UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 
UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of AUGUST, 2020

Commission File Number: 001-32929

POLYMET MINING CORP.
(Translation of registrant's name into English)

100 King Street, Suite 5700 
Toronto, ON Canada M5X 1C7 
(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

[    ] Form 20-F   [ X ] Form 40-F

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): [               ]

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): [               ]

EXPLANATORY NOTE

This report on Form 6-K and attached exhibit are incorporated by reference into Registration Statement No. 333-192208 and this report on Form 6-K shall be deemed a part of such registration statement from the date on which this report on Form 6-K is filed, to the extent not superseded by documents or reports subsequently filed or furnished by PolyMet Mining Corp. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.

 




SUBMITTED HEREWITH

Exhibits

  CONDENSED INTERIM FINANCIAL STATEMENTS for the three and six months ended June 30, 2020
  99.2 MANAGEMENT DISCUSSION AND ANALYSIS for the three and six months ended June 30, 2020
  99.3 Form 52-109F2 Certification of Interim Filings - CEO
  99.4
 Form 52-109F2 Certification of Interim Filings - CFO

 


 SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 
 
PolyMet Mining Corp.
 
 
(Registrant)
 
 
 
Date: August 6, 2020
By:
/s/ Jonathan Cherry
 
 
Jonathan Cherry
 
Title:
Chairman, President and CEO
 
Exhibit 99.1








POLYMET MINING CORP.


CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For the three and six months ended June 30, 2020





PolyMet Mining Corp.
Condensed Interim Consolidated Balance Sheets
Unaudited - All figures in thousands of U.S. Dollars

   
June 30,
2020
    
December 31,
2019
  
ASSETS
            
             
Current
            
Cash
  
$
6,473
    
$
7,401
  
Amounts receivable
    
473
      
472
  
Prepaid expenses
    
623
      
1,039
  
     
7,569
      
8,912
  
Non-Current
                
Restricted deposits (Notes 6 and 11)
    
11,292
      
11,449
  
Amounts receivable and other assets
    
2,666
      
2,442
  
Mineral property, plant and equipment (Note 4)
    
414,875
      
410,132
  
Intangibles (Note 5)
    
24,416
      
24,380
  
Total Assets
    
460,818
      
457,315
  
                 
LIABILITIES
                
                 
Current
                
Accounts payable and accruals
    
4,861
      
4,533
  
Lease liabilities
    
100
      
60
  
Environmental rehabilitation provision (Note 6)
    
1,492
      
1,276
  
     
6,453
      
5,869
  
Non-Current
                
Accounts payable and accruals
    
468
      
-
  
Lease liabilities
    
505
      
556
  
Convertible debt (Note 8)
    
10,842
      
-
  
Promissory note (Note 9)
    
16,109
      
15,501
  
Environmental rehabilitation provision (Note 6)
    
51,841
      
51,249
  
Total Liabilities
    
86,218
      
73,175
  
                 
SHAREHOLDERS’ EQUITY
                
                 
Share capital
    
527,822
      
526,884
  
Equity reserves
    
67,630
      
64,648
  
Deficit
    
(220,852
)
    
(207,392
)
Total Shareholders’ Equity
    
374,600
      
384,140
  
Total Liabilities and Shareholders’ Equity
  
$
460,818
    
$
457,315
  

Nature of Business and Liquidity (Note 1)
Commitments and Contingencies (Note 13)

ON BEHALF OF THE BOARD OF DIRECTORS:

             /s/ Jonathan Cherry              , Director                                                                                                                                                                       /s/ Dr. David Dreisinger        , Director



- See Accompanying Notes –

PolyMet Mining Corp.
Condensed Interim Consolidated Statements of Loss and Comprehensive Loss
Unaudited - All figures in thousands of U.S. Dollars, except for shares and per share amounts

   
Three months ended
    
Six months ended
  
   
June 30,
2020
    
June 30,
2019
    
June 30,
2020
    
June 30,
2019
  
Operations Expense
                        
Resource evaluation
  
$
3,925
    
$
-
    
$
6,623
    
$
-
  
Salaries, directors’ fees and related benefits
    
1,162
      
588
      
2,372
      
1,225
  
Share-based compensation (Note 10)
    
648
      
109
      
1,159
      
1,298
  
Public company and public relations
    
454
      
247
      
748
      
686
  
Professional fees
    
276
      
(69
)
    
499
      
214
  
Office and administration
    
64
      
115
      
282
      
278
  
Depreciation
    
53
      
31
      
106
      
64
  
Loss From Operations
    
6,582
      
1,021
      
11,789
      
3,765
  
                                 
Other Expenses (Income)
                                
Finance (income) costs - net (Note 11)
    
(529
)
    
119
      
1,968
      
1,242
  
Loss (gain) on foreign exchange
    
2
      
(11
)
    
2
      
7
  
(Gain) loss on debenture modification
    
-
      
(10
)
    
-
      
2,004
  
Gain on disposal of assets
    
-
      
(172
)
    
-
      
(172
)
Gain on financial asset fair value
    
-
      
(26
)
    
(292
)
    
(98
)
Other income
    
(4
)
    
(11
)
    
(7
)
    
(20
)
Total Other (Income) Expenses
    
(531
)
    
(111
)
    
1,671
      
2,963
  
                                 
Total Loss and Comprehensive Loss for the Period
    
6,051
      
910
      
13,460
      
6,728
  
                                 
                                 
Basic and Diluted Loss per Share
  
$
0.01
    
$
0.00
    
$
0.01
    
$
0.02
  
                                 
Weighted Average Number of Shares – basic and diluted
    
1,006,383,162
      
344,737,881
      
1,006,132,963
      
333,456,972
  

- See Accompanying Notes -

PolyMet Mining Corp.
Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity
Unaudited - All figures in thousands of U.S. Dollars, except for shares

   
Share Capital
(authorized = unlimited)
                    
                           
Total
  
   
Issued
    
Share
    
Equity
          
Shareholders'
  
   
Shares
    
Capital
    
Reserves
    
Deficit
    
Equity
  
Balance – December 31, 2018
    
321,190,069
    
$
272,420
    
$
62,111
    
$
(149,489
)
  
$
185,042
  
Total comprehensive loss for the period
    
-
      
-
      
-
      
(6,728
)
    
(6,728
)
Rights Offering & issuance costs
    
682,813,838
      
253,047
                      
253,047
  
Debenture refinancing warrants
    
-
      
-
      
1,564
      
-
      
1,564
  
Payment of land purchase options (Note 10)
    
52,500
      
36
      
-
      
-
      
36
  
Exercise of share options (Note 10)
    
400,171
      
572
      
(298
)
    
-
      
274
  
Vesting of restricted shares and RSU’s (Note 10)
    
543,417
      
633
      
(633
)
    
-
      
-
  
Share-based compensation (Note 10)
    
102,921
      
84
      
1,652
      
-
      
1,736
  
Balance – June 30, 2019
    
1,005,102,916
    
$
526,792
    
$
64,396
    
$
(156,217
)
  
$
434,971
  




   
Share Capital
(authorized = unlimited)
                    
                           
Total
  
   
Issued
    
Share
    
Equity
          
Shareholders'
  
   
Shares
    
Capital
    
Reserves
    
Deficit
    
Equity
  
Balance – December 31, 2019
    
1,005,230,259
    
$
526,884
    
$
64,648
    
$
(207,392
)
  
$
384,140
  
Total comprehensive loss for the period
    
-
      
-
      
-
      
(13,460
)
    
(13,460
)
Debenture exchange warrants (Note 8)
    
-
      
-
      
3,203
      
-
      
3,203
  
Vesting of restricted shares and RSU’s (Note 10)
    
1,192,424
      
788
      
(788
)
    
-
      
-
  
Share-based compensation (Note 10)
    
574,812
      
150
      
567
      
-
      
717
  
Balance – June 30, 2020
    
1,006,997,495
    
$
527,822
    
$
67,630
    
$
(220,852
)
  
$
374,600
  



- See Accompanying Notes -

PolyMet Mining Corp.
Condensed Interim Consolidated Statements of Cash Flows
Unaudited - All figures in thousands of U.S. Dollars

   
Three months ended
    
Six months ended
  
   
June 30,
2020
    
June 30,
2019
    
June 30,
2020
    
June 30,
2019
  
Operating Activities
                        
Loss for the period
  
$
(6,051
)
  
$
(910
)
  
$
(13,460
)
  
$
(6,728
)
Items not involving cash:
                                
Depreciation
    
53
      
31
      
106
      
64
  
Finance costs (Note 11)
    
436
      
-
      
765
      
-
  
Environmental rehabilitation provision accretion
(Notes 6 and 11)
    
516
      
418
      
1,041
      
856
  
Share-based compensation (Note 10)
    
648
      
109
      
1,159
      
1,298
  
Unrealized loss (gain) on foreign exchange
    
(1
)
    
2
      
3
      
1
  
(Gain) loss on debenture modification
    
-
      
(10
)
    
-
      
2,004
  
Gain on disposal of assets
    
-
      
(172
)
    
-
      
(172
)
Gain on financial asset fair value
    
-
      
(26
)
    
(292
)
    
(98
)
Changes in non-cash working capital
                                
Restricted deposits
    
(1,490
)
    
-
      
157
      
-
  
Amounts receivable and other assets
    
68
      
(218
)
    
67
      
275
  
Prepaid expenses
    
189
      
(47
)
    
416
      
(6
)
Accounts payable and accruals
    
(524
)
    
2,463
      
313
      
2,249
  
Net cash (used in) provided by operating activities
    
(6,156
)
    
1,640
      
(9,725
)
    
(257
)
                                 
Financing Activities
                                
Share issuance proceeds
    
-
      
21,565
      
-
      
21,839
  
Share issuance costs
    
-
      
(11,953
)
    
-
      
(11,953
)
Debenture funding, net of costs (Note 8)
    
7,000
      
-
      
13,888
      
-
  
Debenture repayment
    
-
      
(6,882
)
    
-
      
(6,882
)
Cash settled RSU’s (Note 10)
    
(85
)
    
(17
)
    
(85
)
    
(229
)
Net cash provided by financing activities
    
6,915
      
2,713
      
13,803
      
2,775
  
                                 
Investing Activities
                                
Property, plant and equipment purchases (Note 4)
    
(2,450
)
    
(5,181
)
    
(4,941
)
    
(10,845
)
Property, plant and equipment disposal proceeds
    
-
      
1,043
      
-
      
1,043
  
Restricted deposits and earnings
    
-
      
(350
)
    
-
      
(407
)
Intangible purchases (Note 5)
    
-
      
-
      
(62
)
    
-
  
Net cash used in investing activities
    
(2,450
)
    
(4,488
)
    
(5,003
)
    
(10,209
)
                                 
Net Decrease in Cash
    
(1,691
)
    
(135
)
    
(925
)
    
(7,691
)
Effect of foreign exchange on Cash
    
1
      
(2
)
    
(3
)
    
(1
)
Cash - Beginning of period
    
8,163
      
6,302
      
7,401
      
13,857
  
Cash - End of period
  
$
6,473
    
$
6,165
    
$
6,473
    
$
6,165
  
 
Supplemental information – non-cash investing
and financing
                                
Capitalization of accounts payable and accruals to mineral property
  
$
(380
)
  
$
457
    
$
(19
)
  
$
1,157
  
Capitalization of borrowing costs to mineral property
    
-
      
7,114
      
-
      
14,410
  
Capitalization of share-based compensation to mineral property (Note 10)
    
30
      
36
      
173
      
436
  
Capitalization of shares for land options to mineral property
  
$
-
    
$
16
    
$
-
    
$
36
  

- See Accompanying Notes -

PolyMet Mining Corp.
Notes to Condensed Interim Consolidated Financial Statements
As at June 30, 2020 and for the three and six months ended June 30, 2020
Unaudited - Tabular amounts in thousands of U.S. Dollars, except for shares and per share amounts

1.
Nature of Business and Liquidity

PolyMet Mining Corp. was incorporated in British Columbia, Canada 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.

