20-F

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

FORM 20-F

ANNUAL REPORT FISCAL 2004 ENDED JANUARY 31, 2004

¨ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal period ended January 31, 2004

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____

Commission file number 0-18701

POLYMET MINING CORP.
(Formerly Fleck Resources Ltd.)
(Exact name of Registrant as specified in its charter)

British Columbia, Canada
(Jurisdiction of incorporation or organization)

Suite 1116-925 West Georgia St., Vancouver, British Columbia V6C 3L2
(Address of principal executive offices)

Securities to be registered pursuant to Section 12(b) of the Act: None

Securities to be registered pursuant to Section 12(g) of the Act:

Common Shares, without par value
(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

Indicate the number of outstanding shares of each of the issuer's classes of capital or common shares as of the close of the period covered by the annual report. 44,992,054

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 12 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past ninety days. Yes x No ¨

Indicate by check mark which financial statement item the registrant has elected to follow:

Item 17 x Item 18 ¨

POLYMET MINING CORP.

TABLE OF CONTENTS

Item 1.	Identity of Directors, Senior Management and Advisors
Item 2.	Offer Statistics and Expected Timetable
Item 3.	Key Information
Item 4.	Information on the Company
Item 5.	Operating and Financial Review and Prospects
Item 6.	Directors, Senior Management and Employees
Item 7.	Major Shareholders and Related Party Transactions
Item 8.	Financial Information
Item 9.	The Offer and Listing
Item 10.	Additional Information
Item 11.	Quantitative and Qualitative Disclosure About Market Risk
Item 12.	Description of Securities Other than Equity Securities
Item 13.	Default, Dividend Arrearages and Delinquencies
Item 14.	Material Modifications to the Right of Security Holders and Use of Proceeds
Item 15.	Controls and Procedures
Item 16A.	Audit Committee Financial Expert
Item 16B.	Code of Ethics
Item 16C.	Principal Accountant Fees and Services
Item 17.	Financial Statements
Item 18.	Financial Statements
Item 19.	Financial Statements and its Exhibits
Signature Page

ITEM 1.     IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

Not required

ITEM 2.     OFFER STATISTICS AND EXPECTED TIMETABLE –

Not required

ITEM 3.     KEY INFORMATION

A.     Selected Financial Data

The following table presents selected financial information. The Company's financial statements are stated in United States Dollars and are prepared in accordance with Canadian Generally Accepted Accounting Principles (GAAP); the application of which, in the case of the Company, conforms in all material respects for the periods presented with US GAAP, except as disclosed in footnotes to the financial statements.

Selected Financial Data
(US$ in 000’s)

	Year Ended 1/31/04	Year Ended 1/31/03	Year Ended 1/31/02 Restated	Year Ended 1/31/01 Restated	Year Ended 1/31/00 Restated
Revenue	$0	$0	$0	$0	$0
Net Income (Loss)	($147)	($472)	($1156)	($3,314)	($5,725)
(Loss) Per Share	($0.00)	($0.01)	($0.04)	($0.12)	($.26)
Dividends Per Share	$0.00	$0.00	$0.00	$0.00	$0.00
Wtg. Avg. Shares (000)	35,452	32,658	31,925	27,041	22,714
Working Capital	$424	($73)	$322	$1,181	$1,020
Long-Term Debt	$0	$0	$0	$0	$0
Shareholders’ Equity	$926	($31)	$441	$1,319	$2,266
Total Assets	$1,025	$52	$504	$1,741	$1,883
US GAAP Net Loss	($147)	($469)	($1,226)	($3,303)	($2,279)
US GAAP EPS	$0	(0.01)	($0.04)	($.12)	($.12)
US GAAP Mineral Prop.	$0	$0	$0	$0	$0
US GAAP Shareholders’
Equity	$926	($29)	$441	$1,319	$2,266
US GAAP Total Assets	$1,025	$52	$504	$1,741	$2,397

(1)	Cumulative Restated Net Loss since incorporation has been ($14,361,251).
(2)	Under US GAAP and SEC regulations, the Company would have expensed all mineral property acquisition/exploration costs in the period incurred.

Under US GAAP, long-term investments would be written down to market value on an individual basis and charged to a contra-equity account for unrealized losses on investments.

Under US GAAP, contingently-cancellable (and escrowed) common shares would not have been included in the calculation of weighted-average-number-of-shares used to determine EPS.

The rate of exchange was 1.3222 on July 15, 2004.

All monetary amounts are expressed in United States dollars except otherwise indicated. The following table sets forth the rate of exchange for the Canadian Dollar at the end of each of the previous six months and the five most recent fiscal years ended January 31st, the average rates for each year and the range of high and low rates for month end period and each year. For purposes of this table, the rate of exchange means the noon buying rate in New York City for cable transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York. The table sets forth the number of Canadian Dollars required under that formula to buy one US Dollar. The average rate means the average of the exchange rates on the last day of each month during the year.

For the month end	High	Low
June 30, 2004	1.3453	1.3383
May 31, 2004	1.3637	1.3603
April 30, 2004	1.3762	1.3664
March 31, 2004	1.3103	1.3048
February 28, 2004	1.3510	1.3333
January 31, 2004	1.3360	1.3238

For the year ended	Average	High	Low
1/31/04	1.38	1.53	1.27
1/31/03	1.56	1.61	1.50
1/31/02	1.56	1.61	1.52
1/31/01	1.48	1.45	1.45
1/31/00	1.47	1.51	1.45

B.     Capitalization and indebtedness

Not applicable.

C.     Reason for the offer and use of proceeds.

Not applicable.

D.     Risk Factors

An investment in PolyMet’s Common Shares is subject to the risks and uncertainties inherent in PolyMet’s business. Any investor should consider the following factors, as well as other information set forth in this annual report, in connection with an investment in PolyMet’s Common Shares. If any of the risks described below occur, PolyMet’s business, results of operations and financial condition could be adversely affected. In such cases, the price of PolyMet’s Common Shares could decline, and investors could lose all or part of their investment.

Risks Inherent in Mining

Exploration for economic deposits of minerals is subject to a number of risk factors. While the rewards for mining companies can be substantial if an economically viable discovery is made, few of the properties explored are ultimately developed into producing mines. The Company's ability to continue exploration and development of its properties is dependent upon its ability to raise significant additional funds in the future. Should the Company not be able to obtain such financing, a portion of its interest in properties may be lost to joint venture partners, or its properties may be lost entirely.

