ANNUAL INFORMATION FORM

FOR THE ELEVEN MONTHS ENDED DECEMBER 31, 2017

of

POLYMET MINING CORP.

(the “Company” or “PolyMet”)

March 27, 2018

 

Suite 5700 – 100 King Street West,

Toronto, Ontario

M5X 1C7

 

 

Tel: 416-915-4149
Fax: 416-915-4189
Website:  www.polymetmining.com

 

 

 

 

 

 

 

1.	Introductory Notes

In this Annual Information Form (“AIF”) “PolyMet” or the “Company” refers to PolyMet Mining Corp. and its subsidiaries (unless the context otherwise dictates).  All information contained herein is as of March 27, 2018 unless otherwise indicated, other than certain financial information which is as of December 31, 2017, being the date of the Company’s most recently audited financial year end.  All dollar amounts in this AIF are expressed in United States (“U.S.”) dollars, the functional and reporting currency of the Company, unless otherwise indicated.

Additional information related to the Company is available for view on the System for Electronic Document Analysis and Retrieval (“SEDAR”) and EDGAR at www.sedar.com and at www.sec.gov, respectively, and on the Company’s website www.polymetmining.com.

Cautionary Statement Regarding Forward-Looking Statements

This AIF contains “forward-looking statements”.  Within the meaning of applicable Canadian securities legislation and Section 27A of the United States Securities Act of 1933 and Section 21E of the United States Securities Exchange Act of 1934, forward-looking statements are not, and cannot be, a guarantee of future results or events. Forward looking statements are based on, among other things, opinions, assumptions, estimates and analyses that are subject to significant risks, uncertainties, contingencies and other factors that may cause actual results and events to be materially different from those expressed or implied by the forward-looking statement. All statements in this AIF that address events or developments that PolyMet expects to occur in the future are forward-looking statements and are generally, although not always, identified by words such as “expect”, “plan”, “anticipate”, “project”, “target”, “potential”, “schedule”, “forecast”, “budget”, “estimate”, “intend” or “believe” and similar expressions or their negative connotations, or that events or conditions “will”, “would”, “may”, “could”, “should” or “might” occur. These forward-looking statements include, but are not limited to, PolyMet’s objectives, strategies, intentions, expectations, production, costs, capital and exploration expenditures, including an estimated economics of future financial and operating performance and prospects for the possible expansion of the operation based on a PEA-level study and a ramp-up evaluation representing production growth and improved margins mine, life projections, recovery rate and concentrate grade projections, ability to obtain all necessary environmental and government approvals to completion and if undertaking an expansion case, ability to obtain at all, the viability and all information with respect to the ability to develop the Project to additional potential by mining additional resources beyond the permit design at a higher production rate. Prior to any decision to apply for permits to develop the project further, PolyMet would need to complete preliminary and definitive feasibility studies, as well as an analysis of the environmental impact and alternatives of any proposal.  In addition, any future proposal would be subject to environmental review and permits, public notice and comment, and approval by appropriate federal and state Agencies. All forward-looking statements in this AIF are qualified by this cautionary note.

The material factors or assumptions that PolyMet has identified and were applied by PolyMet in drawing the conclusions or making forecasts or projections set in the forward-looking statements include, but are not limited to:

·	various economic assumptions, in particular, metal price estimates, set out in this AIF and elsewhere;

·	certain operational assumptions set out in the AIF, including mill recovery, operating scenarios;

·	construction schedules and timing issues; and

·	assumptions concerning timing and certainty regarding the environmental review and permitting process.

The risks, uncertainties, contingencies and other factors that may cause actual results and events to differ materially from those expressed or implied by the forward-looking statement may include, but are not limited to, risks generally associated with the mining industry, such as: economic factors (including future commodity prices, currency fluctuations, inflation rates, energy prices and general cost escalation); uncertainties related to the development of the NorthMet Project; dependence on key personnel and employee relations; risks relating to political and social unrest or change, operational risk and hazards, including unanticipated environmental, industrial and geological events and developments and the inability to insure against all risks; failure of plant, equipment, processes, transposition and other infrastructure to operate as anticipated; compliance with governmental and environmental regulations, including permitting requirements; etc., as well as other factors identified and as described in more detail under the heading “Risk Factors” in Item 5. The list is not exhaustive of the factors that may affect the forward-looking statements. There can be no assurance that such statements will prove to be accurate, and actual results, performance or achievements could differ materially from those expressed in, or implied by, these forward-looking statements. Accordingly, no assurance can be given that any events anticipated by the forward-looking statements will transpire or occur, or if any of them do, what benefits or liabilities PolyMet will derive therefrom. The forward-looking statements reflect the current expectations regarding future events and operating performance and speak only as of the date hereof and PolyMet does not assume any obligation to update the forward-looking statements if circumstances or management’s beliefs, expectations or opinions should change other than as required by applicable law. For the reasons set forth above, undue reliance should not be placed on forward-looking statements .

 

 

Cautionary Note to U.S. Investors – Information Concerning Preparation of Resource Estimates

This AIF has been prepared in accordance with the requirements of the securities laws in effect in Canada, which differ from the requirements of United States securities laws.  The terms “mineral reserve”, “proven mineral reserve” and “probable mineral reserve” are Canadian mining terms as defined in accordance with Canadian National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI  43-101”) and the Canadian Institute of Mining, Metallurgy and Petroleum (the “CIM”) – CIM Definition Standards on Mineral Resources and Mineral Reserves, adopted by the CIM Council, as amended. These definitions differ materially from the definitions in the United States Securities and Exchange Commission’s (“SEC”) Industry Guide 7 under the United States Securities Act of 1933, as amended. Under SEC Industry Guide 7 standards, mineralization cannot be classified as a “reserve” unless the determination has been made that the mineralization could be economically and legally extracted at the time the reserve determination is made. As applied under SEC Industry Guide 7, a “final” or “bankable” feasibility study is required to report reserves, the three-year historical average price is used in any reserve or cash flow analysis to designate reserves, and the primary environmental analysis or report must be filed with the appropriate governmental authority.

In addition, the terms “mineral resource”, “measured mineral resource”, “indicated mineral resource” and “inferred mineral resource” are defined in and required to be disclosed by NI 43-101; however, these terms are not defined terms under SEC Industry Guide 7 and are normally not permitted to be used in reports and registration statements filed with the SEC. Investors are cautioned not to assume that all or any part of a mineral deposit in these categories will ever be converted into SEC Industry Guide 7 reserves. “Inferred mineral resources” have a great amount of uncertainty as to their existence, and great uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of an inferred mineral resource will ever be upgraded to a higher category. Under Canadian rules, estimates of inferred mineral resources may not form the basis of feasibility or pre-feasibility studies, except in rare cases. Investors are cautioned not to assume that all or any part of an inferred mineral resource exists or is economically or legally mineable. Disclosure of “contained metal” in a resource is permitted disclosure under Canadian regulations; however, the SEC normally only permits issuers to report mineralization that does not constitute “reserves” by SEC Industry Guide 7 standards as in place tonnage and grade without reference to unit measures.