The corporate address and records office of the Company are located at 100 King Street West, Suite 5700, Toronto, Ontario, Canada M5X 1C7, and 700 West Georgia, 25th Floor, Vancouver, British Columbia, Canada, V7Y 1B3, respectively.  The executive office of PolyMet US is located at 444 Cedar Street, Suite 2060, St. Paul, Minnesota, United States of America, 55101.

The Company has a majority shareholder relationship with Glencore AG, a wholly owned subsidiary of Glencore plc (together “Glencore”), as a result of Glencore’s ownership of 71.6% of the Company’s issued shares.

The Company’s primary mineral property is the NorthMet Project (“NorthMet” or “Project”), a polymetallic project in northeastern Minnesota, United States of America, which comprises the NorthMet copper-nickel-precious metals ore body and the Erie Plant, a processing facility located approximately six miles from the ore body.

PolyMet received its Permit to Mine from the State of Minnesota on November 1, 2018, a crucial permit for construction and operation of the Project. The Minnesota Department of Natural Resources (“MDNR”) also issued all other permits for which the Company had applied including dam safety, water appropriations, endangered and threatened species takings, and public waters work permits, along with Wetlands Conservation Act approval. In addition, PolyMet received air and water permits from the Minnesota Pollution Control Agency (“MPCA”) on December 18, 2018. Further, PolyMet received the federal Record of Decision and Section 404 Wetlands Permit from the U.S. Army Corps of Engineers on March 21, 2019, which was the last key permit or approval needed to construct and operate the Project.

Legal challenges were filed in the Minnesota Court of Appeals contesting various aspects of the MDNR and MPCA decisions. In June 2019, the Court of Appeals transferred a challenge to the MPCA water quality permit to the Ramsey County District Court for the limited purpose of an evidentiary hearing.   During the first quarter of 2020, the Court of Appeals remanded the Permit to Mine and dam safety permits to the MDNR for a contested case hearing and the air permit to the MPCA to provide additional information. The Company, MDNR, MPCA and several other groups petitioned the Minnesota Supreme Court to review these decisions. In March 2020, the Minnesota Supreme Court granted review of the Court of Appeals ruling on the Permit to Mine and dam safety permits.  In June 2020, the Minnesota Supreme Court granted review of the Court of Appeals ruling on the air permit.  PolyMet cannot act on these permits until the litigation is resolved of which the timing is uncertain.

The realization of the Company’s investment in NorthMet and other assets is dependent upon various factors, including the existence of economically recoverable mineral reserves, the ability to obtain and maintain permits necessary to construct and operate NorthMet, the ability to obtain financing necessary to complete the development of NorthMet, and to conduct future profitable operations or alternatively, disposal of the investment on an advantageous basis.

1
PolyMet Mining Corp.
Notes to Condensed Interim Consolidated Financial Statements
As at June 30, 2020 and for the three and six months ended June 30, 2020
Unaudited - Tabular amounts in thousands of U.S. Dollars, except for shares and per share amounts

1.
Nature of Business and Liquidity - Continued

Given the ongoing development of the Project, the Company has experienced recurring losses from operations and net cash outflows for operating and investing activities, which are expected to continue until the Project is constructed and operational.  As at June 30, 2020, the Company had cash of $6.473 million, working capital of $1.116 million and an agreement with Glencore to issue unsecured convertible debentures to Glencore in four tranches during 2020 with a total minimum principal amount of $20.0 million and total maximum principal amount of $30.0 million, the amount of each tranche to be determined jointly by the Company and Glencore. As of June 30, 2020, the Company had issued $14.0 million of convertible debentures to Glencore under this agreement (see Note 8).

The Company believes it is probable it will continue to receive funding from Glencore or other financing sources, including funding from the issuance of unsecured convertible debentures, allowing the Company to satisfy future financial obligations, complete development of the Project and to conduct future profitable operations. Management’s belief is based upon the underlying value of the Project, progress on obtaining and maintaining permits, ongoing discussions with potential financiers and the majority shareholder relationship with Glencore (see Note 7).

In late December 2019, a novel coronavirus (COVID-19) was identified as originating in China, which subsequently spread worldwide and on March 11, 2020, the World Health Organization declared it was a pandemic. The continued spread of COVID-19 globally, prolonged restrictive measures put in place to help control the outbreak of COVID-19 or other adverse public health developments could adversely affect global economies and financial markets. This could result in volatility or an economic downturn having adverse effects on the future demand and prices for metals the Company will produce and on the ability to raise sufficient funds to finance ongoing development of the Project.  The extent to which COVID-19 impacts the Company’s business, including the market for its securities, the ability to raise capital and valuation of non-financial assets including mineral property, plant and equipment and intangibles, has not been material to date but will depend on future developments, which are highly uncertain and cannot be predicted at this time.


2.
Summary of Significant Accounting Policies

Statement of Compliance
 
These unaudited condensed interim consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”), applicable to the preparation of interim financial statements, including IAS 34, Interim Financial Reporting and follow the same accounting policies and methods of application as set out in Note 2 of the audited consolidated financial statements for the year ended December 31, 2019.  These condensed interim consolidated financial statements do not include all the information and note disclosures required by IFRS for annual financial statements and therefore should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2019.  The financial statements were approved by the Board of Directors on August 6, 2020.

2
PolyMet Mining Corp.
Notes to Condensed Interim Consolidated Financial Statements
As at June 30, 2020 and for the three and six months ended June 30, 2020
Unaudited - Tabular amounts in thousands of U.S. Dollars, except for shares and per share amounts

3.
Mineral Property Agreements

NorthMet, Minnesota, U.S.A.
 
Pursuant to an agreement dated January 4, 1989, subsequently amended and assigned, the Company leases certain mineral property rights in St. Louis County, Minnesota from RGGS Land & Minerals Ltd., L.P.  Provided the Company continues to make annual lease payments, the lease period continues until June 12, 2048 with an option to extend the lease for up to five additional ten-year periods on the same terms and further extend as long as there are commercial mining operations.  All lease payments have been paid to date with the next annual payment of $0.175 million due in January 2021.

Pursuant to an agreement dated December 1, 2008, the Company leases certain mineral property rights in St. Louis County, Minnesota from LMC Minerals.  Provided the Company continues to make annual lease payments, the lease period continues until December 1, 2028 with an option to extend the lease for up to four additional five-year periods on the same terms.  All lease payments have been paid to date with the next annual payment of $0.030 million due in November 2020.

The lease payments are considered advance royalty payments and will be deducted from future production royalties payable to the lessor, which range from 3% to 5% based on the net smelter return per ton received by the Company. The Company’s recovery of $3.186 million in advance royalty payments to RGGS Land & Minerals Ltd., L.P. is subject to the lessor receiving an amount not less than the amount of the annual lease payment due for that year. The Company’s recovery of $0.249 million in advance royalty payments to LMC Minerals is subject to the lessor receiving an amount not less than the amount of the annual lease payment due for that year.


4.
Mineral Property, Plant and Equipment

Details of the Mineral Property, Plant and Equipment are as follows:
 
Net Book Value
  
Mineral
Property
    
Plant and
Equipment
    
Total
  
Balance at December 31, 2019
  
$
409,356
    
$
776
    
$
410,132
  
Additions
    
4,718
      
88
      
4,806
  
Changes to environmental rehabilitation provision (Note 6)
    
17
      
-
      
17
  
Amortization and Depreciation
    
-
      
(80
)
    
(80
)
Balance at June 30, 2020
    
414,091
      
784
      
414,875
  
Gross carrying value
    
461,259
      
2,019
      
463,278
  
Accumulated depreciation and impairment
  
$
(47,168
)
  
$
(1,235
)
  
$
(48,403
)

Mineral Property
  
June 30,
2020
    
December 31,
2019
  
Mineral property acquisition and interest costs
  
$
79,625
    
$
79,625
  
Mine plan and development
    
51,919
      
51,388
  
Environmental
    
145,194
      
142,814
  
Consulting and wages
    
60,131
      
58,610
  
Reclamation and remediation (Note 6)
    
46,916
      
46,899
  
Site activities
    
30,228
      
29,942
  
Mine equipment
    
78
      
78
  
Total
  
$
414,091
    
$
409,356
  

3
PolyMet Mining Corp.
Notes to Condensed Interim Consolidated Financial Statements
As at June 30, 2020 and for the three and six months ended June 30, 2020
Unaudited - Tabular amounts in thousands of U.S. Dollars, except for shares and per share amounts

4.
Mineral Property, Plant and Equipment - Continued

In November 2005, the Company acquired from Cliffs Erie LLC, a subsidiary of Cleveland Cliffs Inc. (together “Cliffs”) large parts of a processing facility located approximately six miles from the ore body.  In December 2006, the Company acquired from Cliffs additional property and associated rights sufficient to provide it with a railroad connection linking the mine development site and the processing facility. The transaction also included a railcar fleet, locomotive fueling and maintenance facilities, water rights and pipelines, administrative offices on site and an additional 6,000 acres of land to the east and west of the existing tailings storage facilities.  The consideration paid for the processing facility and associated infrastructure was $18.9 million in cash and 9,200,547 shares at a fair market value of $13.953 million. As part of the consideration, the Company indemnified Cliffs for reclamation and remediation obligations of the acquired property (see Note 6).

During the six months ended June 30, 2020, the Company capitalized development costs of $4.718 million (June 30, 2019 - $25.996 million) necessary to bring the Project to commercial production.  In addition, borrowing costs directly attributable to the Project were capitalized in the amount of $nil (June 30, 2019 - $14.410 million) due to suspension of capitalization following the asset impairment during the three months ended December 31, 2019.  As Project assets are not in use or capable of operating in a manner intended by management, no depreciation or amortization of these assets has been recorded to June 30, 2020.

The Company regularly assesses whether there are indicators of asset impairment. During the first quarter of 2020, indicators were identified, including updates to the Project and developments related to ongoing legal challenges, which potentially affect the timing of the Project.  The recoverable amounts of mineral property, plant and equipment and intangibles were measured based on fair value less costs of disposal (“FVLCD”), determined by assessing future expected cash flows based on future business plans supported by life of mine plans. The valuation assessment uses the most recent reserve and resource estimates, relevant cost assumptions and market forecasts of commodity prices discounted using an operation specific weighted average cost of capital.  The determination of FVLCD used Level 3 valuation techniques.   Based on the results of the Company’s recoverability analysis, the FVLCD exceeded the carrying amount of the assets and no impairment was required during the first quarter of 2020.  No indicators of asset impairment were identified during the second quarter of 2020.