The Company's mineral operations are subject to governmental legislation, policies and controls relating to prospecting, development, production, environmental protection, mining taxes and labor standards. In addition, the profitability of a particular mining prospect is affected by the market for base and precious metals, which entails the assessment of many factors, some of which include changing production costs, the supply and demand for metals, the rate of inflation, the inventory of metal producing corporations, the political environment and changes in international investment patterns.

Ownership of mineral interests involves certain inherent risks due to the difficulties of determining the validity of certain claims, as well as the potential for problems arising from the frequently ambiguous transfer history characteristic of many mineral interests. The Company has investigated ownership of its mineral interests and, to the best of its knowledge, ownership interests are in good standing.

The Company may become subject to liability for certain hazards against which it cannot insure or against which it may elect not to insure because of high premium costs or other reasons. Payment of such liabilities would reduce funds available for acquisition of mineral properties or exploration and development.

Conflicts of Interest

Certain directors, officers or promoters of the Company are directors, officers, significant shareholders or promoters of other publicly listed companies. As a result, potential conflicts of interest may arise with respect to the exercise by such persons of their respective duties for the Company. In the event that such a conflict of interest arises at a meeting of the directors of the Company, a director who has such a conflict will abstain from voting for or against the approval of such participation or such terms. In the appropriate cases, the Company will establish a special committee of independent directors to review a matter in which several directors, or management, may have a conflict. Other than as indicated, the Company has no other procedures or mechanisms to deal with conflicts of interest.

Absence of Dividends

The Company has never declared or paid cash dividends on its Common Shares and does not anticipate doing so in the foreseeable future. There can be no assurance that the Company's board of directors will ever declare cash dividends, which action is exclusively within its discretion. Investors cannot expect to receive a dividend on the Company's Common Shares in the foreseeable future, if at all.

Dilution

The Company may in the future grant to some or all of its own and its subsidiaries' directors, officers, insiders and key employees options to purchase the Company's Common Shares as non-cash incentives to those employees. Such options may be granted at exercise prices equal to market prices at time when the public market is depressed. To the extent that significant numbers of such options may be granted and exercised, the interests of the then existing shareholders of the Company may be subject to additional dilution.

The Company is currently without a source of revenue and will most likely be required to issue additional securities to finance its operation and may also issue substantial additional securities to finance the development of any or all of its projects.

Volatility of Common Share Price and Volume

The Company's Common Shares are listed for trading on the TSX Venture Exchange. Shareholders of the Company may be unable to sell significant quantities of the Common Shares into the public trading markets without a significant reduction in the price of the shares, if at all. The market price of the Common Shares may be affected significantly by factors such as changes in the Company's operating results, the availability of financings, fluctuations in the price of metals, the interest of investors, traders and others in small exploration stage public companies such as the Company and general market conditions. In recent years the securities markets have experienced a high level of price and volume volatility, and the market price of securities of many companies, particularly small capitalization exploration companies similar to the Company, have experienced wide fluctuations, which have not necessarily been related to the operating performances, underlying asset values or future prospects of such companies. There can be no assurance that future fluctuations in the price of the Company's shares will not occur.

Adverse Tax Consequences to U.S. Shareholders Resulting From the Company's PFIC Status

The Company believes that it is qualified as a passive foreign investment company ("PFIC") for the fiscal year ended January 31, 2003 and may qualify as a PFIC in the future with respect to U.S. Holders of the Company's common shares because the only source of income is interest, a passive source of income under the PFIC rules.

See Item 10 Additional Information - Taxation - United States Federal Income Tax

Consequences for a more detailed discussion of material United States federal income tax consequences for U.S. Shareholders.

ITEM 4.    INFORMATION ON THE COMPANY

A.     History and Development of the Company

The Company was incorporated in British Columbia, Canada on March 4, 1981 under the name Fleck Resources Ltd. The Company changed its name from Fleck Resources to Polymet Mining Corp. on June 10, 1998.

The Company’s head office is situated at Suite 1116 – 925 West Georgia Street, Vancouver, B.C. V6C 3L2. Its registered and records office is the Company’s legal counsels offices situated at 1040 – 999 West Hastings Street, Vancouver, B.C. V6C 2W2. The Company is a reporting issuer in each of the provinces of Albert, British Columbia and Ontario. The Company’s shares have been listed on the TSX Venture Exchange (TSX V) since April 13, 1984 with the symbol "POM" and on the Over the Counter Bulletin Board (“OTCBB”) under the symbol “POMGF” in the United States.

The principal expenditures of the Company are related to its NorthMet Project located in Minnesota, USA. During the years ended January 31, 2004, 2003 and 2002 expenditures totaling $6,736,016.

The Company relies principally on equity financing to fund its projects and expenditures.

B.     Business Overview

PolyMet Mining Corp. (hereinafter referred to as the "Company" or "Registrant") is engaged in the exploration and development, when warranted, of natural resource properties. The Company’s primary mineral property is the NorthMet Project, a polymetallic project in northeastern Minnesota, USA.

The Company controlled and explored several minerals properties prior to Fiscal 2000; however, exploration activities subsequently have concentrated on development of the NorthMet Project. During 2000 and 2001 the Company completed diamond core and reverse circulation, drilling programs and in April 2001 completed a pre-feasibility study. During 2002 (fiscal 2003), the only on-site project work completed was associated with environmental mitigation.

In the years ended January 31, 2004, 2003 and 2002, the Company did not have any active operations that generated revenues.

On March 17, 2003, the Company incurred a change of management. As a result the Company’s officers and directors resigned and a new President, Secretary, Chief Financial Officer and three board

members were appointed. Subsequently, the Company moved is head offices from Denver, Colorado to Vancouver, British Columbia as noted hereinabove.

Management’s primary focus for the year ended was to achieve an understanding of the economic viability on its Northmet project. In order to do so, Polymet had several milestones to accomplish most importantly:

• In December 2003, the Company, entered into a Memorandum of Understanding granting and option to acquire certain equipment from Cleveland Cliffs of Cleveland, Ohio (“Cliffs”) located near the Company’s NorthMet projects as well as certain other infrastructure facilities. Under the terms of the agreement Cliffs will maintain available designated elements of the facility while the Company develops its feasibility study on the NorthMet project. As consideration for the exclusive option, the Company has agreed to a cash payment of $500,000 by 31 January 2004 (paid) and the issuance to Cliffs of 1,000,000 common shares (issued 30 March 2004) to maintain the exclusive rights until 30 June 2006. Within six months of completion of a bankable feasibility study for the NorthMet project the Company shall complete the acquisition for an agreed consideration.
   