Accordingly, information concerning mineral deposits contained in this AIF may not be comparable to similar information made by public U.S. companies subject to the reporting and disclosure requirements under the United States federal securities laws and the rules and regulations thereunder.

 

 

Qualified Persons Under NI 43-101

Except where specifically indicated otherwise, the disclosure in this AIF of scientific and technical information regarding PolyMet’s mineral properties has been reviewed and approved by the following persons who are Qualified Persons as defined by NI 43-101:

·	Zachary J. Black, SME-RM, of Hard Rock Consulting, of Lakewood, CO;

·	Jennifer J. Brown, P.G., of Hard Rock Consulting, of Lakewood, CO;

·	Nicholas Dempers, Pr. Eng., SAIMM, of Senet, of South Africa;

·	Thomas L. Drielick, P.E., of M3 Engineering, of Tucson, AZ.

·	Art S. Ibrado, P.E., of M3 Engineering., of Tucson, AZ; and

·	Erin L. Patterson, P.E., of M3 Engineering., of Tucson, AZ;

·	Tom Radue, P.E., of Barr Engineering, of Minneapolis, MN;

·	Jeff S. Ubl, P.E., of Barr Engineering, of Minneapolis, MN;

·	Herbert E. Welhener, SME-RM, Independent Mining Consultants, of Tucson, AZ;

2.	Corporate Structure

PolyMet Mining Corp. was incorporated under the Business Corporations Act (British Columbia) on March 4, 1981 under the name Fleck Resources Ltd. and changed its name to PolyMet Mining Corp. on June 10, 1998.  Through its 100%-owned subsidiary, Poly Met Mining, Inc. (“PolyMet US” and, together with PolyMet Mining Corp., “PolyMet” or the “Company”) the Company is engaged in the exploration and development of natural resource properties.  PolyMet US was incorporated in Minnesota, United States on February 16, 1989.

The Company’s corporate office is located at 100 King Street West, Suite 5700, Toronto, ON M5X 1C7, Canada.  The principal executive office is located at 444 Cedar Street, Suite 2060, St. Paul, MN  55101, USA.  The registered and records office is located at 2500 – 700 West Georgia Street, Vancouver, B.C. V7Y 1B3, Canada.  The operational headquarters are located at 6500 County Road 666, Hoyt Lakes, MN 55750-0475, USA.

On December 7, 2017, the Board of Directors approved a resolution to change the year end from January 31 to December 31.

3.	General Development of the Business

Significant History of the Company

PolyMet’s primary mineral property and principal focus is the commercial development of its NorthMet Project (“NorthMet” or “Project”), a polymetallic project in northeastern Minnesota, United States of America, which hosts copper, nickel, cobalt and platinum group metal mineralization.

The NorthMet ore body is at the western end of a series of known copper-nickel-precious metals deposits in the Duluth Complex.  Completion of the Definitive Feasibility Study (“DFS”) in 2006 established proven and probable reserves, positioning NorthMet as the most advanced of the four advanced projects in the Duluth Complex: namely, from west to east, NorthMet, Mesaba, Serpentine, and Maturi.

Asset Acquisition

PolyMet acquired the Erie Plant, associated infrastructure, and approximately 12,400 acres (19.4 square miles) of surface rights from Cliffs Erie LLC, a subsidiary of Cleveland-Cliffs Inc. (together “Cliffs”).  The plant is located about six miles west of the NorthMet ore body and comprises a 100,000 ton-per-day crushing and milling facility, a railroad and railroad access rights connecting the Erie Plant to the NorthMet ore body, tailings storage facilities, 120 railcars, locomotive fueling and maintenance facilities, water rights and pipelines, administrative offices on site, and approximately 6,000 acres of land to the east and west of the existing tailings storage facilities.

 

 

Financing

In 2008, PolyMet and Glencore AG, a wholly owned subsidiary of Glencore plc (together “Glencore”), entered into a strategic partnership in which Glencore will market PolyMet’s products, provides technical and commercial support, and owns 29.1% of PolyMet’s issued shares, holds $25 million initial principal senior secured convertible debentures, and holds $70 million initial principal senior secured non-convertible debentures as at December 31, 2017.  Subsequent to December 31, 2017, $5.0 million was issued on January 18, 2018 and PolyMet and Glencore agreed to extend the maturity date of the secured non-convertible debt to March 31, 2019, reduce the interest rate on the secured non-convertible debt, and issue secured debentures with a total principal amount of up to $80.0 million.

Permitting

In November 2015, the Minnesota Department of Natural Resources (“MDNR”), the U.S. Army Corps of Engineers (“USACE”), and the United States Forrest Service (“USFS”) published the NorthMet Final Environmental Impact Statement (“EIS”) as required under the Minnesota Environmental Policy Act (“MEPA”) and the National Environmental Policy Act (“NEPA”).  The U.S. Environmental Protection Agency (“EPA”) was a Cooperating Agency in preparation of the EIS.  As part of the decade-long MEPA and NEPA processes there were several extensive periods for public review and comment prior to publication of the Final EIS.  The EIS included a proposed land exchange between the USFS and the Company.

Since March 2016, when the MDNR issued its decision that the Final EIS met the requirements under MEPA, PolyMet has submitted the permit applications required to construct and operate the NorthMet Project.  During the second half of 2017 and 2018 to date, the regulatory agencies for the state of Minnesota have released a number of draft permits, including the Permit to Mine.  PolyMet’s objectives for the remainder of 2018 include receipt of key permits and approvals needed to construct and operate the NorthMet Project.

Land Exchange

On January 9, 2017, after responding in writing to more than 22,500 comments, and supported by a Memorandum of Agreement under Section 106 of the National Historic Preservation Act, the USFS issued its Final Record of Decision (“ROD”) authorizing the land exchange.

On November 28, 2017, the U.S. House of Representatives voted approval of the HR3115, the land exchange between PolyMet and the USFS, with a vote of 309 to 99.  This bill has been advanced to the US Senate for consideration.   The Company will continue its involvement in the administrative steps to complete the land exchange transaction while the bill is under consideration.

 

Three Year History

The Company’s focus over the last three years has been on completion of the environmental review process by state and federal agencies, preparation and submission of permit applications, and support of the agencies during review of permit application, issuance of draft permits, and issuance of final permits.