4
PolyMet Mining Corp.
Notes to Condensed Interim Consolidated Financial Statements
As at June 30, 2020 and for the three and six months ended June 30, 2020
Unaudited - Tabular amounts in thousands of U.S. Dollars, except for shares and per share amounts

5.
Intangibles

Details of the Intangibles are as follows:

   
Six months ended
June 30, 2020
    
Year ended
December 31, 2019
  
Intangibles – beginning of period
  
$
24,380
    
$
24,185
  
Additions
    
62
      
195
  
Amortization
    
(26
)
    
-
  
Intangibles – end of period
    
24,416
      
24,380
  
Gross carrying value
    
24,442
      
24,380
  
Accumulated depreciation and impairment
  
$
(26
)
  
$
-
  

In October 2017, the Company entered into an agreement with EIP Credit Co., LLC to reserve wetland mitigation bank credits the Company can use for the Project for a minimum of five years in exchange for an initial down payment applicable to the purchase price, contractual transfer of certain lands, and annual option payments not applicable to the purchase price.  Annual option payments of $0.250 million are expensed as incurred whereas option exercise payments are recorded to Intangibles and transferred to Mineral Property, Plant and Equipment once placed into service.  As at June 30, 2020, the carrying amount of wetland mitigation bank credit intangibles was $24.185 million (December 31, 2019 – $24.185 million).

During the six months ended June 30, 2020, the Company capitalized $0.062 million related to software costs (December 31, 2019 - $0.195 million).  As at June 30, 2020, the carrying amount of software intangibles was $0.231 million (December 31, 2019 – $0.195 million).


6.
Environmental Rehabilitation Provision

Details of the Environmental Rehabilitation Provision are as follows:

   
Six months ended
June 30, 2020
    
Year ended December 31, 2019
  
Environmental Rehabilitation Provision – beginning of period
  
$
52,525
    
$
61,107
  
Change in estimate
    
17
      
(9,912
)
Liabilities discharged
    
(250
)
    
(742
)
Accretion expense
    
1,041
      
2,072
  
Environmental Rehabilitation Provision – end of period
    
53,333
      
52,525
  
Less current portion
    
(1,492
)
    
(1,276
)
Non-current portion
  
$
51,841
    
$
51,249
  

Federal, state and local laws and regulations concerning environmental protection affect the Company’s assets.  As part of the consideration for the asset acquisitions from Cliffs (see Note 4), the Company indemnified Cliffs for reclamation and remediation obligations of the acquired property.  The Company’s provisions are based upon existing laws and regulations.  It is not currently possible to estimate the impact on operating results, if any, of future legislative or regulatory developments.

5
PolyMet Mining Corp.
Notes to Condensed Interim Consolidated Financial Statements
As at June 30, 2020 and for the three and six months ended June 30, 2020
Unaudited - Tabular amounts in thousands of U.S. Dollars, except for shares and per share amounts

6.
Environmental Rehabilitation Provision - Continued

The Company’s best estimate of the environmental rehabilitation provision as at June 30, 2020 was $53.333 million (December 31, 2019 - $52.525 million) based on estimated cash flows required to settle this obligation in present day costs of $70.230 million (December 31, 2019 - $70.480 million), a projected inflation rate of 2.1% (December 31, 2019 – 2.2%), a market risk-free nominal interest rate of 3.9% (December 31, 2019 – 4.0%) and expenditures expected to occur over a period of approximately 30 years.  The carrying value of the provision is sensitive to the estimates and assumptions used in its measurement.  If the discount rate had been 1% lower than management’s estimate, the liability would have increased by $8.2 million as at June 30, 2020 and conversely, if the discount rate had been 1% higher than management’s estimate, the liability would have decreased by $6.6 million as at June 30, 2020.

On November 1, 2018, the Company received the Permit to Mine for the Project and certain other permits from the MDNR which included a schedule for financial assurance obligations, including required cash contributions to a trust fund. The Company has satisfied its current financial assurance obligations primarily by establishing and contributing $10.0 million in restricted deposits to a trust fund and providing $65.0 million in surety bonds and letters of credit, with the MDNR as the beneficiary in each case. Financial assurance obligations are reviewed annually based on the Company’s planned reclamation activities, with the total assurance and related financial instruments adjusted accordingly. The Company may terminate these financial instruments, partially or in full, only upon fulfilling site reclamation requirements and receiving approval from the MDNR.  Future required cash contributions to the trust fund are $2.0 million per year beginning in the first year of mining operations and continue until the eighth year after which annual contributions will be prorated based on the expected reclamation obligation at the end of mining.  In addition, the Company provided Cliffs with a $13.4 million letter of credit to satisfy requirements under the asset acquisition agreements and related obligations.  There were no changes in the financial assurance obligations during the six month period ended June 30, 2020.  As at June 30, 2020, the trust fund balance was $11.041 million (December 31, 2019 - $11.198 million).


7.
Glencore Financing

Since October 2008, the Company and Glencore have entered into a series of financing agreements comprising:


 •
Equity – $25.0 million placement of common shares in 2009; $30.0 million placement of common shares in 2010; $20.0 million placement of common shares in 2011; $20.960 million purchase of common shares in 2013; $10.583 million purchase of common shares in the 2016 Private Placement; and a $243.435 million purchase of common shares in the 2019 Rights Offering;


•
Convertible debt (see Note 8) – $25.0 million initial principal secured convertible debentures drawn in 2008 and 2009 and up to $30 million initial principal unsecured convertible debentures drawn and to be drawn in 2020. The 2008 and 2009 convertible debt balance was fully repaid with proceeds from the 2019 Rights Offering;


•
Non-convertible debt – $30.0 million initial principal secured debentures drawn in 2015; $11.0 million initial principal secured debenture drawn in 2016; $14.0 million initial principal secured debentures drawn in 2016; $20.0 million initial principal secured debentures drawn in 2017 and 2018; and $80.0 million initial principal secured debenture drawn in 2018 with the final tranche in the amount of $15.0 million cancelled by the Company. The non-convertible balance was fully repaid with proceeds from the 2019 Rights Offering; and


•
Promissory note (see Note 9) – agreement comprising $15.0 million initial principal note drawn in August 2019.

6
PolyMet Mining Corp.
Notes to Condensed Interim Consolidated Financial Statements
As at June 30, 2020 and for the three and six months ended June 30, 2020
Unaudited - Tabular amounts in thousands of U.S. Dollars, except for shares and per share amounts

8.
Convertible Debt

Details of the Convertible Debt are as follows:
 
   
Six months ended
June 30, 2020
    
Year ended
December 31, 2019
  
Convertible Debt – beginning of period
  
$
-
    
$
56,984
  
Fair value of debenture funding
    
10,685
      
-
  
Change due to modification
    
-
      
792
  
Accretion and capitalized interest
    
157
      
2,105
  
Repayment
    
-
      
(59,881
)
Convertible Debt – end of period
  
$
10,842
    
$
-
  
 
During 2008 and 2009, the Company issued $25.0 million of secured convertible debentures to Glencore.  The Company provided security on these debentures covering all of the assets of PolyMet. Interest was compounded quarterly and payable by increasing the principal amount of the debentures. Since inception, $34.881 million of interest was capitalized to the principal amount of the debenture.  All borrowing costs were eligible for capitalization and $2.105 million was capitalized during 2019. Upon closing of the Rights Offering, these debentures were fully repaid on June 28, 2019.
 
On March 17, 2020, the Company agreed to issue unsecured convertible debentures to Glencore in four tranches during 2020 with a total minimum principal amount of $20.0 million and total maximum principal amount of $30.0 million, the amount of each tranche to be determined jointly by the Company and Glencore.  The debentures are due on the earlier of March 31, 2023 or upon US$100 million of Project financing.  Interest accrues on the unsecured debentures balance drawn at 4% per annum and the principal amount of the debentures is convertible into common shares of the Company at a conversion price equal to $0.2223.  The first tranche in the amount of $7.0 million was issued on March 18, 2020 and the second tranche in the amount of $7.0 million was issued on June 23, 2020.  Issuance of the remaining tranches is expected quarterly to maintain sufficient liquidity.
 
The convertible debenture proceeds were bifurcated between the debt and equity components.  The fair value of the debt portion was estimated using a discounted cash flow model method.  The fair value of the debt portion for the March 18, 2020 debenture was $5.213 million with a residual of $1.675 million allocated to equity.  Transaction costs for the financing were $0.112 million.  The fair value of the debt portion for the June 23, 2020 debenture was $5.472 million with a residual of $1.528 million allocated to equity.  The debt portion has been recorded at amortized cost, net of transaction costs, and is being accreted to face value over the expected life using the effective interest method.  No borrowing costs were capitalized during 2020.

7
PolyMet Mining Corp.
Notes to Condensed Interim Consolidated Financial Statements
As at June 30, 2020 and for the three and six months ended June 30, 2020
Unaudited - Tabular amounts in thousands of U.S. Dollars, except for shares and per share amounts

9.
Promissory Note

Details of the Promissory Note are as follows:
 
   
Six months ended
June 30, 2020
    
Year ended
December 31, 2019
  
Promissory Note – beginning of period
  
$
15,501
    
$
-
  
Funding, net of costs
    
-
      
15,000
  
Accretion and capitalized interest
    
608
      
501
  
Promissory Note – end of period
  
$
16,109
    
$
15,501
  

On August 7, 2019, the Company issued to Glencore a promissory note in the amount of $15.0 million with proceeds to be used for general corporate purposes.  The promissory note bears interest at three month U.S. dollar LIBOR plus 6.0% and is payable on the earlier of (i) December 31, 2021 or (ii) the availability of at least $100 million of debt or equity financing, on which date all principal and interest accrued to such date will be due and payable.  Since inception, $1.109 million of interest has been capitalized to the principal amount of the promissory note.  Borrowing costs of $0.341 million were eligible for and were capitalized during 2019.  No borrowing costs were capitalized during 2020.


10.
Share Capital

a)
Issuances for Cash and Land Acquisition

During the six months ended June 30, 2020 the Company issued nil shares (June 30, 2019 – 400,171 shares) pursuant to the exercise of share options for proceeds of $nil (June 30, 2019 - $0.274 million).

During the six months ended June 30, 2020 the Company issued nil shares (June 30, 2019 – 52,500 shares) to maintain land purchase options with the shares valued at $nil (June 30, 2019 - $0.036 million).

On June 24, 2020, shareholders approved the proposed consolidation of the issued and outstanding common shares of the Company on the basis of up to ten (10) pre-consolidation shares for every one (1) post-consolidation share and further authorized the Board of Directors to determine when and if to effect such consolidation.  No action has been taken by the Board of Directors to date.

b)
Share-Based Compensation

The Omnibus Share Compensation Plan (“Omnibus Plan”) was created to align the interests of the Company’s employees, directors, officers and consultants with those of shareholders.  Effective May 25, 2007, the Company adopted the Omnibus Plan, which was approved by the Company’s shareholders on June 27, 2007, modified and further ratified and reconfirmed by the Company’s shareholders most recently on June 27, 2018.  The Omnibus Plan restricts the award of share options, restricted shares, restricted share units, and other share-based awards to 10% of the common shares issued and outstanding on the grant date, excluding 2,500,000 common shares underlying options pursuant to an exemption approved by the Toronto Stock Exchange.