• In January 2004 the Company commenced an independent scoping study, to update the process and infrastructure aspects of its 2001 pre-feasibility study integrating the key components of the Cliffs-Erie facility. The study was completed on March 31, 2004 and determined a considerable capital cost reduction by simplifying the on-site hydrometallurgical process and inclusion of the Cliffs-Erie plant and infrastructure. The cost estimates for process plant and infrastructure amounts to capital of $199 million and operating costs of $6.59 per tonne. The additional capital and operating costs for contract mining and other owners costs are included in a full 43-101 report completed by Patrick Downey and Associates.
   
• The acquisition of the Cliffs-Erie facilities will allow the Company to expedite environmental permitting since most of the difficult construction and infrastructure components have been completed. In February 2004, Polymet retained Barr Engineering Company of Minneapolis to ascertain the requirements for an Environmental Impact Study and put in place field monitoring and

permit applications required to permit the project in light of existing permits in place for the Cliffs-Erie facility and a new open pit operation at NorthMet.

• Polymet retained Bateman Engineering Pty. of Brisbane, Australia as the principal engineer for the Definitive Feasibility Study for the NorthMet project.
   
• On June 17, 2004 the Company announced the closing of a non-brokered private placement for a total of 1,550,000 Units (the "Units"), each Unit comprised of one common share and one-half of one non-transferable share purchase warrant, in the capital stock of the Company at $0.80 per unit to net the treasury an aggregate of $1,240,000 took place effective June 8, 2004. One full share purchase warrant entitles the investors to purchase one additional common share of the Company for a period of 18 months from the closing at $1.20 per share. A finder's fee in the amount of 7.5% of the gross proceeds with respect to the placement of 825,000 units has been paid in the form of 61,875 shares in the capital stock of the Company at a deemed price of $0.80 per share.  

In accordance with the Company’s primary objective of developing its NorthMet project, by an agreement dated 12 September 2003, which closed on 21 January 2004, the Company sold the Marathon leases and related land for proceeds of $250,000.

C.     Organizational Structure

As at January 31, 2004 the Company had two (2) wholly owned subsidiaries, Fleck Minerals Inc., incorporated in Ontario, and PolyMet Mining Inc., incorporated in Minnesota, USA.

D.     Property, plant and equipment

NorthMet Project, Minnesota, USA

(a)     Introduction

The NorthMet Project was discovered by USX (formerly US Steel) in the late 1960s. USX exploration included the drilling of 112 core holes and geological and surface mapping along a grid on 183-meter centers. The holes ranged in depth from 49 meters to 807 meters, with an average depth of 366 meters. Mineralized rock as thick as 91 meters was encountered in the holes; the average mineralized thickness is 21 meters.

In 1989, PolyMet acquired a 20-year renewable mining lease for the NorthMet Project from USX. To date the Company has expended $6,236,016. These expenditures supported drilling, sampling, assaying, environmental, metallurgical testing and the pre-feasibility studies.

The following diagrams illustrate the location of the NorthMet Project.

Figure No. 1
NorthMet Project Map

The Company commissioned various independent mining consultants to provide for the NorthMet Project an Interim Report on Resource Estimation, NorthMet Project, the Pre-Feasibility Study and the Technical update prepared in accordance with an independent Qualified Person's Review and Technical Report, as defined in National Instrument 43-101 ("NI 43-101") of the Canadian Securities Administrators, Standards of Disclosure for Mineral Projects, and in compliance with Form 43-101F1 (the "Technical Report"). These reports were completed in October 1999,and March 2001 respectively and are summarized herein.

In addition, in 2004 the Company commissioned Penguin Automated Systems, Inc (PASI)to study the capital and operating costs impact subsequent to the acquisition of the Cliffs Erie plant on the Northmet Project, with the use of the Platsol^TM process an established recovery technology for copper. In addition the Company Commissioned Bateman Engineering Pty Ltd of Brisbane, Australia to audit the PASI Report confirming the PASI Report conclusions. Subsequent to the completion of the PASI Report and Bateman audit, the Company commissioned an independent mining consultant to provide a technical update for the Northmet Project prepared in accordance with an independent Qualified Person's Review and Technical Report, as defined in NI 43-101 of the

Canadian Securities Administrators, Standards of Disclosure for Mineral Projects, and in compliance with Form 43-101F1.

The Company is incorporated under the laws of British Columbia in Canada. The mineral reserves and resources described in this Annual Report are estimates and have been prepared in compliance with NI 43-101. The definitions of proven and probable reserves used in NI 43-101 differ from the definitions in SEC Industry Guide 7. In addition, the terms "mineral resources", "measured mineral resource", "indicated mineral resource" and "inferred mineral resource" are defined In and required to be, disclosed by NI 43-101; however, these terms are not defined terms under SEC Industry Guide 7 and normally are not permitted to be used in reports and registration statements filed with the SEC. Accordingly, information, contained in this Annual Report containing descriptions of the Company's mineral deposits may not be comparable to similar information made public by U.S. companies subject to the reporting and disclosure requirements under the United States federal securities laws and the rules and regulations thereunder.

The PASI study investigated the capital and operating cost impact of integrating the established material handling, crushing, milling and infrastructure of the mothballed Cliffs-Erie plant on the Northmet project; with use of the PlatSol™ process and established recovery technology for copper cathode. This PlatSol™ hydrometallurgical process was specifically designed to extract the base metals and precious metals from NorthMet ore concentrates. The capital cost for process plant and infrastructure was estimated by PASI at US$199.4 million and operating costs at US$6.59 per tonne. These costs were updated to March 2004, at the pre-feasibility level, and using established estimating methods.

The PASI study confirmed that re-use of the nearby “brownfields” Cliffs-Erie facility at an initial through-put of 25,000 tons per day of ore from the NorthMet project will provide a capital cost saving of US$179 million compared to the 2001 estimates for a “greenfields” operation and there are further savings available to future expansions.

The Company signed, on February 16, 2004, a comprehensive agreement with Cleveland Cliffs Inc. to acquire specific mining assets at the former LTV Steel Mining Company property, now called. The Cliffs-Erie crusher and concentrator processed 100,000 tons per day of taconite ore prior to being mothballed in 2000. The crushing and grinding circuits at Cliffs-Erie facilities may be directly re-used for the front end processing of NorthMet ores. New flotation circuits must be added to

complement the new PlatSol™ hydrometallurgical process and on-site copper SX/EW.