Major highlights include:

·

March 2016 – MDNR determined that the Final EIS addresses the objectives defined in the EIS scoping review, meets procedural requirements and responds appropriately to public comments demonstrating the NorthMet Project can be constructed and operated in compliance with state and federal standards.  The 30-day period allowed by law to challenge the state’s decision passed without any legal challenge being filed;

 

·

July 2016 – the Company submitted applications for water-related permits required to construct and operate NorthMet.  The Eastern Region Regional Office of the USFS issued its response to comments on the Draft ROD for the land exchange and instructed the Superior National Forest to proceed with completing the Final ROD;

 

·	October 2016 – the Company closed the initial tranche of a private placement of 25,963,167 units for gross proceeds of $19.5 million and a second tranche of a private placement of 14,111,251 units for gross proceeds of $10.6 million pursuant to Glencore’s right to maintain its pro rata ownership;

 

 

·	December 2016 – the Memorandum of Agreement of the Section 106 Consultation under the National Historic Preservation Act was signed by the statutory parties;

 

·	January 2017 – the USFS issued its Final ROD authorizing a land exchange to transfer title to the surface rights over and around the NorthMet mineral rights to PolyMet in exchange for certain other lands owned by PolyMet;

 

·	June 2017 - the Company also appointed Patrick Keenan as Chief Financial Officer;

 

·	August and September 2017 - the MDNR released six draft water appropriation permits and two draft dam safety permits for 30-days of public review and comment which have all closed;

 

·	September 2017 - the Company issued and committed to issue to Glencore secured debentures with a total principal amount of $20 million;

 

·	October 2017 - the Company entered into an agreement with EIP Credit Co., LLC (“EIP Credit”) to reserve wetland bank credits for the NorthMet Project;

 

·	November 2017 - the U.S. House of Representatives approved bipartisan legislation introduced by Rep. Rick Nolan, D-MN-8 to ratify the previously approved land exchange between PolyMet and the U.S. Forest Service.  This bill has been advanced to the US Senate for consideration;

 

·	January 2018 - the MDNR released its draft Permit to Mine for public review and comment which has closed;

 

·	January 2018 - the Minnesota Pollution Control Agency (“MPCA”) released its draft water quality permit, draft section 401 certification, and draft air emissions permit   for public review and comment which have all closed;

 

·	February 2018 – the final public hearings on the draft permits were completed;

 

·

March 2018 - the Company and Glencore agreed to extend the term of outstanding debentures until March 31, 2019, reduce the interest rate on the outstanding debentures, and make available $80 million in additional debentures during 2018.  Proceeds will be used to complete pre- and post-permitting work, including detailed engineering and environmental cleanup, and to purchase wetland credits; and

 

·

March 2018 - the Company issued an Updated Technical Report under NI 43-101 incorporating process improvements, project improvements, and environmental controls described in the Final EIS and draft permits.  The update also included detailed capital costs, operating costs, and economic valuation for the mine plan being permitted as well as an assessment of potential future opportunities.

Goals and Objectives for the Next Twelve Months

The permitting process is managed by the regulatory agencies and, therefore, timelines are not under PolyMet control .  Given these circumstances, PolyMet’s objectives include:

·	Transfer of title to the surface rights over and around the NorthMet mineral rights to PolyMet as part of the authorized land exchange;

 

·	Favorable decision by the state on 401 Water Quality Certification and USACE Final ROD and 404 wetlands permit under Clean Water Act;

 

·	Favorable decisions on state permits (Permit to Mine, air, water, and dam safety permits);

 

·	Completion of project implementation plan; and

 

·	Completion of construction finance plan, subject to typical conditions precedent such as receipt of key permits.

 

 

Upon completion of the land exchange, PolyMet will own surface rights to approximately 19,050 acres or 29.8 square miles of contiguous surface rights stretching from west of the Erie Plant to east of the proposed East Pit at NorthMet.

 

 

Surface Rights

 

Surface rights of the NorthMet Deposit are held by the USFS. The United States acquired the surface rights from U.S. Steel in 1938 under provisions of the Weeks Act of 1922. U.S. Steel retained certain mining rights, which PolyMet secured under the U.S. Steel Lease, along with the mineral rights.

 

PolyMet and the USFS have proposed a land exchange to consolidate their respective land ownerships.

 

In this land exchange, the USFS will acquire 6,690 acres of private land in four separate tracts currently held by PolyMet, to become part of the Superior National Forest and managed under the laws relating to the National Forest System. Already located within the Superior National Forest boundaries, these lands will have multiple uses including recreation, research and conservation. The USFS will convey 6,650 acres of federally-owned surface land to PolyMet, which includes the surface rights overlying and surrounding the NorthMet Deposit. These lands are located near an area heavily used for mining and mine infrastructure, are consistent with regional land uses, and will generate economic benefits to the region through employment and tax revenues.

 

 

Following the Final NorthMet Environmental Impact Statement (FEIS), the Superior National Forest of USFS issued a Final Record of Decision (ROD) to proceed with the administrative land exchange in January 2017. The ROD stated, among other things, that the proposed exchange will be beneficial to the USFS and is in the public’s interest.  On November 28, 2017, H.R. 3115, the Superior National Forest Land Exchange Act of 2017, passed by voice vote in the House of Representatives.  If enacted into law, H.R. 3115 will legislatively accomplish the same land exchange approved in the January 2017 USFS ROD. The administrative land exchange process is ongoing as of the date of the 2018 Technical Report.

 

Royalties and Encumbrances

 

The NorthMet Deposit mineral rights carry variable royalties of 3% to 5% based on the NSR per ton of ore mined. For an NMV of under $30 per ton, the royalty is 3%, for $30-35 per ton it is 4%, and above $35 per ton it is 5%. Both the U.S. Steel Lease (RGGS) and the LMC Lease carry advance royalties which can be recouped from future royalty payments, subject to minimum payments in any year.  The US Steel leases were transferred through sale to RGGS although the underlying agreement terms remain the same.

 

Environmental Liabilities

 

Federal, state and local laws and regulations concerning environmental protection affect the PolyMet operation.  As part of the consideration for the purchase of the Erie Plant and associated infrastructure, the Company indemnified Cleveland-Cliffs Inc. (Cliffs) for reclamation and remediation obligations of the acquired property.  Completion of that purchase remains subject to certain contingencies, including, among other things, issuance of final permits for the NorthMet Project under applicable environmental laws and release of Cliffs, and its subsidiary Cliffs Erie LLC, from its obligations under existing state permits with respect to the Erie Plant and other assets acquired by PolyMet.

 

The Company’s estimate of the environmental rehabilitation provision under International Financial Reporting Standards (IFRS) on October 31, 2017 was $72.772 million based on estimated cash flows required to settle this obligation in present day costs of $78.729 million, a projected inflation rate of 2.00%, a market risk-free interest rate of 2.66% and expenditures expected to occur over a period of approximately 30 years.  This estimate includes but is not limited to water treatment and infrastructure closure and removals, with costs estimated by PolyMet and its consultants and construction contractors. This estimate has been reviewed and accepted by auditors for PolyMet’s financial statements.