8
PolyMet Mining Corp.
Notes to Condensed Interim Consolidated Financial Statements
As at June 30, 2020 and for the three and six months ended June 30, 2020
Unaudited - Tabular amounts in thousands of U.S. Dollars, except for shares and per share amounts

10.
Share Capital - Continued

During the six months ended June 30, 2020, the Company recorded $1.332 million for share-based compensation (June 30, 2019 - $1.734 million) with $1.159 million expensed to share-based compensation (June 30, 2019 - $1.298 million) and $0.173 million capitalized to mineral property, plant and equipment (June 30, 2019 - $0.436 million).  The offsetting entries were to equity reserves for $0.567 million (June 30, 2019 - $1.652 million), share capital for $0.150 million (June 30, 2019 – $0.084 million) and payables of $0.615 million (June 30, 2019 - $0.002 million decrease).  Total share-based compensation for the period comprised $0.110 million for share options (June 30, 2019 - $1.113 million), $1.072 million for restricted share units (June 30, 2019 - $0.537 million), and $0.150 million for issuance of 574,812 unrestricted shares (June 30, 2019 - $0.084 million for 102,921 shares).  Exercise of options and warrants and vesting of restricted share units during the period resulted in $0.788 million being transferred from equity reserves to share capital (June 30, 2019 - $0.931 million).

c)
Share Options

Share options granted may not exceed a term of ten years and are forfeited if the grantee ceases to be an eligible person under the Omnibus Plan.

Details of the share options outstanding are as follows:

   
Six months ended
June 30, 2020
    
Year ended
December 31, 2019
  
   
Number of
Options
    
Weighted Average Exercise Price
    
Number of
Options
    
Weighted Average Exercise Price
  
Outstanding – beginning of period
    
24,066,000
    
$
0.77
      
22,692,002
    
$
0.91
  
Granted
    
250,000
      
0.39
      
3,625,000
      
0.81
  
Exercised
    
-
      
-
      
(625,000
)
    
0.71
  
Expired
    
(1,255,000
)
    
1.01
      
(1,626,002
)
    
1.01
  
Anti-dilution price adjustment
    
-
      
-
      
-
      
(0.12
)
Outstanding – end of period
    
23,061,000
    
$
0.75
      
24,066,000
    
$
0.77
  

Range of Exercise Prices
  
Number of
options
outstanding
    
Number of
options
exercisable
    
Weighted Average Exercise Price
    
Weighted Average Remaining Life
  
0.39 to 0.69
    
10,544,000
      
10,544,000
    
$
0.63
      
1.94
  
0.70 to 0.86
    
9,717,000
      
9,018,000
      
0.77
      
3.29
  
0.87 to 1.30
    
1,750,000
      
1,750,000
      
0.92
      
2.88
  
1.31 to 1.63
    
1,050,000
      
1,050,000
      
1.56
      
0.66
  
     
23,061,000
      
22,362,000
    
$
0.75
      
2.52
  

As at June 30, 2020 all outstanding share options had vested and were exercisable, with the exception of 699,000, which are scheduled to vest upon production.  The outstanding share options have expiry periods between 0.57 and 9.99 years and are expected to primarily be settled in shares upon exercise.

9
PolyMet Mining Corp.
Notes to Condensed Interim Consolidated Financial Statements
As at June 30, 2020 and for the three and six months ended June 30, 2020
Unaudited - Tabular amounts in thousands of U.S. Dollars, except for shares and per share amounts

10.
Share Capital - Continued
 
The fair value of share options granted were estimated at the date of grant using the Black-Scholes pricing model with the following weighted average assumptions:
 
   
Six months ended
June 30, 2020
    
Year ended
December 31, 2019
  
Risk-free interest rate
    
0.33
%
    
2.52
%
Expected dividend yield
    
-
      
-
  
Expected forfeiture rate
    
-
      
-
  
Expected volatility
    
71.88
%
    
54.56
%
Expected life in years
    
5.00
      
2.50
  
Weighted average fair value of each option
  
$
0.23
    
$
0.29
  
 
The expected volatility reflects the Company’s expectation that historical volatility over a period similar to the life of the option is indicative of future trends, which may or may not necessarily be the actual outcome.

d)
Restricted Shares and Restricted Share Units

Restricted shares and restricted share units granted are forfeited if the grantee ceases to be an eligible person under the Omnibus Plan.

Details of the restricted shares and restricted share units are as follows:

   
Six months ended
June 30, 2020
    
Year ended
December 31, 2019
  
Outstanding - beginning of period
    
4,648,864
      
3,347,907
  
Issued
    
9,182,521
      
1,725,869
  
Vested
    
(1,538,549
)
    
(1,049,364
)
Anti-dilution quantity adjustment
    
-
      
624,452
  
Outstanding - end of period
    
12,292,836
      
4,648,864
  

During the six months ended June 30, 2020, the Company issued 9,182,521 restricted share units (June 30, 2019 – 1,632,119) which had a fair value of $2.389 million (June 30, 2019 - $1.325 million) to be expensed and capitalized over the vesting periods.

During the six months ended June 30, 2020, there were nil restricted shares (June 30, 2019 – 95,500) settled upon vesting in shares, 1,192,424 restricted share units (June 30, 2019 – 543,417) settled upon vesting with shares and 346,125 restricted share units (June 30, 2019 – 302,617) settled upon vesting with cash for $0.085 million (June 30, 2019 – $0.229 million).

As at June 30, 2020, outstanding restricted shares and restricted share units are scheduled to vest upon completion of specific targets or dates (Construction Finance – 865,575; Production – 459,272; December 2020 – 325,000; January 2021 – 1,534,108; January 2022 – 8,088,077 and Other – 418,750).  The remaining 602,054 outstanding restricted share units have vested but share delivery is deferred until retirement, termination, or death.  The Company expects 5,223,534 outstanding restricted share units will be settled in cash and the remainder will be settled in shares as allowed under the Omnibus Plan.

e)
Bonus Shares

The bonus share incentive plan was established for the Company’s directors and key employees and was approved by the disinterested shareholders at the Company’s shareholders’ meeting held in May 2004.  The Company has authorized 3,640,000 bonus shares for the achievement of Milestone 4 representing commencement of commercial production at NorthMet.  At the Company’s
 
10
PolyMet Mining Corp.
Notes to Condensed Interim Consolidated Financial Statements
As at June 30, 2020 and for the three and six months ended June 30, 2020
Unaudited - Tabular amounts in thousands of U.S. Dollars, except for shares and per share amounts

10.
Share Capital - Continued

Annual General Meeting of shareholders held in June 2008, the disinterested shareholders approved issuance of these shares upon achievement of Milestone 4.  Regulatory approval is also required prior to issuance of these shares.

Details of the bonus shares are as follows:

   
Six months ended
June 30, 2020
    
Year ended
December 31, 2019
  
   
Allocated
    
Authorized
& Unissued
    
Allocated
    
Authorized
& Unissued
  
Outstanding – beginning of period
    
2,700,000
      
3,640,000
      
2,700,000
      
3,640,000
  
Outstanding – end of period
    
2,700,000
      
3,640,000
      
2,700,000
      
3,640,000
  

The fair value of these unissued bonus shares was amortized until the estimated date of issuance and has now been fully amortized.

f)
Share Purchase Warrants

Details of the share purchase warrants are as follows:

   
Six months ended
June 30, 2020
    
Year ended
December 31, 2019
  
   
Number of
Purchase
Warrants
    
Weighted Average Exercise Price
    
Number of
Purchase
Warrants
    
Weighted Average Exercise Price
  
Outstanding – beginning of period
    
31,379,179
    
$
0.80
      
27,189,713
    
$
0.95
  
Issued
    
-
      
-
      
6,458,001
      
0.74
  
Anti-dilution price adjustment
    
-
      
-
      
-
      
(0.12
)
Anti-dilution quantity adjustment
    
-
      
-
      
4,189,466
      
-
  
Expiration
    
-
      
-
      
(6,458,001
)
    
0.82
  
Outstanding – end of period
    
31,379,179
    
$
0.80
      
31,379,179
    
$
0.80
  

The outstanding share purchase warrants have expiry periods between 1.30 years and 3.75 years, subject to acceleration in certain circumstances.

The fair value of share purchase warrants granted were estimated at the date of grant using the Black-Scholes pricing model with the following weighted average assumptions:
 
   
Six months ended
June 30, 2020
    
Year ended
December 31, 2019
  
Risk-free interest rate
    
-
      
2.18
%
Expected dividend yield
    
-
      
-
  
Expected forfeiture rate
    
-
      
-
  
Expected volatility
    
-
      
52.59
%
Expected life in years
    
-
      
3.00
  
Weighted average fair value of each warrant
   $
-
    
$
0.24
  

The expected volatility reflects the Company’s expectation that historical volatility over a period similar to the life of the warrant is indicative of future trends, which may or may not necessarily be the actual outcome.

11
PolyMet Mining Corp.
Notes to Condensed Interim Consolidated Financial Statements
As at June 30, 2020 and for the three and six months ended June 30, 2020
Unaudited - Tabular amounts in thousands of U.S. Dollars, except for shares and per share amounts

11.
Finance Costs – Net

Details of net finance costs are as follows:
 
   
Six months ended
  
   
June 30,
2020
    
June 30,
2019
  
Debt accretion and capitalized interest:
Convertible debt (Note 8)
  
$
157
    
$
2,105
  
Non-convertible debt
    
-
      
12,305
  
Promissory note (Note 9)
    
608
      
-
  
Environmental rehabilitation accretion (Note 6)
    
1,041
      
856
  
Other finance costs
    
24
      
888
  
Less: amounts capitalized on qualifying assets
    
-
      
(14,410
)
Finance costs
    
1,830
      
1,744
  
Cash interest income
    
(19
)
    
(152
)
Restricted deposits expense (income)
    
157
      
(350
)
Finance expense (income)
    
138
      
(502
)
Finance costs - net
  
$
1,968
    
$
1,242
  


12.
Related Party Transactions

The Company conducted transactions with senior management, directors and persons or companies related to these individuals, and paid or accrued amounts as follows:

   
Six months ended
  
   
June 30, 2020
    
June 30, 2019
  
Salaries and other short-term benefits
  
$
1,729
    
$
1,589
  
Other long-term benefits
    
40
      
29
  
Share-based payment (1)
    
1,018
      
1,509
  
Total
  
$
2,787
    
$
3,127
  

(1)            
Share-based payment represents the amount capitalized or expensed during the period (see Note 10).

Agreements with senior management contain severance provisions for termination without cause or in the event of a change in control.  Other than the President and CEO, no PolyMet director has an agreement providing for benefits upon termination.

As a result of Glencore’s ownership of 71.6% it is also a related party.  In addition to the transactions described in Notes 7, 8 and 9 the Company has entered into a Technical Services Agreement with Glencore whereby the Company reimburses Glencore for Project technical support costs requested under an agreed scope of work, primarily in detailed project design and mineral processing.  During the six months ended June 30, 2020, the Company recorded $0.169 million (June 30, 2019 - $0.100 million) for services under this agreement.