PolyMet’s 2001 pre-feasibility study envisioned on-site production of copper cathode, nickel cathode and cobalt carbonate at an all new processing facility. The Company now plans to simplify the on-site hydrometallurgical processes at Cliffs Erie by producing only copper cathode and shipping a nickel/cobalt concentrate to specialty refiners. PolyMet uses the proprietary PlatSol™ process which has the distinction of extracting all of the value metals in a single hydrometallurgical step. This includes the base metals (copper, nickel and cobalt) as well as gold, platinum and palladium. The gold, platinum and palladium report to a concentrate referred to as PGM’s- platinum group metals. This high value precious metal concentrate will be sent to a specialty refiner. The PASI study confirms that processing a nickel/cobalt concentrate by off-take partners will provide a capital cost saving of over US$60 million.

The PASI document was audited by Bateman Engineering Pty Ltd (Bateman) from both technical and cost perspectives. Bateman will be the principal consultant for PolyMet’s definitive feasibility study (DFS). The PASI document is included as the plant and infrastructure component of the 43-101 update report by Patrick Downey & Associates which includes mining and other owner’s costs.

Bateman’s audit of the Penguin Automated Systems, Inc. (PASI) investigation into the efficacy of the NorthMet Project found no critical technical flaws or critical cost flaws following release of the PASI study in late-April, 2004.

The Company is currently in advanced negotiations with several off-take companies who would be refiners of the nickel/cobalt concentrates and/or the platinum group metals.

(b)     Location/Access/Climate

The NorthMet Project land position covers 4,162 acres or 6.5 square miles of patented mineral rights. The property is located in St. Louis County in the Mesabi Range District about 60 miles north of Duluth, Minnesota and just two miles south of large open-pit Mesabi Range iron mining operations. As a result, infrastructure is already in place for continued exploration and future mine development. The Project is easily accessible via state and county roads. A 12-mile all-season gravel road links the NorthMet Project to the nearby town of Babbitt. A private railroad crosses the property immediately south of the deposit. Two other railway lines are located within ten miles and connect

with three ports on Lake Superior. There is ready access to industrial electric power. The property is zoned for patented mineral rights.

The acquisition of the Cliffs Erie site will provide greater than 80% of infrastructure required for the development of the project, including excellent road and rail access and low cost industrial power. The Cliffs Erie rail tracks and established roads run alongside the planned NorthMet pit and a new spur and rail load-out facility will link to this existing rail infrastructure.

The electrical distribution and sub-stations from the main feed at the plant site are fully operational and will be used for the Polymet project. Water permits also exist for the Cliffs Erie facility. The town of Babbitt, 10km to the north of NorthMet, and Hoyt Lakes 10 km to the south have the community infrastructure to support the requirements of the NorthMet workforce.

Reclaim water, utilities and services, compressed air supply, power supply and distribution, offices, warehousing and laboratories will all be provided for by existing facilities at the Cliffs Erie plant site. New assay laboratory equipment will be purchased for the NorthMet project.

(c)	Claims and ownership
	(i)	NorthMet Lease Pursuant to an Agreement dated January 4, 1983, the Company entered into a lease agreement with USX Corporation on certain lands in St. Louis County, Minnesota. The property is characterized as being mineralized with nickel, copper, platinum, palladium and gold. The term of the lease is 20 years, with annual lease payments as follows: US$10,000 paid on execution of the lease US$10,000 paid on the first anniversary US$25,000 paid on the second and third anniversary US$40,000 paid on the fourth and fifth anniversary US$50,000 paid on the sixth through ninth anniversary US$75,000 paid on the tenth through sixteenth anniversary US$150,000 paid on the seventeenth anniversary and each year thereafter.

	Due to the financial difficulties experienced by PolyMet during 2002, the Company obtained approval from US Steel to make the annual lease payment on the NorthMet property on a quarterly basis. US Steel agreed to payment of the $75,000 owing January 2003 as to $18,750 on 31 January 2003, $18,750 on 9 March 2003 and $37,500 on 18 June 2003. Lease payments were 2004 were paid in accordance with the lease agreement. The Company can, at its option, terminate the lease at any time by giving written notice to the lessor not less than 90 days prior to the effective termination date or can extend the 20-year term by continuing to make annual lease payments. The lease payments are considered advance royalty payments and shall be deducted from future production royalties payable to the lessor, which range from 3% to 5% based on the net smelter return per ton of ore mined received by the Company. The Company’s recovery of the advance royalty payments is subject to the lessor receiving an amount not less than the amount of the annual lease payment for that year.
(ii)	State of Minnesota Minerals Leases (USA). During Fiscal 2002 PolyMet successfully bid on 16 State of Minnesota minerals leases covering 4,363.41 acres. These leases are in proximity of proposed mining and waste disposal sites associated with the Project. The strategic location of these leases should facilitate Project economics and viability over the long term. Total cost of these three-year leases is US$16,784.67 paid in advance.
(iii)	Surface Rights The United States Forest Service (USFS) acquired the surface rights to the NorthMet property from USX in the 1930’s and, at present, the USFS remains the surface rights owner of most of the NorthMet property. USX retained the mineral rights and the right to explore and mine on the site. As a result of this retention, while the USFS is the surface rights owner for most of the NorthMet Property, they cannot prohibit mining on the site. LTV Steel Mining Company/Erie Mining Company owns portions of sections 10, 11 and 12 near their private railroad. However, it may be beneficial for the Project to enter into land swap arrangements with the US Forest

Service to simplify the permitting process and to allow the project access to lands for waste rock stockpiling. The use of Cliffs-Erie existing pits for waste could obviate such forestry issues and this will be studied during the feasibility study. US regulations require an equivalent value of land to be swapped for the land to be used by the Project. The US Forest Service has indicated to PolyMet their willingness to carry out such a land swap. Costs for completing land swap arrangements have not been included in Estimates of Capital Costs.

As both EIS and permitting of the project will be subject to the arrangements of the land swap, PolyMet believes that this land swap with US Forest Service should be completed in conjunction with the Bankable Feasibility Study. PolyMet recommends that negotiations with US Forest Service commence early in the Bankable Feasibility Study timetable.

Table 1 - Land Swap

Task	Cost (US$ Million)	Start (Month Number)	Timing (Months)
US Forest Service Land Swap	3.5	1	24

(d)     History

The NorthMet Project, (formerly the Dunka Road Deposit), was acquired by US Steel in 1938. Their exploration for iron revealed the presence of copper and nickel. A 1971 study for US Steel suggested mineralized deposits to a depth of 2000 feet and recommended underground mining techniques for recovery.