 

Permits

 

Prior to construction and operation of the NorthMet Project, PolyMet will require several permits from federal and state agencies. These are discussed in greater detail below.

 

Accessibility, Climate, Local Resources, Infrastructure and Physiography

 

Accessibility and Climate

 

Access to the NorthMet Project is by a combination of good quality asphalt and gravel roads via the Erie Plant site. The nearest center of population is the town of Hoyt Lakes, which has a population of about 2,500 people. There are a number of similarly sized communities in the vicinity, all of which are well serviced, provide ready accommodations, and have been, or still are, directly associated with the region’s extensive taconite mining industry. The road network in the area is well developed, though not heavily trafficked, and there is an extensive railroad network which serves the taconite mining industry across the entire Range. There is access to ocean shipping via the ports at Taconite Harbor and Duluth/Superior (on the western end of Lake Superior) and the St. Lawrence Seaway.

 

Climate is continental and characterized by wide temperature variations and significant precipitation.

 

 

Local Resources and Infrastructure

 

The area has been economically dependent on the mining industry for many years and while there is an abundance of skilled labor and local mining expertise, the closure in 2001 of the LTVSMC open pit mines and taconite processing facility has had a significant negative impact on the local economy and population growth. There are, however, several other operating mines in other parts of the Iron Range. Because of this, the mining support industries and industrial infrastructure remains well developed and of a high standard.

 

The Erie Plant site is connected to the electrical power supply grid and a main HV electrical power line (138 kV) runs parallel to the road and railroad that traverse the southern part of the mining lease area.  PolyMet has a long-term power contract with Minnesota Power.

 

There are plentiful local sources of fresh water, and electrical power and water are available nearby.  Previous operations at the site processed 100,000 STPD with adequate water supply, which is more than three times the plan for PolyMet.

 

Physiography

 

The Mesabi Iron Range forms an extensive and prominent regional topographic feature. The NorthMet Project site is located on the southern flank of the eastern Range where the surrounding countryside is characterized as being gently undulating. Elevation at the NorthMet Project site is about 1,600 ft asl (1,000 ft above Lake Superior). Much of the region is poorly drained and the predominant vegetation comprises wetlands and boreal forest.

 

History

 

The NorthMet deposit was formally discovered in 1969 during exploration carried out by U.S. Steel. Between 1969 and 1974, U.S. Steel drilled 112 holes for a total of 113,716 ft, producing 9,475 assay intervals which are included in the modern-day NorthMet Project database. Assay data from U.S. Steel core samples was not necessarily collected at the time of the original drilling.

 

A number of historic mineral resource estimates were completed (U.S. Steel, Fleck Resources, NERCO) prior to PolyMet’s acquisition of the NorthMet Project.  These resource estimates predate current NI 43-101 reporting standards and the associated resource models, electronic or otherwise, are not available for verification.

 

There is no historical production data to report for the NorthMet Project.

 

Geological Setting and Mineralization

 

Regional Geology

 

The NorthMet Deposit is situated on the western edge of the Duluth Complex in northeastern Minnesota. The Duluth complex is a series of distinct intrusions of mafic to felsic tholeiitic magmas that intermittently intruded at the base of a comagmatic volcanic edifice during the formation of the Midcontinental rift system between 1108 and 1098 Ma. The intrusives of the Duluth Complex represent a relatively continuous mass that extends in an arcuate fashion from Duluth to the northeastern border between Minnesota and Canada near the town of Grand Portage.  Footwall rocks are predominantly comprised of Paleoproterozoic and Archean rocks, the hanging wall rocks are made up of mafic volcanic rocks and hypabyssal intrusions, and internally scattered bodies of strongly granoblastic mafic volcanic and sedimentary hornfels can be found.

 

Local and Property Geology

 

The NorthMet Deposit is situated within the Partridge River Intrusion (“PRI”). The PRI has been mapped, drilled, and studied in detail because of its importance as a host for copper-nickel (“Cu-Ni”) and iron-titanium (“Fe-Ti”) deposits. The PRI consists of varied troctolitic and (minor) gabbroic rock types that are exposed in an arcuate shape that extends from the Water Hen (Fe-Ti) deposit in the south to the Babbitt (Cu-Ni) deposit in the North. The PRI is bound on the west by the Paleoproterozoic Virginia Formation (slate and graywacke), and to a lessor extent, the Biwabik Iron Formation (“BIF”). The upper portion of the PRI forms a complex contact an assemblage of anorthositic, gabbroic, and hornfelsic rocks. This assemblage is also found as large inclusions within the interior of the PRI. The inclusions are thought to represent earlier roof zone screens that were overplated by later emplacement of Partridge River intrusion magmas.

 

 

Mineralization

 

The metals of interest at NorthMet are copper, nickel, cobalt, platinum, palladium, silver, and gold.  Minor amounts of rhodium and ruthenium are present though these are considered to have no economic significance.  In general, except for cobalt and gold, the metals are positively correlated with copper mineralization.  Cobalt is well correlated with nickel. Most of the metals are concentrated in, or associated with, four sulfide minerals: chalcopyrite, cubanite, pentlandite, and pyrrhotite, with platinum, palladium and gold also found as elements and in bismuthides, tellurides, and alloys.

 

Mineralization occurs in four broadly defined horizons or zones throughout the NorthMet property.  Three of these horizons are within basal Unit 1, though they likely will not be discriminated in mining.  The upper horizon locally extends upward into the base of Unit 2.  The thickness of each of the three Unit 1 enriched horizons varies from 5 ft to more than 200 ft.  Unit 1 mineralization is found throughout the base of the NorthMet deposit.  A less extensive mineralized zone (the copper-rich, sulfur-poor Magenta Zone) is found in Units 4, 5 and 6 in the western part of the NorthMet deposit.

 

Deposit Types

 

The NorthMet deposit is considered a magmatic Copper - Nickel ± platinum group element (PGE) deposit. These are a broad group of deposits containing nickel, copper and PGEs occurring as sulfide concentrations associated with a variety of mafic and ultramafic magmatic rocks. Magmatic Cu-Ni sulfide deposits with or without PGEs account for approximately 60 percent of the world’s nickel production. Magmatic Ni-Cu±PGE sulfide deposits are spatially and genetically related to bodies of mafic and/or ultramafic rocks. The sulfide deposits form when the mantle-derived magmas become sulfide-saturated and segregate immiscible sulfide liquid, commonly following interaction with continental crustal rocks.