12
PolyMet Mining Corp.
Notes to Condensed Interim Consolidated Financial Statements
As at June 30, 2020 and for the three and six months ended June 30, 2020
Unaudited - Tabular amounts in thousands of U.S. Dollars, except for shares and per share amounts

13.
Commitments and Contingencies

In the normal course of business, the Company enters into contracts that give rise to firm commitments for future minimum payments.  In addition to items described elsewhere in these financial statements, as at June 30, 2020, the Company had firm commitments of approximately $0.660 million with approximately $0.462 million due over the next year and the remainder due over the following two years.

The Company is involved in various claims, litigation and other matters arising in the ordinary course and conduct of business. While it is not possible to determine the ultimate outcome of such actions at this time, and inherent uncertainties exist in predicting such outcomes, it is the Company's belief that the ultimate resolution of such actions is not reasonably likely to have a material adverse effect on its consolidated financial position or results of operations. The assessment of contingencies inherently involves the exercise of significant judgment and estimates of the outcome of future events.  As a result of the assessment, no significant contingent liabilities were recorded as at June 30, 2020.


14.
Financial Instruments and Risk Management

The carrying values of each classification of financial instrument as at June 30, 2020 are:
 
   
Amortized
Cost
    
Fair value
through
profit or loss
    
Total carrying
value
  
Financial assets
                  
Cash
  
$
6,473
    
$
-
    
$
6,473
  
Restricted deposits
    
470
      
10,822
      
11,292
  
Amounts receivable and other assets
    
739
      
2,400
      
3,139
  
Total financial assets
    
7,682
      
13,222
      
20,904
  
 
Financial liabilities
                        
Accounts payable and accruals
    
4,661
      
668
      
5,329
  
Convertible debt
    
10,842
      
-
      
10,842
  
Promissory note
    
16,109
      
-
      
16,109
  
Lease liabilities
    
605
      
-
      
605
  
Total financial liabilities
  
$
32,217
    
$
668
    
$
32,885
  

The carrying values of each classification of financial instrument as at December 31, 2019 are:
 
   
Amortized
Cost
    
Fair value
through
profit or loss
    
Total carrying
value
  
Financial assets
                  
Cash
  
$
7,401
    
$
-
    
$
7,401
  
Restricted deposits
    
809
      
10,640
      
11,449
  
Amounts receivable and other assets
    
738
      
2,176
      
2,914
  
Total financial assets
    
8,948
      
12,816
      
21,764
  
 
Financial liabilities
                        
Accounts payable and accruals
    
4,408
      
125
      
4,533
  
Promissory note
    
15,501
      
-
      
15,501
  
Lease liabilities
    
616
      
-
      
616
  
Total financial liabilities
  
$
20,525
    
$
125
    
$
20,650
  
















13
PolyMet Mining Corp.
Notes to Condensed Interim Consolidated Financial Statements
As at June 30, 2020 and for the three and six months ended June 30, 2020
Unaudited - Tabular amounts in thousands of U.S. Dollars, except for shares and per share amounts
 
14.
Financial Instruments and Risk Management - Continued

Fair Value Measurements

The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value.  The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).  The three levels of the fair value hierarchy are described below:


 Level 1 –
Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 –
Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3 –
Inputs for the asset or liability that are not based on observable market data.

Financial instruments measured at fair value subsequent to recognition include restricted deposits (see Note 6) measured at fair value through profit or loss using Level 1 inputs resulting in a carrying value of $10.822 million (December 31, 2019 - $10.640 million), amounts receivable measured at fair value through profit or loss using Level 3 inputs resulting in a carrying value of $2.400 million (December 31, 2019 - $2.176 million) and accruals for expected payments to settle restricted share units measured at fair value through profit or loss using Level 2 inputs resulting in a carrying value of $0.668 million (December 31, 2019 - $0.125 million).

The fair values of the convertible debt and promissory note approximate the carrying amount at amortized cost using the effective interest method.  The fair values of other financial assets and other financial liabilities approximate their carrying amounts due to their short-term nature.

Liquidity Risk
 
Liquidity risk is the risk the Company will not be able to meet its financial obligations as they become due and arises through the excess of financial obligations over available financial assets due at any point in time. The Company’s objective in managing liquidity risk is to maintain sufficient readily available reserves in order to meet its liquidity requirements at any point in time and is achieved by maintaining sufficient cash.  See additional discussion in Note 1.

14
Exhibit 99.2








POLYMET MINING CORP.


MANAGEMENT DISCUSSION AND ANALYSIS

For the three and six months ended June 30, 2020




PolyMet Mining Corp.
Management Discussion and Analysis
As at June 30, 2020 and for the three and six months ended June 30, 2020
Tabular amounts in thousands of U.S. Dollars, except for shares and per share amounts

General

The following information, prepared as at August 6, 2020 should be read in conjunction with the unaudited condensed interim consolidated financial statements of PolyMet Mining Corp. and its subsidiaries (together “PolyMet” or the “Company”) as at June 30, 2020 and for the three and six months ended June 30, 2020 and related notes attached thereto, which are prepared in accordance with IAS 34, Interim Financial Reporting and in conjunction with the audited consolidated financial statements for the year ended December 31, 2019 prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).  All amounts are expressed in United States (“U.S.”) dollars unless otherwise indicated.


Forward Looking Statements

This Management Discussion and Analysis (“MD&A”) contains statements that constitute "forward-looking statements" within the meaning of Section 21E of the United States Securities Exchange Act of 1934, as amended (the “US Exchange Act”).  These statements appear in a number of different places in this MD&A and can frequently, but not always, be identified by words such as “expects”, “anticipates”, “believes”, “intends”, “estimates”, “potential”, “possible”, “projects”, “plans” and similar expressions, or statements that events, conditions or results “will”, “may”, “could” or “should” occur or be achieved or their negatives or other comparable words.  Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause PolyMet’s actual results, performance or achievements to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements.  Forward-looking statements include statements regarding the outlook for the Company’s future operations, plans and timing for PolyMet’s exploration and development programs, statements about future market conditions, supply and demand conditions, forecasts of future costs and expenditures, the outcome of legal proceedings, and other expectations, intentions and plans that are not historical fact.  The Company’s actual results may differ materially from those in the forward-looking statements due to risks facing PolyMet or due to actual facts differing from the assumptions underlying the Company’s predictions.

The forward-looking statements contained in this MD&A are based on assumptions, which include, but are not limited to:
•
Obtaining and maintaining permits;
•
Raising the funds necessary to develop the NorthMet Project and continue operations;
•
Executing prospective business plans; and
•
Complying with applicable government regulations and standards.

Such forward-looking statements are subject to risks, uncertainties and other factors, including those listed or incorporated by reference under “Risk Factors” in the Annual Information Form.  These risks, uncertainties and other factors include, but are not limited to:
•
Changes in general economic and business conditions, including changes in interest rates and exchange rates;
•
Changes in the resource market including prices of natural resources, costs associated with mineral exploration and development, and other economic conditions;
•
Climate change and the impact of natural or other disasters and global health crises;
•
Actions by governments and authorities including changes in government regulation;
•
Uncertainties associated with legal proceedings; and
•
Other factors, many of which are beyond the Company’s control.

2
PolyMet Mining Corp.
Management Discussion and Analysis
As at June 30, 2020 and for the three and six months ended June 30, 2020
Tabular amounts in thousands of U.S. Dollars, except for shares and per share amounts

All forward-looking statements included in this MD&A are based on information available to the Company on the date of this MD&A.  The Company expressly disclaims any obligation to update publicly, or otherwise, these statements, whether as a result of new information, future events or otherwise except to the extent required by law, rule or regulation.  Readers should not place undue reliance on forward-looking statements.  Readers should carefully review the cautionary statements and risk factors contained in this and all other documents that the Company files from time to time with regulatory authorities.

Cautionary note to U.S. investors: The terms “measured and indicated mineral resource”, “mineral resource”, and “inferred mineral resource” used in this MD&A are Canadian geological and mining terms as defined in accordance with National Instrument 43-101, Standards of Disclosure for Mineral Projects (“NI 43-101”) under the guidelines set out in the Canadian Institute of Mining, Metallurgy and Petroleum (the “CIM”) Standards on Mineral Resources and Mineral Reserves.  U.S. investors are advised that while such terms are recognized and required under Canadian regulations, the SEC does not recognize these terms.  Mineral Resources do not have demonstrated economic viability.  It cannot be assumed that all or any part of a Mineral Resource will be upgraded to Mineral Reserves.  Under Canadian rules, estimates of inferred mineral resources may not form the basis of or be included in feasibility or other studies.  U.S. investors are cautioned not to assume that any part of an inferred mineral resource exists or is economically or legally mineable.


Summary of Business

PolyMet is a TSX and NYSE American listed Issuer engaged in the exploration and development of natural resource properties.  The Company’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, gold, silver 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, one of the largest undeveloped mineral resources in the world.  An updated technical report and feasibility study published in March 2018 confirmed the technical and economic viability, positioning NorthMet as the most advanced of the four large scale deposits in the Duluth Complex: namely, from west to east, NorthMet, Mesaba, Serpentine and Maturi.

The Company acquired a former taconite processing facility in 2005 which is located about six miles west of the NorthMet ore body and comprises a crushing and milling facility, railroad and access rights connecting the plant site to the NorthMet ore body, tailings storage facilities, locomotive fueling and maintenance facilities, water rights and pipelines, administrative offices and lands to the east and west of the existing tailings storage facilities.

PolyMet completed a land exchange with the U.S. Forest Service (“USFS”) on June 28, 2018 and now controls approximately 30 square miles of contiguous surface rights stretching from west of the processing facility to east of the proposed East Pit at NorthMet.

PolyMet received its Permit to Mine from the State of Minnesota on November 1, 2018, a crucial permit for construction and operation of the Project.  The Minnesota Department of Natural Resources (“MDNR”) issued all other permits for which the Company had applied including dam safety, water appropriations, endangered and threatened species takings, and public waters work permits, along with Wetlands Conservation Act approval.   In addition, PolyMet received air and water permits from the Minnesota Pollution Control Agency (“MPCA”) on December 18, 2018 and the federal Record of Decision (“ROD”) and Section 404 Wetlands Permit from the U.S. Army Corps of Engineers (“USACE”) on March 21, 2019, which was the last key permit or approval needed to construct and operate the Project.  Legal challenges contesting various aspects of the MDNR and MPCA decisions are on-going and have led to court rulings that have delayed the Project timeline.

See additional discussion below.

3
PolyMet Mining Corp.
Management Discussion and Analysis
As at June 30, 2020 and for the three and six months ended June 30, 2020
Tabular amounts in thousands of U.S. Dollars, except for shares and per share amounts

Summary of Recent Events and Outlook

Highlights and Recent Events
The Company received all key permits and approvals required to construct and operate NorthMet (subject to litigation) and secured title to the surface rights over and around the NorthMet mineral rights.  PolyMet also completed geotechnical investigations, implemented its environmental management system and strengthened its financial position.


More specifically:
•
In November 2019, mineral resources and reserves for the NorthMet deposit were updated based on results of the 2018-2019 drilling program resulting in a Proven and Probable Reserve increase of 14% to 290 million tons and a Measured and Indicated Resource increase of 22% to 795 million tons;
•
In June 2019, a $265.0 million rights offering was completed with the proceeds used to fully repay outstanding debt and strengthen the Company’s financial position.  As a result of the rights offering, ownership in the Company by Glencore, AG (“Glencore”) increased to 71.6%;
•
In March 2019, the federal ROD and wetlands permit were received from the USACE, which was the last key permit or approval needed to construct and operate the Project; and
•
As noted in the “Environmental Review and Permitting” section below, a number of legal challenges have been filed contesting various aspects of federal and state permitting decisions.  The Company continues to litigate these decisions and has received favorable final decisions in six cases to date.