The NorthMet deposit is in an historic and active mining area. Mining is the economic mainstay of northeastern Minnesota, which is the source of the majority of U.S. domestic iron ore. Much of the population has worked in the mining industry and local opinion is predominately pro-mining. The State of Minnesota offers low mining taxes, along with cash incentives and co-financing programs to stimulate mining activities.

(e)     Environmental

The environmental review process in Minnesota is reasonably well defined. Various permits from state and federal authorities will be necessary. An environmental impact Statement (EIS) will be required, with the Minnesota Department of National Resources as the lead agency.

During the pre-feasibility study, PolyMet had on staff a number of environmental consultants to coordinate both the environmental studies and the permitting required to bring the NorthMet Project to production. No cultural sites were identified either from a review of existing data and literature, or from aerial photographs. The neighboring Babbitt Project (also called Minnmax) completed a full Environmental Impact Statement (EIS) which was filed as a public document by then operator Amax Mining and this study did not produce any significant findings. Northmet completed their-own preliminary Baseline Environmental Study in April 2000. This study addressed:

• Wildlife Usage, including threatened and endangered wildlife;
• Preliminary Wetlands Survey;
• Ground Water Quality; and
• The Development of the Geochemical Study Plan.

No evidence was found of any threatened or endangered animals in the area. The area was identified as a major wetland area with some 70% of the land being classified as wetlands. The wetlands that will be disturbed by operations at NorthMet will have to be replaced on at least a 1:1 ratio in terms of the existing wetland mitigation scheme. The practice of replacing wetlands is well established in the area and this can be a relatively high ongoing operating cost for a project. The use of the extensive tailings and water storage areas which are part of the Cliffs Erie deal will mitigate most of such costs. Disturbance of the wet lands in the open pit area would be the most affected area.

Table 1 - Estimated NorthMet Wetlands Mitigation Requirements

Area	Acres
Pit	1020
Rock Dump West -	0
CE Pit back fill	0
Rock Dump East -	0
CE Pit back fill	0
Flotation Tailings Dam -	0
CE permitted site
Hydro-Metallurgical Residue Dam -
CE existing
Plant and Roads -
CE existing
Total	1020
Wetlands Mitigation Requirement at 70%	714

In terms of the Federal and State Wetland Mitigation legislation, the NorthMet Project must replace any wetlands disturbed on the NorthMet property on at least an acre for acre basis. Initial surveys undertaken have shown 70% of the NorthMet open pit area is classified as wetlands. The use of Cliffs Erie obviates almost all of the previous requirements from the 2001 study.

The option to use key lands and impoundments in the Cliffs-Erie deal lessens the original estimates of the Wetlands Mitigation requirements. These are currently considered to be limited to the open pit area of 714 acres. Wetlands Mitigation is a key step in bringing the NorthMet Project into production. With this reduced Wetlands Mitigation scope the costs will now be part of the required project capital and not an up-front cost component within the Bankable Feasibility Study.

The major steps, estimated costs and timetable required to complete all environmental matters to obtain the necessary State and Federal permits are generally described in Table 3 below. The use or re-use of the Cliffs Erie site will obviate much of the costs and requirements projected in the 2001 pre-feasibility study since critical items like tailings areas are already included.

The land swap with US Forest Service has been included separately in the cost and timing estimates given in Table 3. While it could have a significant impact on the EIS and permitting process, the early completion of this land swap should simplify and accelerate the EIS and permitting process.

In order to enable the timely completion of project permitting and meet Federal and State environmental requirements, the EIS process will be initiated during the Bankable Feasibility Study. The Pertinent aspects of the permitting process must be constantly monitored during the feasibility study. A draft EIS will be released for public comment prior to completion of the Bankable Feasibility Study. Subject to the satisfactory completion of the EIS, the Project will then apply to obtain the necessary construction and operating permits to develop the Project. The EIS will include the following:

• Collection of all Baseline data for submission to EIS team;
• Development and submission of Plan of Operation;

• Minnesota Department of Natural Resources (“DNR”) selection and appointment of sub-contractor (environmental consultants) to prepare EIS;
• Sub-contractor preparation of Draft EIS;
• Draft EIS released for public comment;
• Final EIS prepared and issued;
• Federal Findings of No Significant Impact and Record of Decision;
• Awarding of State Environmental Permits.

(f) Permits

The major permits required by the Project are:

• Plan of Operations/Environmental Impact Statement;
• Mining and Reclamation Permit (Mining and Closure Plan) issued by the DNR;
• Air Emissions Permits (one for construction and one for operations) issued by Pollution Control Agency of Minnesota (“PCA”) ;
• State Wetlands Review;
• Minnesota Non Ferrous Mine Permit and Five Year Operating Plan;
• Storm Water Permit
• 401 Water Quality Certification;
• Water Discharge Permits (Surface and Ground Water) issued by PCA and
• 404 Wetlands Mitigation Permit issued by the United States Army Corps of Engineers (“Corps”).

As the project moves forward PolyMet will need to work with the relevant agencies to amend existing permits where required for use on the base metal operations at NorthMet and Cliffs-Erie.

Table 3 - NorthMet EIS and Permitting Cost and Timing Estimates

Task	Cost (US$ Million)	Start (Month Number)	Timing (Months)
Baseline Study	0.45	1	6-10
Plan of Operations	0.15	6	2
Preparation of Draft EIS	0.30	11	12
Preparation of Final EIS	0.60	23	6
Major Permits	0.40	8	22-29
Federal Record of Decision		30-32	1
Total	1.90		34

The expected time line from start to receipt of the required permits for the operations could be approximately 3 years at an estimated cost of US$1.90 million. This excludes any cost of land acquisition or swapping for wetlands mitigation and the estimated cost of US$3.5 million for the US Forest Service land swaps.

The political climate in Minnesota is favourable for permitting of a new mining operation. The communities in the Iron Ore Range have been badly affected by the recent mine closures, and the existing labour force is seeking employment. Officials throughout the Minnesota state government have indicated a strong desire to replace the lost income and jobs and to assist in getting new economic development underway in the area.

(f)     Exploration

During September 1999 to February 2000, and again in the forth quarter of Fiscal 2001, the Company completed diamond core and reverse circulation drilling programs. These programs were designed with two-fold purposes: 1) in-fill drilling for estimated resource calculations, and 2) collect mineralized material for a mini-continuous pilot plant testing program. PolyMet has drilled 87 of the 201 drill holes now in the deposit. In addition, the Company, with the assistance of Minnesota’s Natural Resources Research Institute, assayed previously unassayed sections of the USX drill core. Chemex Labs in Reno, Nevada assayed samples of mineralized rock. Acme Analytical in Vancouver, B.C. ran check assays. The Company has incorporated the drill results into the new resource calculations included in the pre-feasibility study completed in April 2001.