 

The NorthMet deposit is a large-tonnage, disseminated accumulation of sulfide in mafic rocks, with rare massive sulfides. Copper to nickel ratios generally range from 3:1 to 4:1. Primary mineralization is probably magmatic, though the possibility of structurally controlled re-mobilization of the mineralization (especially PGE) has not been excluded.  The sulfur source is both local and magmatic.  Extensive detailed logging has shown no definitive relation between specific rock type and the quantity or grade quality of sulfide mineralization in the Unit 1 mineralized zone or in other units, though local noritic to gabbronoritic rocks (related to footwall assimilation) tend to be of poorer PGE grade and higher in sulfur.

 

Exploration

 

U.S. Steel commenced mapping and ground surveys of the NorthMet Project in 1967 and initiated drilling exploration in 1968. Drilling has been the primary method of exploration at the NorthMet Project; however, 240 geophysical soundings, numerous test pits, and down-hole geophysical testing have been completed to better understand the depth to bedrock and the lithologic contacts.

 

Drilling

 

Prior to PolyMet’s involvement in the NorthMet Project, 116 core holes were drilled in the main project area by U.S. Steel and NERCO (see Table 10-1 of the 2018 Technical Report).

 

 

PolyMet completed 290 drill holes on the NorthMet Project between 1998 and 2010 totaling 171,332 ft. Of the 290 holes drilled by PolyMet, 52 were drilled using reverse circulation, and 238 are diamond core holes.

 

From 1998 to 2000, PolyMet drilled 52 vertical reverse circulation (RC) holes to supply material for a bulk sample.  A portion of these drill-holes twinned U.S. Steel holes, and others served as in-fill over the extent of the NorthMet deposit. The RC holes averaged 474 ft, with a minimum of 65 ft and a maximum depth of 745 ft.

 

The first PolyMet core drilling program was carried out during the later parts of the RC program, with three holes drilled late in 1999 and the remainder in early 2000.  There were seventeen BTW (1.65 inch) and fifteen NTW (2.2 inch) diameter holes all of which were vertical.  Three RC holes were re-entered and deepened with AQ core. Core holes averaged 692 ft in depth, with a minimum of 229 ft and a maximum depth of 1,192 ft. (not including RC holes extended with AQ core). These holes were assayed from top to bottom (with minimal exception) on 5-foot intervals.  Samples were split into half core at the PolyMet field office in Aurora, Minnesota.

 

PolyMet’s 2005 drilling program had four distinct goals: collection of metallurgical sample, continued in-fill drilling for resource estimation, resource expansion, and collection of oriented core for geotechnical data.  The program included 109 holes totaling 77,165 ft, including:

 

·	15 one-inch diameter holes for metallurgical samples (6,974 ft) drilled by Boart-Longyear of Salt Lake City (February - March 2005).

 

·	PQ sized holes (core diameter 3.3 inches) totaling 6,897 ft, to collect bulk sample material, and to improve the confidence in the known resource area (February - March 2005).

 

·	52 NTW sized holes (2.2 inches) totaling 41,403 ft for resource definition.

 

·	30 NQ2 sized holes (2.0 inches) totaling 21,892 ft for resource definition and geotechnical purposes.  The NTW and NQ2 size core was drilled in the spring (February-March) and fall (September-December) of 2005.

 

Roughly 11,650 multi-element assays were collected from the 2005 drilling program.  Another 1,790 assays were performed on previously drilled U.S. Steel and PolyMet core during, as well. Of the 109 holes drilled in 2005, 93 were drilled at an angle. The angled holes were aligned on a grid oriented N34W with dips ranging from -60° to -75°.  Sixteen NQ2 sized holes were drilled and marked for oriented core at varying dips, for geotechnical assessment across the NorthMet Project.

 

In 2007, PolyMet conducted two drilling programs, a winter program of 47 holes totaling 19,102.5 ft and a summer program of 14 holes totaling 5,437.5 ft.  The initial 16 winter holes were NTW sized, the remaining drill holes from both programs were NQ2 core.  Most of these holes were angled to north-northwest (azimuth 326°). The 2007 holes averaged 402 ft in depth, with a minimum of 148 ft and maximum of 768.5 ft.

 

In 2010, PolyMet conducted a winter drilling program with two objectives:

 

·	Collect detailed geostatistical data across a grid in the initial mining area, and

 

·	Develop a geologic and assay framework around the west margin of the deposit.

 

Secondary to these purposes was the gathering of approximately ten tons of potential bulk sample material.

 

The grid area in the planned east pit encompassed 8,720 ft of drilling with 1,664 multi-element assays and the western drilling totaled 11,401 ft with 1,345 samples taken. Grid drilling was sampled by elevations representing bench levels. Data from this was used to establish appropriate sampling protocols during mining.

 

Assay results in the grid area were consistent with expectations from previous block models. In the west, Unit 1 and Magenta Zone ore grade mineralization continue well outside the planned pit boundaries with the furthest hole in this program 2,600 feet to the west of the planned pit edge.

 

 

The drilling exploration conducted by PolyMet is summarized in Table 10-1 of the 2018 Technical Report, and drill hole distribution is shown on Figure 10-1 of the 2018 Technical Report.

 

Core recovery is reported by PolyMet to be upwards of 99% (see table below) with rare zones of poor recovery.  Rock quality designation (RQD) is also very high, averaging 85% for all units, excluding the Iron formation.  Experience in the Duluth Complex indicates that core drilling has no difficulty in producing samples that are representative of the rock mass.  Rock is fresh and competent and the types of alteration (when observed: sausserization, uralization, serpentinization and chloritization) do not affect recovery.

 

 

Summary of Core Recoveries and RQD Measurements (includes all drilling through 2010 )

 

 

Sample Preparation, Analyses and Security

 

There are multiple generations of sample analyses that contribute to the overall NorthMet Project assay database:

 

·	Original U.S. Steel core sampling, by U.S. Steel, 1969-1974

 

·	Re-analysis of U.S. Steel pulps and rejects, selection by Fleck and NRRI, 1989-1991

 

·	Analysis of previously un-sampled U.S. Steel core, sample selection by Fleck and NRRI in 1989-1991, and 1999-2001

 

·	Analysis of 2 of the 4 NERCO drill-holes, 1991

 

·	PolyMet RC cuttings, 1998-2000

 

·	PolyMet core, 2000, 2005, 2007, and 2010

 

The laboratories utilized by U.S. Steel were not independent of the company, and no information regarding accreditation is available. All the labs that have provided analytical testing for PolyMet were or currently are fully accredited, independent, commercial labs that are not related to any of the exploration companies or any of its directors or management.

 

PolyMet's drill hole and assay database is administered by the Company’s geologic staff from the operational headquarters in Hoyt Lakes. PolyMet uses Excel and Gemcom GEMS to manage the geologic data. Paper logs are available at the operational headquarters.

 

There is no documentation indicating sample handling protocols at drill sites, and only limited documentation of sample handling between the drill site and assay laboratory for programs conducted by U.S. Steel and NERCO.