Net cash used in operating and investing activities during the six months ended June 30, 2020 was $14.728 million.  Primary activities during the period related to studies and evaluation, maintaining existing infrastructure, permit compliance and site monitoring, permit litigation defense, financing and general corporate purposes.

Goals and Objectives for the Next Twelve Months
PolyMet’s objectives include:

•
Successfully defend against legal challenges to permits;
•
Maintain political, social and regulatory support for the Project; and
•
Continue engineering and optimization of the Project.

The Company is in discussions with various sources of debt and equity financing sufficient to fund on-going permit litigation, Project optimization and construction.  Construction and ramp-up to commercial production is anticipated to take approximately thirty months from receipt of construction funding.  Legal challenges contesting various aspects of the MDNR and MPCA decisions are on-going and have led to court rulings which adversely affect the Project timeline.

See additional discussion in the “Liquidity and Capital Resources” section below.

4
PolyMet Mining Corp.
Management Discussion and Analysis
As at June 30, 2020 and for the three and six months ended June 30, 2020
Tabular amounts in thousands of U.S. Dollars, except for shares and per share amounts

Detailed Description of Business

Asset Acquisition
In November 2005, the Company acquired from Cliffs Erie LLC, a subsidiary of Cleveland-Cliffs Inc. (together “Cliffs”), a former taconite processing facility located approximately six miles west of the NorthMet deposit which includes crushing and milling equipment, plant site buildings, real estate, tailings storage facilities and mine workshops, as well as access to extensive mining infrastructure including roads, rail, water and power.

Plans are to refurbish, reactivate and, as appropriate, update the crushing, concentrating and tailings storage facilities to produce concentrates containing copper, nickel, cobalt and precious metals – platinum, palladium, gold and silver.  Once commercial operations are established, the Company may install an autoclave to upgrade nickel concentrates to produce a nickel-cobalt hydroxide and a precious metals precipitate.

In December 2006, additional property and associated rights were acquired from Cliffs sufficient to provide a railroad connection linking the NorthMet deposit and processing facilities.  The transaction also included railcars, locomotive fueling and maintenance facilities, water rights and pipelines, administrative offices and land to the east and west of the existing tailings storage facilities.

PolyMet indemnified Cliffs for reclamation and remediation associated with the property under both transactions and long-term mitigation plans are included in the Company’s environmental rehabilitation provision.

In June 2018, the Company acquired surface rights over the NorthMet deposit through a land exchange with the USFS using land the Company previously owned.  With the exchange, PolyMet has total surface rights, including ownership and other use and occupancy rights, to approximately 30 square miles of land including the land at the mine and processing sites, the transportation corridor connecting those sites and buffer lands.

Mineral rights in and around the NorthMet orebody are held through mineral leases with RGGS Land & Minerals Ltd., L.P. (“RGGS”) and LMC Minerals ("LMC").  The RGGS lease covers 5,123 acres.  Provided the Company continues to make annual lease payments, the lease period continues until June 12, 2048 with an option to extend the lease for up to five additional ten-year periods on the same terms and further extend as long as there are commercial mining operations.  The LMC lease covers 120 acres that are encircled by the RGGS property.  Provided the Company continues to make annual lease payments, the lease period continues until December 1, 2028 with an option to extend the lease for up to four additional five-year periods on the same terms.  Lease payments to both lessors are considered advance royalty payments and will be deducted from future production royalties payable to the lessor, which range from 3% to 5% based on the net smelter return per ton received by the Company.

Feasibility Study, Mineral Resources and Mineral Reserves
PolyMet published an updated Technical Report under NI 43-101 dated March 26, 2018 incorporating process improvements, project improvements and environmental controls described in the Final Environmental Impact Statement (“EIS”) and draft permits.  The update also included detailed capital costs, operating costs and economic valuations for the mine plan being permitted.  Preliminary economic assessments for higher production scenarios were also presented.  Proven and Probable mineral reserves were estimated to be 254.7 million short tons grading 0.294% copper, 0.084% nickel, 80 ppb platinum, 268 ppb palladium, 39 ppb gold, 74.42 ppm cobalt, and 1.06 ppm silver.  These mineral reserves lie within Measured and Indicated mineral resources of an estimated 649.3 million short tons grading 0.245% copper, 0.074% nickel, 65 ppb platinum, 221 ppb palladium, 33 ppb gold, 71 ppm cobalt, and 0.91 ppm silver.  See additional details in the Company’s most recent Annual Information Form or the Company’s NorthMet Project Form NI 43-101F1 Technical Report dated March 26, 2018, both filed on SEDAR and EDGAR.

5
PolyMet Mining Corp.
Management Discussion and Analysis
As at June 30, 2020 and for the three and six months ended June 30, 2020
Tabular amounts in thousands of U.S. Dollars, except for shares and per share amounts

In November 2019, PolyMet published an updated Mineral Resource and Reserve statement which increased Proven and Probable mineral reserves by 14% to 290 million short tons grading 0.288% copper, 0.083% nickel, 75 ppb platinum, 264 ppb palladium, 39 ppb gold, 73.95 ppm cobalt and 1.06 ppm silver.  These mineral reserves lie within Measured and Indicated mineral resources of an estimated 795.2 million short tons grading 0.234% copper, 0.071% nickel, 62 ppb platinum, 214 ppb palladium, 31 ppb gold, 69 ppm cobalt and 0.87 ppm silver.  The mineral reserve estimates are based on metal prices of $2.91 per pound copper, $5.54 per pound nickel, $28.82 per pound cobalt, $1,058 per ounce palladium, $889 per ounce platinum, $1,274 per ounce gold and $16.19 per ounce silver.   The mineral resource estimates are based on metal prices of $3.34 per pound copper, $6.37 per pound nickel, $33.14 per pound cobalt, $1,216 per ounce palladium, $1,023 per ounce platinum, $1,465 per ounce gold and $18.62 per ounce silver.  Metal recovery factors were applied to each metal based on recovery curves developed.  The net smelter return cutoff was set at $7.98 per ton for mineral reserves and $6.34 per ton for mineral resources and include processing, general and administrative, and water treatment costs.

Environmental Review and Permitting
In November 2015, the MDNR, USACE, and USFS published the Final EIS and in March 2016, the MDNR issued its decision that the Final EIS met the requirements under the Minnesota Environmental Policy Act.

In November 2018, the Company received all final MDNR permits for which the Company had applied, including the Permit to Mine, dam safety, water appropriations, endangered and threatened species takings, and public waters work permits, along with Wetlands Conservation Act approval.

In December 2018, the Company received all final MPCA permits for which the Company had applied, including the water quality permit, air emission quality permit, and Section 401 Certification.

In March 2019, the Company received the federal ROD and Section 404 Wetlands Permit from the USACE, which was the last key permit or approval needed to construct and operate the Project.  In September 2019, two lawsuits were filed in Minnesota federal court challenging the USACE permits.  PolyMet was not named as a defendant in those actions, but successfully moved to intervene and is now a party in both cases.

Legal challenges were filed in the Minnesota Court of Appeals contesting various aspects of the MDNR and MPCA decisions.  PolyMet is a co-respondent in all suits.

•
During 2019, the Court of Appeals ruled in PolyMet’s favor in two state court actions, one of which sought to force a supplemental environmental review and the other of which challenged the rules used to permit the Project.

•
In June 2019, the Court of Appeals transferred the challenge to the MPCA water quality permit to the Ramsey County District Court for the limited purpose of an evidentiary hearing.  The water quality permit is temporarily stayed pending the outcome of that hearing.

•
In January 2020, the Court of Appeals remanded the Permit to Mine and dam safety permits to the MDNR for a contested case hearing.  The Company, MDNR, and several other groups petitioned the Minnesota Supreme Court to review that decision.  In March 2020, the Minnesota Supreme Court granted review of the Court of Appeals ruling on the NorthMet Permit to Mine and dam safety permits.  The Company cannot act on the MDNR permits until the Supreme Court rules and expects arguments in the case to be heard in the fall of 2020.

•
In March 2020, the Court of Appeals remanded the air permit to the MPCA to provide more information in support of their decision to issue the permit.  The Company and MPCA petitioned the Minnesota Supreme Court to review that decision.  In June 2020, the Minnesota Supreme Court granted review of the Court of Appeals ruling on the NorthMet air permit.  The Company cannot act on the MPCA permits until the Supreme Court rules and expects arguments in the case to be heard in the fall of 2020.

6
PolyMet Mining Corp.
Management Discussion and Analysis
As at June 30, 2020 and for the three and six months ended June 30, 2020
Tabular amounts in thousands of U.S. Dollars, except for shares and per share amounts

USFS Land Exchange
In January 2017, the USFS issued its Final ROD authorizing the land exchange.  In June 2018, the Company and USFS exchanged titles to federal and private lands, completing the land exchange giving the Company control over both surface and mineral rights in and around the NorthMet ore body and consolidating the Superior National Forest’s land holdings in northeast Minnesota.

Four legal challenges were filed contesting various aspects of the land exchange Final ROD.  Motions were filed by PolyMet to dismiss each of these suits for lack of standing.  On October 1, 2019, the U.S. District Court for the District of Minnesota dismissed all lawsuits challenging the land exchange Final ROD.


Financing Activities

Glencore Financing
Since October 2008, the Company and Glencore have entered into a series of financing agreements comprising:

•
Equity – $25.0 million placement of common shares in 2009; $30.0 million placement of common shares in 2010; $20.0 million placement of common shares in 2011; $20.960 million purchase of common shares in 2013; $10.583 million purchase of common shares in the 2016 Private Placement; and a $243.435 million purchase of common shares in the 2019 Rights Offering;

•
Convertible debt – $25.0 million initial principal secured convertible debentures drawn in 2008 and 2009 and up to $30 million initial principal unsecured convertible debentures drawn and to be drawn in 2020.  The 2008 and 2009 convertible debt balance was fully repaid with proceeds from the 2019 Rights Offering.  See additional discussion of the 2020 convertible debenture below;

•
Non-convertible debt – $30.0 million initial principal secured debentures drawn in 2015; $11.0 million initial principal secured debenture drawn in 2016; $14.0 million initial principal secured debentures drawn in 2016; $20.0 million initial principal secured debentures drawn in 2017 and 2018; and $80.0 million initial principal secured debenture drawn in 2018 with the final tranche in the amount of $15.0 million cancelled by the Company.  The non-convertible balance was fully repaid with proceeds from the 2019 Rights Offering; and

•
Promissory note – agreement comprising $15.0 million initial principal note drawn in August 2019.

On March 17, 2020, the Company agreed to issue unsecured convertible debentures to Glencore in four tranches during 2020 with a total minimum principal amount of $20.0 million and total maximum principal amount of $30.0 million, the amount of each tranche to be determined jointly by the Company and Glencore. The debentures are due on the earlier of March 31, 2023 or upon US$100 million of Project financing.  Interest will accrue on the unsecured debentures at 4% per annum on the balance drawn and the principal amount of the debentures is convertible into common shares of the Company at a conversion price equal to $0.2223.  The first tranche in the amount of $7.0 million was issued on March 18, 2020 and the second tranche in the amount of $7.0 million was issued on June 23, 2020.  Issuance of the remaining tranches is expected quarterly to maintain sufficient liquidity.