The only on-site project work during 2002 was associated with environmental mitigation. Buckets of drill cuttings from previous drilling campaigns were collected and subsequently disposed of in a manner specified by appropriate state and federal environmental personnel. Also, all drill holes were plugged in accordance with State of Minnesota regulations and appropriate paperwork filed.

(g)     Metallurgy

One of the two major accomplishments of PolyMet in Fiscal 2002 was completion of a metallurgical testing program that demonstrated successfully, through operation of a continuous pilot plant, the metallurgical recovery process developed.

PolyMet began in 1999 an extensive metallurgical testing program to solve the minerals recovery challenges that historically plagued the NorthMet mineralization. This was achieved at the bench-scale level through the innovative application of existing technologies and subsequently demonstrated through successful pilot plant operations.

The first step in the process is to produce a bulk concentrate, resulting from good recoveries of all saleable minerals at high concentration ratios. These concentrates are then subjected to a pressure oxidation process that places all desired metals into solution under one-set of operating conditions. These metals are then selectively removed from solution for subsequent sale in various forms.

During the last half of calendar year 2000 and the first quarter of 2001, the developed process, called the PlatSol Process, was tested by operating a continuous, mini-pilot plant. The pilot plant was operated under the control of Lakefield Research Laboratories located in Ontario, Canada, as was all environmental testing associated with every phase of plant operation.

The process developed yielded base metal extraction percentages in the high 90’s, PGM extraction percentages of 95% and gold extraction near 90%. The success of the process developed greatly enhances Project economics. Detailed environmental testing of every aspect of the process (air, effluents, plant products and waste discharge) show the process to be far superior environmentally to traditional smelting alternatives for metals recovery. The Company believes the process will easily meet all State of Minnesota and Federal environmental standards and requirements.

(h)     Pre-feasibility Study

The second major accomplishment by PolyMet during Fiscal 2002 was completion of the NorthMet Project Pre-feasibility Study (Study) performed by independent consultants which included Independent Mining Consultants Inc, Amec and SRI. The objectives of this Study were: 1) to clarify and quantify to the extent possible the basic factors that govern the chances for Project success, 2) to assess the various relationships that exist between the variables that directly or indirectly affect Project economics, and 3) to provide the Company the information necessary to decide whether or not the Project justifies the expenditures of additional monies for completion of a final feasibility study.

The Study was made under a suite of operating, cost and price assumptions believed to be reasonable at the time. Only one set

of operating and other conditions were analyzed; there was no attempt to optimize Project economics. The following table summarizes the metal prices used in the Study and the resulting quantities of metals produced and their respective values under the Study assumptions.

Table 1: Summary of Payable Metal and Base Case Commodity Prices
Metal	Payable Quantity	Base Case Price	Gross Revenue
Copper	2,680,718,000 lbs	$0.85	$2,278.6 Million
Nickel	534,204,000 lbs	$3.25	$1,736.2 Million
Cobalt	24,356,000 lbs	$8.00	$194.8 Million
Palladium	3,027,900 oz	$550	$1,665.3 Million
Platinum	868,000 oz	$500	$434.0 Million
Gold	395,700 oz	$275	$108.8 Million
Credit for Silver, Zinc, and Other PGM’s at $0.30 Per Ore Ton			$144.7 Million
TOTAL GROSS REVENUE			$6,562.4 Million

The Study resulted in an estimated capital cost for the Project of US$630.7 million, including a contingency of US$74.5 million. Total operating costs were estimated at US$8.96 per ton of ore mined and processed.

At a copper cut-off grade of 0.01%, the total geologic resource is estimated at about 1.0 billion tons. Of this total, approximately 664 million tons are classified in the “measured” and “indicated” categories. Approximately 409.1 million tons are classified as reserves at grades of 0.29% copper, 0.08% nickel, 67.2 ppm cobalt, 0.28 ppm palladium, 0.08 ppm platinum, and 0.04 ppm gold. The proposed mine plan incorporates some 486.8 million tons of potential mineable resource in a conventional open-pit mining operation.

Based on a proposed production rate of 55,000 tpd of feed, the Project would have a mine life of 24+ years. Overall Project economics, on a before-tax basis, follow:

Net Present Value @ 10% Discount Rate:	US$171.1 million
Internal Rate of Return:	14.1%
Payback Period from Start of Production:	5.4 years

(i)     Capital and Operating Cost Estimates

Estimates of capital and operating costs were generated at the pre-feasibility level in the April 2001 Pre-Feasibility Study led by IMC. Since the project was taken over by new management in March 2003, four critical elements have been revised as follows:

1.	Smaller higher grade mine plan.
2.	Elimination of complex nickel cobalt recovery circuits and conversion to nickel hydroxide.
3.	Securing the mothballed Cliffs Erie Mill concentrator.
4.	Use of a contract miner.

P. Downey and Associates, with the assistance of PASI and IMC, have revised the 2001 capital and operating costs included in the Pre-feasibility Study and updated them to current first quarter 2004 pricing.

(a)     Capital Costs

Revised Capital Cost Estimate

Description	Totals (US$
	Millions)
Mining- using contract miner	5.76
Crushing/Milling/Flot’n	24.91
(Existing Cliffs/Erie)	31.05
PlatSol™-	25.19
Copper SX/EW Plant
PGM Recovery Circuit	20.62
Nickel Hydroxide recovery circuits	6.00
Tailings, Water & Services	4.55
(Existing Cliffs Erie)
Plant Site Utilities & Facilities	12.59
(Existing Cliffs Erie)
Sub Total Direct Costs	130.67
Indirect Costs (Inc. Fees, working	73.13
capital & 20% Contingency)
Other Acquisition-incl. land and	31.00
infrastructure
Total Project Costs	234.80

The capital cost estimate includes the estimated direct cost for equipment, material and labour. In addition, cost estimates were developed for the project indirect costs including EPCM, start up, construction indirects, first fill, spares and contingency. The estimate was developed based on a site visit and inspection of existing equipment and facilities, and the following main sources of information:

• Contract Mining and Associated Services

• Process Design Criteria by PASI.
• Process Flow Sheets.
• Facility General Arrangement Drawings.
• Electrical and Mechanical Equipment List.
• Budget Quotations from Equipment Suppliers.
• Current Labour and Material Costs for the Area.
• The AMEC Simons Mining & Metals 2001 Pre-feasibility Report.