 

Employees of PolyMet (or its predecessor, Fleck Resources) have been either directly or indirectly involved in all sample selection since the original U.S. Steel sampling.  Sample cutting and preparation of core for shipping has been done by PolyMet employees or contract employees.

 

 

 Reverse circulation sampling at the rig was done by, or in cooperation with, PolyMet employees and the drilling contractor.

 

The diamond drillers remove the drill core samples from the rods and place them into covered core boxes. PolyMet representatives collect the trays and transport them to the core storage facility located near the processing plant each day where the core is inventoried prior to processing. Once the geologist is ready to log the hole, the core trays are laid out on core logging tables where all logging takes place prior to sampling.

 

Drill core samples are placed into plastic sample bags, sealed, and placed into a cardboard box. The cardboard box is sealed shut with tape and couriered to the laboratory. Once the laboratory has accepted delivery of the samples they remain under the control of the laboratory.

 

The RC holes were assayed on 5-ft intervals.  Six-inch RC drill-holes produced about 135 lb to 150 lb of sample for every 5 feet of drilling.  This material was split using a riffle splitter into two samples and placed in plastic bags and stored underwater in five-gallon plastic buckets.  A 1/16th sample was taken by rotary splitter from each 5-ft interval of chip sample for assay.  The assay values were used to develop a composite pilot plant sample from bucket samples.  Actual compositing was completed after samples had been shipped to Lakefield.  A second 1/16th sample was sent to the Minnesota Department of Natural Resources for their archive.

 

There are 5,216 analyses from the RC drilling in the current PolyMet database. RC sample collection involved a 1/16 sample representing each five-foot run. These were sent to Lerch for preparation, and then sent to ACME or Chemex for analysis.

 

Chip samples were collected and logged at the PolyMet office and are currently retained at the PolyMet warehouse.  While the chip sample logging is less precise than logging of core samples, the major silicate and sulfide minerals are identifiable, and the location of marker horizons can be derived based on the composition of the individual samples.  The underlying metasedimentary rocks (Virginia Formation) are readily recognized in chip sample, and the base of the NorthMet Deposit is relatively easy to define.  Where rock recognition is difficult, the higher zinc content of the footwall rocks is used to help define the contact.

 

PolyMet geologists log all drill cores at the core storage facility located near the processing plant. The geologists record information for each drillhole including the hole number, azimuth, total depth, coordinate datum, drilling company, hole logger, start and end of drilling dates, rock codes, and a written description of stratigraphy, alteration, texture, mineralogy, structure, grain size, ground conditions, and any notable geologic features. The rock quality designation (RQD) and recovery percentage are also recorded.

 

Sample intervals are determined by the geologist with respect to stratigraphy, mineralization, and sulfide content, otherwise a standard 10-ft interval is sampled. Zones of increased sulfide mineralization >2.5 ft are sampled down to 5-ft intervals. Core within Unit 1 is sampled on 5-ft intervals. Core samples are cut to ¼ or 1/8 of the total core with a diamond bladed saw by trained personnel following written procedures. Each sample is placed in a numbered plastic sample bag with the corresponding sample number tag and placed in a cardboard box for transport to the laboratory. All QA/QC samples are inserted into the sample stream prior to shipment.

 

Sample Preparation

 

Samples were prepared for analysis at Lerch, Acme, or Chemex facilities. In general, all the facilities followed a similar preparation procedure. Samples were crushed to an approximate -10 mesh, prior to being reduced to a 250-gram split for pulverization (149 to 106 µm range).  Pulps were split again to separate a sample for the following analyses:

 

·	Base metals (Cu, Co, Mo, Ni and Zn) - Four-acid digestion with ICP-AES finish,

 

·	Base metals (Ag, Cu, Co, Mo, Ni and Zn) – Aqua Regia digestion with ICP-AES finish,

 

·	PGEs (Au, Pt and Pd) – 30 gm fire assay with ICP-AES finish, and

 

·	Total Sulphur by LECO furnace.

 

 

Select core samples were crushed to -1/2 inch and placed in a poly bottle, purged with nitrogen, and capped and sealed for special metallurgical and environmental analysis.

 

Quality Assurance/Quality Control Procedures

 

QA/QC samples used by PolyMet include blanks, standards and field duplicates. PolyMet inserts QA/QC samples into the sample stream at the following frequencies:

 

·	Insertion of coarse blank every 40 samples;

 

·	Insertion of Standard Reference Material (SRM) every 40 samples; and

 

·	Submission of duplicate 1/4 or 1/8 of the drill core every 40 samples.

 

Core Storage and Sample Security

 

The U.S. Steel core has been stored, either at the original U.S. Steel warehouse in Virginia, Minnesota during drilling, or more recently at the CMRL (now a part of the University of Minnesota).  Core has been secured in locked buildings within a fenced area that is locked at night where a key must be checked out.  The NERCO BQ size core is also stored at this facility.

 

The PolyMet core and RC reference samples were stored in a PolyMet leased warehouse in Aurora, Minnesota during drilling and pre-feasibility.  Core and samples were then moved in 2002 to a warehouse in Mountain Iron, Minnesota where they remained until 2004.  They were then moved to a warehouse at the Erie Plant site in Hoyt Lakes.  Access to this warehouse is limited to PolyMet employees.

 

Opinion on Adequacy

 

Hard Rock Consulting (HRC), an independent consulting firm retained by PolyMet, concluded that the sample preparation, security and analytical procedures are correct and adequate for the purpose of the 2018 Technical Report.  The sample methods and density were appropriate, and the samples were of sufficient quality to comprise a representative, unbiased database.

 

Data Verification

 

The NorthMet mineral resource estimate is based on the exploration drill-hole database available as of April 17, 2014. Drill hole data including collar coordinates, down-hole surveys, sample assay intervals, and geologic logs were provided by PolyMet in Microsoft Excel spreadsheets. The database was reviewed and validated by HRC prior to estimating mineral resources. The NorthMet database includes 114 (116) historic drill holes, 323 PolyMet drill holes, 240 vertical sounding holes, 15 depths to bedrock test pits, and 47 geologic holes from the surrounding area. Of the 739 drill holes, only 437 drill holes were used in the estimation, although many of the 437 holes include only select analytical information. The database was validated using Leapfrog Geo 3D® Version 2.0.0 software. Validation checks performed prior to loading the database into Datamine’s Studio 3 Version 3.24.25.0 mining software included:

 

·	No overlapping intervals,

 

·	Down-hole surveys at drill-hole collar,

 

·	Consistent drill-hole depths for all data tables, and

 

·	Gaps in the “from – to” data tables.

 

The analytical information used for the resource estimate includes copper, nickel, platinum, palladium, gold, silver, cobalt and sulfur.  All assay values Below Detection Limits (BDL) were assigned a value of one half of the detection limit, and missing or non-sampled intervals were assigned a value of zero (0).

