his last day in office in 2001, Rich was a fugitive and a regular fixture (along with Osama bin Laden) on the FBI’s Most Wanted list for charges of racketeering and illegal trading with Iran. Before dying in 2013, Rich had admitted that Glencore paid bribes. The new Glencore, however, denies doing so: “We will not be complicit in any third party’s violation of the law in any country, nor the payment nor receipt of bribes, nor participate in any other criminal, fraudulent or corrupt practice,” reads the company’s corporate practice statement. Nonetheless, investigations over the past decade have alleged that Glencore’s agents and employees made illegal payments to secure market access in Bahrain, Belgium, Iraq, and Panama. Criminal charges have been filed only in the Belgian case, resulting in the criminal court in Brussels fining Glencore 500,000 euros and sentencing a European Commission official to a 14-month prison sentence.
Glencore also has a long history of environmental pollution, human rights violations, and anti-labor practices. As part of its plans to go public in 2011, Glencore published for the first time a corporate responsibility report that acknowledged high rates of fatalities (including 56 in just 3 years at one mine in Zambia) and environmental fines (totalling $780,000 in 2010). After going public in 2011, problems with environmental and human rights continue. For example, in Peru, Glencore is accused by human rights groups of signing secret contracts with Peruvian police for security at its Tintaya-Antapaccay operation in Espinar, Peru, where two protesters were killed in May 2012 and where Glencore was fined by the Peruvian government as recently as January 2014 for pollution. In 2012 Glencore was named a top contender for The New Internationalist Magazine’s Public Eye worst corporation award for its environmental and human rights record.
Although the company is one of the largest in its sector, and the world – with a market capitalization on flotation of $60 billion – Glencore paid only $2 million in tax last year on European revenues of more than $1 billion.
Financial Assurance is Critical to the Environmental Impact
Financial assurance is a critical part of the environmental impact of the proposed PolyMet mine. Once mining starts, metal sulfide containing waste rock and tailings will be exposed to air where they will oxidize to generate sulfuric acid. Waste water treatment will be required for centuries. The PolyMet SDEIS preliminarily estimates the cost of post mining monitoring and maintenance to be between $3.5 and $6 million 2013 dollars per year. To provide an income of $6 million annually using secure government bonds requires $435 million dollars principal at current bond rates (US bond rate 1.38%), plus additional funds for closing down the mine site and processing plant.
Although the details of the financial assurance bond are vitally important to the people of Minnesota, the current SDEIS has less than three pages devoted to it. Recently, PolyMet was represented by senior company official Brad Moore at a hearing of the Minnesota House committee on Environment, Natural Resources and Agricultural Finance, at which time he would provide no details of PolyMet’s financial assurance package. He further declined Chairwoman Jean Wagenius’ request to give the committee a worksheet supporting PolyMet’s estimate of the amount of financial assurance required, repeatedly insisting that PolyMet’s position is that they are working with “regulators.” In a subsequent statement, PolyMet defended Moore’s comments by noting that financial assurance terms for mining projects, by Minnesota Statute, is administrated by the DNR and is not a legislative function.
Although it is not legally required, there is no law against providing financial assurance information in environmental impact statements such as the current PolyMet SDEIS, and in the case of sulfide mining in very sensitive and pristine environments, it makes very much sense to do so. PolyMet’s non existent reputation and questionable finances together with Glencore’s track record increase the importance of financial assurance and the need for transparency and honesty in establishing it. Citizens of Minnesota should join the Chairwoman of the Minnesota House committee on Environment, Natural Resources and Agricultural Finance Jean Wagenius in appealing for more details of the financial assurance process and request that Governor Dayton not allow his appointee Tom Landwehr, head of the Minnesota DNR, to move ahead opaquely in permitting PolyMet’s mine while ignoring public and legislator concerns about the environment and finances.