(b)     Operating Costs

The 2001 Pre-Feasibility Study estimate of operating costs included an owner operated mining fleet, an all new processing plant, infrastructure and G&A costs associated with the on-site production of a PGM concentrate, copper cathode, nickel cathode and cobalt sulphide.

The current revised project operating costs use the same basic project data updated to 2003 but are based on a simplified flowsheet whereby only copper cathode is produced on site. The revised operating costs also reflect a contract mining operation and use of the Cliffs Erie crusher/mill/concentrator. The Cliffs Erie facility also received a beneficial electrical power rate for the first 25 MW of usage and this rate has been carried in the current operating cost estimate. Labour rates are based on data available from Minnesota Iron Range mines. The operating cost estimates include a 5% contingency, as detailed in Table 9.

Revised Operating Cost Estimate

Cost Area	Annual Cost (US$ Millions)	Cost/Tonne Ore (US$/Tonne/Ore)
General & Administrative	4,856,600
(“G & A”)	4,856,600	0.53
Subtotal G & A
Mine
Contract miner
Sub Total Mine	28,938,000	3.21
Mill & Process
Reagents & consumables	22,142,258
Labour Costs	10,977,823
Operating Supplies	400,000
Maintenance Supplies	1,915,896
Environmental	300,000
Sub Total Mill & Process	35,735,977	3.91
Power	16,746,886	1.84
Total Operating Costs	86,277,463	9.49
5% Contingency	4,313,873	0.95
Total Operating Costs	90,591,336	10.44

The following items are not included in the direct cash operating cost estimate:

• Product delivery to smelters or copper cathode end users.
• Selling and marketing costs

• Corporate overhead
• Depreciation, amortization and depletion
• Interest charges

(j) Mining

The original mine plan for the pre-feasibility study of 2001 was for a mining rate of 20,075 ktons per year (55,000 tons per day for 365 days). This plan was modified for the current update to 9,125 ktonnes per annum (25,000 tonnes per day for 365 days). The mine is scheduled to operate 360 days per year. The new mine plan is based on using a mine contractor to complete all mining operations with Polymet staff supervising mine plan operations and mine geology.

Mine development will generally follow that outlined by IMC in the pre-feasibility study with the exception that Phase 6 and 7 will only occur if metal prices and capital and operating costs warrant this development. The goal of the phases is to develop the mine in a logical order by commencing the mine with the higher grade material which also has a lower strip ratio. The mine plan will then progress to higher strip ratios. Phase 1 is in the northeastern part of the deposit with phase 2 in the southwestern portion. The remaining three phases will push the hanging wall south. Exits will be maintained to the south during all phases of mining so that access can be obtained to the rail load-out facility.

Waste rock will be stored in dumps located to the north and east of the main ore body. The waste dumps will be located outside of any potential ore body extensions should Polymet decide to expand the pit. Waste facilities will be constructed in 7m lifts with an overall slope angle of 22 degrees (2.5H:1V).

Mining operations will be carried out by mining contractor. The contractor will provide all necessary fleet requirements for a turn-key mining operation based on the required annual mine production schedule. Work activities will include:

• Construction of the initial out-of-pit access roads from the pit area to the rail load-out facility and the mine rail spur and to the waste rock storage areas.
• Removal of all topsoil from the mine and waste storage areas. Replace topsoil on the waste storage areas at completion of mining as part of ongoing mine reclamation.
• Pre-production development required to expose ore for initial production.
• Mine and transport ore to the rail load-out facility.

• Maintain all mine work areas, in-pit haul roads, and external haul roads.
• Maintain waste storage areas.

The major mine fleet will consist of nine 185 t trucks, one 18m³ and one 11m³ loaders, two 23 m³ shovels and two blasthole drills. Support equipment will include track dozers and motor graders to maintain road surfaces, dumps and operating benches.

Mining will be conducted year round based on three 8 hour shifts per day.

Mine operating costs are based on data from similar mining operations and contract mining costs. The costs cover all general labour and consumable costs, amortization of initial equipment capital investment, equipment depreciation and contractor profit.

(i) Future Exploration

The results of technical update indicate that the Northmet project, as currently defined, shows sufficient potential to be carried forward to the next phase which is a feasibility study. The purpose of the feasibility study will be to examine all aspects of the project development and to establish with greater accuracy its economic and technical viability.

The Marathon Deposit, Ontario, Canada:

By an agreement dated 6 November 2000, the Company granted a third party the option to acquire a 50% working interest in certain leased mineral properties located in Ontario, Canada referred to as the Marathon property. During the year ended 31 January 2004, the Company received termination notification from the optionee.

By an agreement dated 12 September 2003, which closed on 21 January 2004, the Company sold the Marathon leases and related land for proceeds of $250,000. Details of the related gain (loss) on sale are as follows:

		Marathon		Marathon
		Leases		Land			Total
Proceeds	$	219,925	$	30,075		$	250,000
							(38,582	)
Cost		-		(38,582	)
Gain (loss) on sale	$	219,925	$	(8,507	)	$	211,418

Regulations and Government Rules

The mining industry has been subject to increasing government controls and regulations in recent years. The Company has obtained all necessary permits for exploration work performed to date and anticipates no material problems obtaining the necessary permits to proceed with further development.

ITEM 5.     OPERATING AND FINANCIAL REVIEW AND PROSPECTS

This discussion and analysis should be read in conjunction with the Company's consolidated financial statements. The Company's reporting currency is the United States dollar and are prepared in accordance with Canadian Generally Accepted Accounting Principles (GAAP); however, there are no material differences between U.S. GAAP and Canadian GAAP regarding the financial statements. All amounts in this discussion and in the consolidated financial statements are expressed in United States dollars, unless identified otherwise.

(a)     Operating Results

Summary of Financial Results

Polymet recorded a loss in 2004 of $146,800 ($0.00) compared to a loss of $471,679 ($0.01 per share) in 2003 and a loss of $1,155,762 ($0.04 per share) in 2002. Losses in 2002 were attributed the restatement of exploration and pre-feasibility acquisition costs due to a change in accounting principles and the downsizing and eventual move of the Company’s head office operations.

The Company during 2004 expended $288,699 in general and administrative costs compared to $331,886 in 2003 and $595,076 in 2002 and $91,616 in exploration, pre-feasibility and lease payments compared to $112,318 in 2003 and $606,162 in 2002.