 

 

HRC reviewed PolyMet’s check assay programs and considers the programs to provide adequate confidence in the data.  Samples that are associated with QA/QC failures were reviewed and reanalyzed as necessary.

 

Exploration drilling, sampling, security, and analysis procedures were conducted in a manner that meets or exceeds industry standard practice. All drill cores and cuttings from PolyMet’s drilling have been photographed. Drill logs have been digitally entered into an exploration database organized and maintained in Gemcom. The split core and cutting trays have been securely stored and are available for further checks.

 

Mineral Processing and Metallurgical Testing

 

The NorthMet Deposit is hosted in the Duluth Complex in northeastern Minnesota. A significant amount of metallurgical test work has been conducted on the Duluth Complex; therefore, the general metallurgy of the complex is fairly well understood.

 

Orway Mineral Consultants (OMC) in 2014 studied SAG Mill based comminution circuits for the NorthMet Project. This was done to assess if a SAG Mill based circuit would be practical for the NorthMet Project and capable of rationalizing the existing 4-stage crushing circuit (total of 11 crushers) and 12 lines of Rod Mill + Ball Mill grinding circuits in the existing Erie concentrator.  Comminution test work results from SGS were interpreted by OMC and used to scope out a SAG mill based comminution circuit to process 32,000 STPD.  Further comminution test work was conducted by Hazen Research (Golden, Co.) in 2015 to confirm the comminution parameters.

 

The development of the current NorthMet flotation process flowsheet was based on test work (SGS, 2015) and includes the following:

 

·	Flotation Test work conducted by SGS Lakefield (SGS) between 1998 and 2014, and

 

·	Supplementary flotation test work conducted by SGS in 2015 and interpreted by Eurus Mineral Consultants (EMC) for circuit modeling and flotation plant design.

 

SGS conducted extensive flotation test work up until 2010. The work covered by SGS included significant amounts of batch and rate flotation test work on a number of samples provided by PolyMet. A flotation process block flow diagram was developed from the results and observations of the initial batch test work conducted by SGS. The process block flow diagram shown in Figure 13-1 in the 2018 Technical Report can be summarized into three main circuits as follows:

 

·	The Bulk Copper-Nickel Flotation circuit

 

·	The Copper-Nickel Separation Circuit

 

·	The Pyrrhotite Flotation Circuit

 

Pilot scale test work was conducted by SGS to demonstrate the flowsheet developed for the NorthMet process. The results of the pilot test work are also included in the SGS report.

 

Additional flotation test work was requested of SGS in 2015 to fill in gaps in the flotation test work.  EMC conducted a flotation circuit simulation of the process flow based on the results obtained from both SGS's batch and pilot scale test work. The work that EMC conducted was initially targeted at simulating the pilot plant, and then to producing full production scale results. EMC's simulations were based on a throughput of 32,000 STPD. The results of the simulations were used to review the previous design and update the current process plant design basis and criteria.

 

A second pilot plant program was carried out by SGS in 2009 to investigate hydrometallurgical processes.

 

Mineral Resource Estimates

 

Zachary J. Black, RM-SME, of Hard Rock Consulting, LLC (“HRC”) is a Qualified Person as defined by NI 43-101 for mineral resource estimation and classification. HRC estimated the mineral resource for the NorthMet Project from drill-hole data constrained by geologic boundaries using an Ordinary Kriging (“OK”) algorithm.

 

 

The NorthMet Deposit was divided into eight units for geological modeling: the Biwabik Iron Formation including banded iron formation, sedimentary marine rocks of the Virginia Formation that overlie the Biwabik Formation, and five distinct units within the Duluth Complex and overburden.

The Magenta Zone, a smaller mineralized zone that cuts through Units 3 through 7 but resides primarily within Units 5 and 6, was modeled from select intercepts provided by PolyMet US.

Grades that were estimated include copper, nickel, cobalt, platinum, palladium, gold, silver and total sulfur.

HRC created a rotated three-dimensional (3D) block model in Datamine Studio 3® mining software. The block resource model was estimated using the lithologic boundaries of the Duluth Complex as the basis for an estimation domain. Units 1, 3, 5, 6, 7, the Magenta Zone, and Virginia Formation were all estimated using only samples that resided inside of the defined boundaries. Grades were estimated from 10-foot (ft) down-hole composites using Ordinary Kriging. Composites were coded according to their domain. Each metal was estimated using variogram parameters established by AGP Mining Consultants Inc. (AGP) in 2013, which were re-evaluated by HRC and deemed acceptable for use in the current mineral resource estimation.

The mineral resources reported herein are classified as Measured, Indicated and Inferred in accordance with standards defined by the Canadian Institute of Mining, Metallurgy and Petroleum (“CIM”) and prepared by the CIM Standing Committee on Reserve Definitions and adopted by CIM Council on May 10, 2014. Each individual mineral resource classification reflects an associated relative confidence of the grade estimates.

The mineral resources estimated for the NorthMet Project includes 649.3 million tons of Measured and Indicated resources and 508.9 million tons Inferred resources. The resource has been limited to the material that resides above the optimized pit shell. All mineralization below the optimized pit shell has been excluded from any resource classification and is not considered to be part of the mineral resource.

The mineral resource estimate for the NorthMet Project is summarized in the below table. This mineral resource estimate includes all drill data obtained as of January 31, 2016 and has been independently verified by HRC. The Measured and Indicated mineral resources are inclusive of the mineral reserves. Inferred mineral resources are, by definition, always additional to mineral reserves.

Source: Hard Rock Consulting, LLC, January 2018

*Notes:

1.	Mineral resources are not mineral reserves and do not have demonstrated economic viability.

2.	All resources are stated above a $7.35 NSR cut-off.  Cut-off is based on estimated processing and G&A costs. Metal Prices and metallurgical recoveries used for the development of cut-off grade are presented in Table 14-33 of the 2018 Technical Report.

3.	Mineral resource tonnage and contained metal have been rounded to reflect the accuracy of the estimate, and numbers may not add due to rounding.

4.	Cu-Eq (copper equivalent grade) is based on the mill recovery to concentrates and metal prices (see Table 14-33 of the 2018 Technical Report).

5.

Copper Equivalent (Cu Eq) = ((Cu head grade x recovery x Cu Price)) + (Ni head grade x recovery x Ni Price) + (Pt head grade x recovery x Pt Price) + (Pd head grade x recovery x Pd Price) +(Au head grade x recovery x Au Price) + (Co head grade x recovery x Co Price) + (Ag head grade x recovery x Ag Price)) / (Cu recovery x Cu Price).