The convertible debenture proceeds were bifurcated between the debt and equity components.  The fair value of the debt portion was estimated using a discounted cash flow model method.  The fair value of the debt portion for the March 18, 2020 debenture was $5.213 million with a residual of $1.675 million that was allocated to equity.  Transaction costs for the financing were $0.112 million.  The fair value of the debt portion for the June 23, 2020 debenture was $5.472 million with a residual of $1.528 million that was allocated to equity.  The debt portion has been recorded at amortized cost, net of transaction costs, and is being accreted to face value over the expected life using the effective interest method.

7
PolyMet Mining Corp.
Management Discussion and Analysis
As at June 30, 2020 and for the three and six months ended June 30, 2020
Tabular amounts in thousands of U.S. Dollars, except for shares and per share amounts

Other Financing

During the six months ended June 30, 2020, the Company issued nil common shares (June 30, 2019 – 400,171 shares) pursuant to the exercise of share options for proceeds of $nil (June 30, 2019 - $0.274 million).

During the six months ended June 30, 2020, the Company issued nil common shares (June 30, 2019 – 52,500 shares) to maintain land purchase options with the shares valued at $nil (June 30, 2019 - $0.036 million).

On June 24, 2020, shareholders approved the proposed consolidation of the issued and outstanding common shares of the Company on the basis of up to ten (10) pre-consolidation shares for every one (1) post-consolidation share and further authorized the Board of Directors to determine when and if to effect such consolidation.  No action has been taken by the Board of Directors to date.


Summary of Quarterly Results

   
Period Ended
  
   
Jun 30,
2020
    
Mar 31,
2020
    
Dec 31,
2019
    
Sep 30,
2019
    
Jun 30,
2019
    
Mar 31
2019
    
Dec 31,
2018
    
Sep 30,
2018
  
Loss from operations
    
(6,582
)
    
(5,207
)
    
(2,818
)
    
(1,287
)
    
(1,021
)
    
(2,744
)
    
(1,529
)
    
(1,262
)
Other Income (Expenses)
    
531
      
(2,202
)
    
(46,779
)
    
(291
)
    
111
      
(3,074
)
    
(1,380
)
    
(426
)
Loss for the Period
    
(6,051
)
    
(7,409
)
    
(49,597
)
    
(1,578
)
    
(910
)
    
(5,818
)
    
(2,909
)
    
(1,688
)
Loss per Share (1)
    
(0.01
)
    
(0.01
)
    
(0.05
)
    
(0.00
)
    
(0.00
)
    
(0.02
)
    
(0.01
)
    
(0.01
)
Cash (used in) provided by
operating activities
    
(6,156
)
    
(3,569
)
    
(2,393
)
    
(1,415
)
    
1,640
      
(1,897
)
    
(1,804
)
    
(512
)
Cash provided by financing
activities
    
6,915
      
6,888
      
-
      
14,997
      
2,713
      
62
      
45,500
      
61
  
Cash used in investing activities
    
(2,450
)
    
(2,553
)
    
(5,189
)
    
(4,749
)
    
(4,488
)
    
(5,721
)
    
(36,794
)
    
(10,178
)

(1)
Loss per share amounts may not reconcile due to rounding differences and share issuances during the year.

The loss for the period includes share-based compensation for the period ended:
 
  June 30, 2020 - $0.648 million
June 30, 2019 - $0.109 million
  March 31, 2020 - $0.511 million
March 31, 2019 - $1.189 million
  December 31, 2019 - $0.140 million December 31, 2018 - $0.105 million
  September 30, 2019 - $0.120 million September 30, 2018 - $0.182 million

Results fluctuate from period to period based on NorthMet development, corporate activities, and non-cash items.  Additional discussion of significant items is included below.

Three months ended June 30, 2020 compared to three months ended June 30, 2019

Focus during the current year period was on legal defense of Project permits, engineering and optimization opportunities, site monitoring and permit compliance, maintenance of existing infrastructure and financing.

a) Loss for the Period:

During the current year period, the Company incurred a loss of $6.051 million ($0.01 loss per share) compared to a loss of $0.910 million ($0.00 loss per share) during the prior year period.  The increased loss was due to additional studies related to engineering and further evaluation of the mineral resource.

8
PolyMet Mining Corp.
Management Discussion and Analysis
As at June 30, 2020 and for the three and six months ended June 30, 2020
Tabular amounts in thousands of U.S. Dollars, except for shares and per share amounts

b) Cash Flows for the Period:

Cash used in operating activities during the current year period was $6.156 million compared to cash provided by operating activities during the prior year period of $1.640 million.  The increase was primarily due to cash used on additional studies and further evaluation of the mineral resource as noted above and changes in working capital.

Cash provided by financing activities during the current year period was $6.915 million compared to cash provided during the prior year period of $2.713 million.  The increase was due to convertible debenture funding in the current year period compared with rights offering proceeds and debenture repayment in the prior year period.

Cash used in investing activities during the current year period was $2.450 million compared to cash used during the prior year period of $4.488 million.  The decrease was primarily due to lower capitalized spend following receipt of permits in March 2019.

Including the effect of foreign exchange, total cash on hand decreased during the current year period by $1.690 million to $6.473 million compared to the prior year period where cash decreased by $0.137 million to $6.165 million.

c) Capital Expenditures for the Period:

During the current year period, mineral property, plant, and equipment costs were capitalized in the amount of $1.898 million as compared to $12.639 million during the prior year period.  The decrease was primarily due to lower capitalized spend following receipt of permits in March 2019.

Six months ended June 30, 2020 compared to six months ended June 30, 2019

Focus during the six months ended June 30, 2020 was on was on legal defense of Project permits, engineering and optimization opportunities, site monitoring and permit compliance, maintenance of existing infrastructure and financing.

a) Loss for the Period:

During the current year period, the Company incurred a loss of $13.460 million ($0.01 loss per share) compared to a loss of $6.728 million ($0.02 loss per share) during the prior year period.  The increased loss was due to additional studies related to engineering and further evaluation of the mineral resource.

b) Cash Flows for the Period:

Cash used in operating activities during the current year period was $9.725 million compared to cash used during the prior year period of $0.257 million.  The increase was primarily due to cash used on additional studies and further evaluation of the mineral resource as noted above and changes in working capital.

Cash provided by financing activities during current year period was $13.803 million compared to cash provided during the prior year period of $2.775 million.  The increase was due to convertible debenture funding in the current year period compared with rights offering proceeds and debenture repayment in the prior year period.

Cash used in investing activities during the current year period was $5.003 million compared to cash used during the prior year period of $10.209 million.  The decrease was primarily due to lower capitalized spend following receipt of permits in March 2019.

9
PolyMet Mining Corp.
Management Discussion and Analysis
As at June 30, 2020 and for the three and six months ended June 30, 2020
Tabular amounts in thousands of U.S. Dollars, except for shares and per share amounts

Including the effect of foreign exchange, total cash on hand decreased during the current year period by $0.928 million to $6.473 million compared to the prior year period where cash decreased $7.692 million to $6.165 million.

c) Capital Expenditures for the Period:

During the current year period, mineral property, plant, and equipment costs were capitalized in the amount of $4.806 million as compared to $26.642 million during the prior year period.  The decrease was primarily due to lower capitalized spend following receipt of permits in March 2019.


Liquidity and Capital Resources

Liquidity risk is the risk the Company will not be able to meet its financial obligations as they become due and arises through the excess of financial obligations over financial assets due at any point in time.

In the normal course of business, the Company enters into contracts that give rise to firm commitments for future minimum payments.  In addition to items described elsewhere in these financial statements, as at June 30, 2020, the Company had firm commitments of approximately $0.660 million with approximately $0.462 million due over the next year and the remainder due over the following two years.

Given the ongoing development of the Project, the Company has experienced recurring losses from operations and net cash outflows for operating and investing activities, which are expected to continue until the Project is constructed and operational.  As at June 30, 2020, the Company had cash of $6.473 million, working capital of $1.116 million and an agreement with Glencore to issue unsecured convertible debentures to Glencore in four tranches during 2020 with a total minimum principal amount of $20.0 million and total maximum principal amount of $30.0 million, the amount of each tranche to be determined jointly by the Company and Glencore.  As of June 30, 2020, the Company had issued $14.0 million of convertible debentures to Glencore under this agreement.

The Company believes it is probable it will continue to receive funding from Glencore or other financing sources, including funding from the issuance of unsecured convertible debentures, allowing the Company to satisfy future financial obligations, complete development of the Project and to conduct future profitable operations.  Management’s belief is based upon the underlying value of the Project, progress on obtaining and maintaining permits, ongoing discussions with potential financiers and the majority shareholder relationship with Glencore.  See additional discussion in the “Financing Activities” section above.

In late December 2019, a novel coronavirus (COVID-19) was identified as originating in China, which subsequently spread worldwide and on March 11, 2020, the World Health Organization declared it was a pandemic.  The continued spread of COVID-19 globally, prolonged restrictive measures put in place to help control the outbreak of COVID-19 or other adverse public health developments could adversely affect global economies and financial markets.  This could result in volatility or an economic downturn having adverse effects on the future demand and prices for metals the Company will produce and on the Company’s ability to raise sufficient funds to finance ongoing development of the Project.  The extent to which COVID-19 impacts the business, including the market for its securities, the ability to raise capital and valuation of non-financial assets including mineral property, plant and equipment and intangibles, have not been material to date but will depend on future developments, which are highly uncertain and cannot be predicted at this time.

The Company is in discussions with various sources of debt and equity finance sufficient to fund on-going permit litigation, Project optimization and construction.  Construction and ramp up to commercial production is anticipated to take approximately thirty months from receipt of construction funding.
 
10
PolyMet Mining Corp.
Management Discussion and Analysis
As at June 30, 2020 and for the three and six months ended June 30, 2020
Tabular amounts in thousands of U.S. Dollars, except for shares and per share amounts

Financial Instruments and Risk Management

Fair Value Measurements

The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value.  The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).  The three levels of the fair value hierarchy are described below:


 Level 1 –
Quoted prices (unadjusted) in active markets for identical assets or liabilities;
 

 Level 2 –
Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly; and
 

 Level 3 –
Inputs for the asset or liability that are not based on observable market data.

Financial instruments measured at fair value subsequent to recognition include restricted deposits measured at fair value through profit or loss using Level 1 inputs resulting in a carrying value of $10.822 million (December 31, 2019 - $10.640 million), amounts receivable measured at fair value through profit or loss using Level 3 inputs resulting in a carrying value of $2.400 million (December 31, 2019 - $2.176 million) and accruals for expected payments to settle restricted share units measured at fair value through profit or loss using Level 2 inputs resulting in a carrying value of $0.668 million (December 31, 2019 - $0.125 million).

The fair values of the convertible debt and promissory note approximate the carrying amount at amortized cost using the effective interest method.  The fair values of other financial assets and other financial liabilities approximate their carrying amounts due to their short-term nature.