 

 

Mineral Reserve Estimates

 

Proven and Probable Mineral Reserves of 254.7   million tons are reported for the NorthMet Project within the final pit design used for the mine production schedule and shown in the below table. All inferred material was classified as waste and scheduled to the appropriate waste stockpile.  The final mineral reserves are reported using a $7.98   NSR cut-off inside the pit design using the diluted grades. Both the mineral resource and mineral reserve estimates take into consideration metallurgical recoveries, concentrate grades, transportation costs, smelter treatment charges and royalties in determining NSR values. The below table also shows the mineral reserves by classification category and grade. The Qualified Person responsible for the Mineral Reserve estimate is Herb Welhener, Vice President of IMC.

*Notes:

1.	Mineral reserve tonnage and contained metal have been rounded to reflect the accuracy of the estimate, and numbers may not add due to rounding

2.	All reserves are stated above a $7.98 NSR cutoff and bound within the final pit design.

3.	Tonnage and grade estimates are in Imperial units

4.	Total Tonnage within the pit is 628,499 ktons; average waste: ore ratio = 1.47

5.	Cu-Eq values are based on the metal prices in Table 15-2 of the 2018 Technical Repot and total mill recoveries in Table 15-3 of the 2018 Technical Report and diluted mill feed.

6.

Copper Equivalent (CuEq) = ((Cu head grade x recovery x Cu Price) + (Ni head grade x recovery x Ni Price) + (Pt head grade x recovery x Pt Price) + (Pd head grade x recovery x Pd Price) + (Au head grade x recovery x Au Price) + (Co head grade x recovery x Co Price) + (Ag head grade x recovery x Ag Price)) / (Cu head grade x recovery x Cu Price)

7.	NSR values include post property concentrate transportation, smelting and refining costs and payable metal calculations .

 

Mining Methods

 

Open Pit Mine Plan

 

The NorthMet Project contains mineralization at or near the surface that is ideal for open pit mining methods.

 

Mining is planned on a 7 day per week schedule, with two 12-hour shifts per day.  There will be four crews planned to cover the rotating schedule. The mine plan includes 225 million tons of ore at an overall strip ratio of 1.6:1. Mining is planned in three pits: The East Pit, the Central Pit, and the West Pit. As mining of the Central Pit commences, it will extend into the East Pit, thereby joining the pits. The combined pit will be referred to as the East Pit.

 

The method of material transport evaluated for the 2018 Technical Report is open pit mining using two 36.6-yd3 hydraulic front shovels as the main loading units with a 22.5-yd3 front end loader as a backup loading unit. The material will be loaded into 240-ton haul trucks and the ore will be hauled to the rail transfer hopper for rail haulage to the mill or ore surge pile (OSP) areas, and the waste rock to waste stockpiles or pit backfills.

 

During the first half of the operation, the more reactive waste rock mined will be placed in two temporary stockpiles (one west of the East Pit referred to as the Category 4 Stockpile, and one south of the East Pit referred to as the Category 2/3 Stockpile), and the least reactive waste rock will be placed in a permanent stockpile north of the West Pit (referred to as the Category 1 Stockpile).  Once mining is completed in the East Pit, the more reactive waste rock mined will be placed directly in the East Pit as backfill. The more reactive waste rock in the Category 4 Stockpile (in the location of the future Central Pit) will then be relocated as backfill into the East Pit, thus clearing the area for mining of the Central Pit.  the Category 2/3 Stockpile will then be moved into the East Pit as backfill. Once mining is completed in the Central Pit, waste rock will be backfilled into that pit, too. By the end of the mine life, all of the more reactive waste rock will be placed as backfill in the pits. As the least reactive waste rock is mined, it will be placed in the permanent Category 1 Stockpile or in the East and Central Pits as backfill. The three mine pits will flood with water after mining and backfilling are completed, which results in the more reactive waste rock being permanently disposed of subaqueously. The general Mine Site layout, including pits, waste rock stockpiles, ore surge pile, rail transfer facility, and overburden storage and laydown area are shown on Figure 16 1 in the 2018 Technical Report.

 

 

Pre-Production Development

 

The preproduction mine development will be carried out by contractors until bedrock has been uncovered.  Clearing, grubbing and harvesting of marketable timber and biomass will be completed as part of Mine Site development and mining. The surface overburden consists of glacial till and peat. Final pre-stripping overburden bank slopes will be maintained at a slope that is not steeper than 2.5H:1V.  Excavated peat will be stockpiled in the OSLA or near construction footprints until it can be reused for construction and other on-site reclamation.  The remaining glacial till fraction of the overburden will also be removed from the pit footprints and, where necessary, within the stockpile liner footprints, separated based on being saturated or unsaturated, and hauled to the appropriate construction or disposal areas.

 

Pre-production mine development will utilize on-site construction materials, where possible, including overburden materials and Category 1 waste rock, once available. Additional construction materials will be obtained, as approved by the MDNR. Potential construction materials include waste rock from the state-owned waste rock stockpile located approximately 5 miles west of the Mine Site along Dunka Road, and possibly waste rock and overburden from the inactive (LTVSMC) Area 5 Mine Site to the north and east of the FTB.

 

Before mining operations can begin, the Mine Site infrastructure, facilities and water management systems must be developed. Mine Site development will take 18-24 months.

 

Production Schedule

 

The production schedule for the NorthMet Project is driven by the nominal ore rate of 32,000 STPD equivalent to 11.6 million tons per annum (average of 362.5 days per year, or 99% availability) with a 20-year mill life.  Mining is planned on a 7 day per week schedule, with two 12-hour shifts per day. The mine plan includes 225 million tons of ore and an overall strip ratio of 1.6:1.  The production schedule has been calculated on an annual basis for the life of the mine.

 

The cutoff grade used for the mine schedule is based on the NSR values assigned to the block model described in Section 15.1.3 of the 2018 Technical Report. The NSR value is based on the diluted metal grades and the dilution approach is described in Section 15.1.2 of the 2018 Technical Report. An elevated cutoff is used in the early mining years to achieve a higher metal content in the mill feed tonnage.  Material below mill cutoff is temporarily stockpiled for processing later in the mill schedule.  The cutoff to the OSP is $8.50/t NSR and includes the tonnage between the mill cutoff NSR used in a particular year and the $8.50/t NSR stockpile cutoff value.  The NSR cutoff ranges between $14.00/t to $10.00/t during years 1 through 10 and then is $7.98/t for years 11 through 18. The cutoffs for the mill ore are shown in the below table as part of the annual production schedule.  The $7.98/t NSR cutoff covers the cost of processing, site G&A and waste water treatment on a per ton of ore basis.

 

The Life of Mine (LOM) schedule was developed on an annual basis for all years. Milling of the mined ore begins in month four of Year 1 and ramps up to full production; a total of 7.250 Mt are milled during Year 1, approximately 63% of a full year’s production rate.  The yearly mine production schedule showing ore and waste tonnages is presented in the below table.