Liquidity Risk
 
Liquidity risk is the risk the Company will not be able to meet its financial obligations as they become due and arises through the excess of financial obligations over available financial assets due at any point in time.  The Company’s objective in managing liquidity risk is to maintain sufficient readily available reserves in order to meet its liquidity requirements at any point in time and is achieved by maintaining sufficient cash and managing debt.  While in the past the Company has been successful in closing financing agreements, there can be no assurance it will be able to do so in the future.  See additional discussion in the “Liquidity and Capital Resources” section above.

11
PolyMet Mining Corp.
Management Discussion and Analysis
As at June 30, 2020 and for the three and six months ended June 30, 2020
Tabular amounts in thousands of U.S. Dollars, except for shares and per share amounts

Related Party Transactions

The Company conducted transactions with senior management, directors and persons or companies related to these individuals, and paid or accrued amounts as follows:

   
Six months ended
  
   
June 30,
2020 (1)
    
June 30,
2019 (2)
  
Salaries and other short-term benefits
  
$
1,729
    
$
1,589
  
Other long-term benefits
    
40
      
29
  
Share-based payment (3)
    
1,018
      
1,509
  
Total
  
$
2,787
    
$
3,127
  

(1)
Six months ended June 30, 2020 includes Directors (Jonathan Cherry, David Dreisinger, W. Ian L. Forrest, Peter Freyberg, Helen Harper, Alan Hodnik, Hilmar Rode, Stephen Rowland and Michael Sill) and senior management (Jonathan Cherry, Patrick Keenan, Bradley Moore and Richard Lock).
(2)
Six months ended June 30, 2019 includes Directors (Dennis Bartlett, Jonathan Cherry, Mike Ciricillo, David Dreisinger, W. Ian L. Forrest, Helen Harper, Alan Hodnik, Stephen Rowland and Michael Sill) and senior management (Jonathan Cherry, Patrick Keenan and Bradley Moore).
(3)
Share-based payment represents the amount capitalized or expensed during the period.

Agreements with senior management contain severance provisions for termination without cause or in the event of a change in control.  Other than Jonathan Cherry, no PolyMet director has an agreement providing for benefits upon termination.

As a result of Glencore’s 71.6% ownership and majority shareholder relationship, Glencore is also a related party.  In addition to the transactions described in the “Financing Activities” section above, the Company has entered into a Technical Services Agreement with Glencore whereby the Company reimburses Glencore for NorthMet technical support costs requested under an agreed scope of work, primarily in detailed project design and mineral processing.  During the six months ended June 30, 2020, the Company recorded $0.169 million (June 30, 2019 - $0.100 million) for services under this agreement.


Off Balance-Sheet Arrangements

The Company does not utilize off-balance sheet arrangements.


Proposed Transactions

There are no proposed asset or business acquisition/disposal transactions that will materially affect the performance of the Company.

12
PolyMet Mining Corp.
Management Discussion and Analysis
As at June 30, 2020 and for the three and six months ended June 30, 2020
Tabular amounts in thousands of U.S. Dollars, except for shares and per share amounts
 
Critical Accounting Estimates

The preparation of consolidated financial statements in conformity with IFRS requires the use of certain critical accounting estimates.  This requires management to make estimates that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as at the date of the financial statements.

Critical accounting estimates used in the preparation of the consolidated financial statements are as follows:

Determination of Mineral Reserves

Reserves are estimates of the amount of product that can be economically and legally extracted from the Company’s property.  In order to estimate reserves, estimates are required about a range of geological, technical and economic factors, including quantities, production techniques, production costs, capital costs, transport costs, metal prices and exchange rates.  Estimating the quantity of reserves requires the size, shape and depth of deposits to be determined by analyzing geological data. This process may require complex and difficult geological judgments to interpret the data.  In addition, management will form a view of forecast prices for its products, based on current and long-term historical average price trends.  Changes in the proven and probable reserve estimates may impact the carrying value of property, plant and equipment, rehabilitation provisions, deferred tax amounts and depreciation, depletion and amortization.
 
Provision for Environmental Rehabilitation Costs

Provisions for environmental rehabilitation costs associated with mineral property, plant and equipment, are recognized when there is a present legal or constructive obligation that can be estimated reliably, and it is probable an outflow of economic benefits will be required to settle the obligation.  Provisions are determined by discounting the expected future cash flows at a pre-tax risk-free rate reflecting current market assessments of the time value of money.

The estimates of environmental rehabilitation liabilities could be affected by changes in regulations, changes in the extent of environmental rehabilitation required, changes in the means of rehabilitation, changes in the extent of responsibility for the financial liability, changes in operating plans, or changes in cost estimates.  Operations may in the future be affected from time to time in varying degrees by changes in environmental regulations, including those for future removal and site restoration costs.  The likelihood of new regulations and overall effect upon the Company may vary greatly and are not predictable.

The provision for environmental rehabilitation obligations represents management’s best estimate of the present value of the future cash outflows required to settle the liability.

13
PolyMet Mining Corp.
Management Discussion and Analysis
As at June 30, 2020 and for the three and six months ended June 30, 2020
Tabular amounts in thousands of U.S. Dollars, except for shares and per share amounts
 
Other MD&A Requirements

Outstanding Share Data

Authorized Capital:  Unlimited common shares without par value.

The following table summarizes the outstanding share information as at July 31, 2020:

Type of Security
  
Number
Outstanding
    
Weighted Average Exercise Price
  
Issued and outstanding common shares (1)
    
1,006,997,495
    
$
-
  
Restricted share units
    
12,096,348
    
$
-
  
Share options
    
23,061,000
    
$
0.75
  
Share purchase warrants
    
31,379,179
    
$
0.80
  

(1)
Includes 95,500 of restricted shares which vest upon production.

As at June 30, 2020, the Company had obligations to issue up to 3,640,000 shares under the Company’s bonus share incentive plan upon achievement of Milestone 4 representing commencement of commercial production at NorthMet.  At the Company’s Annual General Meeting of shareholders held in June 2008, the disinterested shareholders approved issuance of these shares upon achievement of Milestone 4.  Regulatory approval is also required prior to issuance of these shares.


Risks and Uncertainties

An investment in the Company’s common shares is highly speculative and subject to a number of risks and uncertainties.  Only those persons who can bear the risk of the entire loss of their investment should participate.  An investor should carefully consider the risks described in PolyMet’s Annual Information Form for the year ended December 31, 2019 and other information filed with both the Canadian and United States securities regulators before investing in the Company’s common shares.  The risks described in PolyMet’s Annual Information Form are not the only ones faced.  Additional risks that the Company currently believes are immaterial may become important factors that affect the Company’s business.  If any of the risks described in PolyMet’s Annual Information Form for the year ended December 31, 2019 occur, the Company’s business, operating results and financial condition could be seriously harmed and investors could lose all of their investment.


Management’s Responsibility for Consolidated Financial Statements

The information provided in this report and the accompanying Consolidated Financial Statements are the responsibility of management.  The Consolidated Financial Statements have been prepared by management in accordance with IFRS as issued by the IASB and include certain estimates that reflect management’s best judgments.

The Board of Directors has approved the information contained in the Consolidated Financial Statements.  The Board of Directors fulfills its responsibilities regarding the Consolidated Financial Statements mainly through its Audit Committee, which has a written mandate that complies with current requirements of Canadian securities legislation, United States securities legislation, and the United States Sarbanes-Oxley Act of 2002.  The Audit Committee meets at least on a quarterly basis.

14
PolyMet Mining Corp.
Management Discussion and Analysis
As at June 30, 2020 and for the three and six months ended June 30, 2020
Tabular amounts in thousands of U.S. Dollars, except for shares and per share amounts
 
Evaluation of Disclosure Controls and Procedures
 
The Company's Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Company's disclosure controls and procedures (as such term is defined in Rules 13(a)-15(e) and 15(d)-15(e) under the US Exchange Act and the rules of the Canadian Securities Administrators as at December 31, 2019 (the "Evaluation Date").  Based on such evaluation, such officers concluded that, as of the Evaluation Date, the Company's disclosure controls and procedures are effective.  Such disclosure controls and procedures are designed to ensure that the information required to be disclosed by the Company in reports that it files or submits to the US Securities and Exchange Commission and the Canadian Securities Administrators is recorded, processed, summarized and reported within the time periods specified in applicable rules and forms, and includes controls and procedures designed to ensure information relating to the Company required to be included in reports filed or submitted under Canadian and United States securities legislation is accumulated and communicated to the Company’s management to allow timely decision regarding disclosure.

There have been no changes in the Company’s disclosure controls and procedures during the six month period ended June 30, 2020 that have materially affected, or are reasonably likely to material affect, its disclosure controls and procedures.

Management’s Report on Internal Control over Financial Reporting
 
Management is responsible for establishing and maintaining adequate internal control over financial reporting.  Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Consolidated Financial Statements for external reporting purposes in accordance with IFRS as issued by the IASB.

Internal control over financial reporting, no matter how well designed, has inherent limitations.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

There have been no changes in the Company’s internal control over financial reporting during the six month period ended June 30, 2020 that have materially affected, or are reasonably likely to material affect, its internal control over financial reporting.

Additional Information

Additional information related to the Company is available on SEDAR and EDGAR, respectively, at www.sedar.com and at www.sec.gov, and on the Company’s website www.polymetmining.com.


15
Exhibit 99.3


Form 52-109F2
Certification of Interim Filings
Full Certificate

I, Jonathan Cherry, Chairman, President and Chief Executive Officer of PolyMet Mining Corp., certify the following:
 
1.
Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of PolyMet Mining Corp. (the “issuer”) for the interim period ended June 30, 2020.
 
2.
No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.
 
3.
Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.
 
4.
Responsibility: The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer.
 
5.
Design:  Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer(s) and I have, as at the end of the period covered by the interim filings
 

 (a)
designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that
 

 (i)
material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and
 

 (ii)
information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and
 

 (b)
designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP.
 
5.1
Control framework:  The control framework the issuer’s other certifying officer(s) and I used to design the issuer’s ICFR is the Internal Control – Integrated Framework (2013) published by The Committee of Sponsoring Organizations of the Treadway Commission (COSO).
 
5.2
N/A
 
5.3
N/A

6.
Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on April 1, 2020 and ended on June 30, 2020 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.
 

Date: August 6, 2020

“Jonathan Cherry” (signed)                                                                                                                       
Jonathan Cherry
Chairman, President and Chief Executive Officer
Exhibit 99.4

Form 52-109F2
Certification of Interim Filings
Full Certificate

I, Patrick Keenan, Chief Financial Officer of PolyMet Mining Corp., certify the following:
 
1.
Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of PolyMet Mining Corp. (the “issuer”) for the interim period ended June 30, 2020.
 
2.
No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.
 
3.
Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.
 
4.
Responsibility: The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer.
 
5.
Design:  Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer(s) and I have, as at the end of the period covered by the interim filings
 

 (a)
designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that
 

 (i)
material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and
 

 (ii)
information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and
 

 (b)
designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP.
 
5.1
Control framework:  The control framework the issuer’s other certifying officer(s) and I used to design the issuer’s ICFR is the Internal Control – Integrated Framework (2013) published by The Committee of Sponsoring Organizations of the Treadway Commission (COSO).
 
5.2
N/A

5.3
N/A
 
6.
Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on April 1, 2020 and ended on June 30, 2020 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.
 

Date: August 6, 2020

“Patrick Keenan” (signed)                                                                                                                          
Patrick Keenan
Chief Financial Officer