Change in Accounting Policy

The Company adopted the recommendations of CICA Handbook Section 3870, Stock-Based Compensation and Other Stock-Based Payments, effective for all awards granted on or after 1 February 2003. This established standards for the recognition, measurement and disclosure of stock-based compensation and other stock-based payments made in exchange for goods and services.

As encouraged by CICA Handbook Section 3870, the Company has enacted prospectively early adoption of the fair value based method of accounting for awards issued to employees for the fiscal year beginning 1 February 2003.

The new standard requires that all stock-based awards made to employees and non-employees be measured and recognized using a fair value based method. In prior years, stock-based compensation expense was only recognized when stock-based compensation awards were made to non-employees, while pro-forma disclosure was acceptable for awards made to employees.

During fiscal year 2003, the Company changed is accounting policy with respect to accounting for exploration expenditures. In 2002 and prior periods, acquisition and exploration expenditures were capitalized to mineral properties. Under the new policy, exploration expenditures (including lease/option payments) are expensed while acquisition expenditures continue to be capitalized. This change has been applied retroactively and has increased the deficit as at 31 January 2000 by $2,876,565 and increased the loss for the year ended 2002 by $606,162.

Summary of Operating Results

Fiscal 2004 Ended 1/31/04 versus Fiscal 2003

The Company’s primary objective for the current year was to achieve certain milestones with respect to the NorthMet project. The Company was successful in obtaining the option to acquire the Cliffs-Erie facility, which upon exercise will significantly reduce the capital costs for the project. In addition an independent scoping study on the NorthMet project was completed integrating the Cliffs-Erie facility and its impact on the overall pre-feasibility capital costs. Expenditures of $500,000 were made to obtain the option to acquire the Cliffs-Erie facility and during March 2004, upon receipt of regulatory approval of the option agreement, the Company issued 1,000,000 common shares to maintain the exclusive rights under the option to 30 June 2006.

With the Company’s focus on the NorthMet project, it reached an agreement for the sale of Marathon leases and related land for proceeds of $250,000.

Fiscal 2003 Ended 1/31/03 versus Fiscal 2002

Fiscal 2003 focused on survivability of the Company during very difficult economic conditions. Management continued its efforts to attract a strategic partner for the NorthMet Project, as well as solicit investment equity capital into the Company. The Company subsequent to year end completed a private placement for net proceeds of $73,410.

The only work performed on-site at the NorthMet Project consisted of environmental mitigation of drill holes and the disposal of

drill cuttings from previous drilling campaigns. All such work has now been completed.

No field work of significance was performed by Geomaque Explorations on the Marathon Project.

Fiscal 2002 Ended 1/31/02 versus Fiscal 2001

In Fiscal 2002 the Company completed two major milestones impacting the NorthMet Project. The first was completion of and final reporting on operations of the continuous mini-pilot plant used to demonstrate the PlatSol metallurgical process previously developed by the Company. The pilot plant testing program successfully demonstrated application of the process to NorthMet mineralization, with high recoveries of payable minerals/metals achieved. Also, rigid environmental testing of every phase of pilot plant operations showed the process to be free of any significant environmental issues.

The second milestone achieved was completion of the NorthMet Project Pre-feasibility Study. This study was conducted by external consultants and evaluated the Project under one set of operating design, production and metals pricing assumptions. There was no attempt to optimize Project size or economics. The resulting financial data showed the Project, under the conditions evaluated, would generate an estimated before-tax Internal Rate of Return (IRR) of 14.1%, a Net Present Value (NPV) at a 10% discount rate of US$171.1 million, and an undiscounted Payback Period of 5.4 years after the start of production. PolyMet’s management believes the study’s results show the Project to be deserving of further work and financial expenditures to take it to the next level, which is completion of a final feasibility study or bankable document. This next phase of Project advancement is estimated to cost approximately US$20 million, including land acquisition.

The status of the Marathon Project was advanced during Fiscal 2002 as a result of additional exploration work performed on the property by Geomaque Explorations, Ltd. Exploration activities focused on the drilling of 15 diamond core holes, the resampling and assaying of core from previously drilled holes, surface mapping and sampling, the construction of a complete database, and modeling of the deposit. The work performed by Geomaque was the result of an “earn-in” agreement between PolyMet and Geomaque, whereby the later company performs necessary exploration on the property in exchange for an equity position in the Project.

The new resource estimate for the Marathon Project, based on the most recent data, show the resource to contain in excess of one

million ounces of platinum and palladium at grades presently being mined at a property north of the Marathon Project. These ounces are contained in the “measured” and “indicated” resource categories.

Liquidity And Capital Resources

Working Capital

As at January 31, 2004, Polymet had working capital of $423,526, with approximately $495,551 in cash and, $27,347 in other working capital and $501,786 in mineral property, plant and equipment expenditures.

The Company relies principally on equity financing to fund its projects and expenditures. The Company has no internal source of funding and thus it depends on the ability to finance by raising funds by the sale of shares.

Operating Cash Flow

For the year ended January 31, 2004, net cash inflows of $1,044,684 exceeded cash outflows of $552,320 resulting in a positive cash flow of $492,364, which when combined with the $3,187 cash balance from year end 2003 results in an ending cash position of $495,551. The cash inflows were a result of three private placements for a total of 11,648,318 shares at prices ranging from CDN $0.0525 to CDN $0.15 per share for proceeds of $1,035,071. Cash outflows comprised principally of $500,000 for the Cliffs-Erie acquisition and general and administrative costs of $288,699.

Financing Activities

The following outlines the Company’s financing activities for the period ended January 31, 2004:

• March 2003, the Company arranged a private placement of 1,904,760 units at CDN $0.0525 per unit for cash in the amount of CDN$67,507. Each unit consists of one common share and one share purchase warrant to purchase one common share at CDN $0.10 for one year. Two directors subscribed for 190,476 units;
   
• September 2003, the Company arranged a private placement of 2,746,892 units at CDN $0.10 for cash in the amount of CDN$247,158. Each unit consists one common share and one share purchase warrant to purchase an additional common share at CDN $0.15 in year one and CDN $0.17 in year two;

• January 2004, the Company completed a private placement of 6,996,666 units at CDN$0.15 for cash in the amount of CDN$1,049,499. Each unit consists of one common share and one-half of one share purchase warrant. One full share purchase warrant entitles the holder to purchase one additional common share for a period of 24 months at a price of CDN$0.25 per share provided that should the Company’s shares trade on the TSX Venture Exchange at over CDN$0.50 per share for over 25 consecutive trading days, the warrants will terminate 30 days thereafter. A finders’ fee of CDN$50,000 cash and 60,000 commons shares at a deemed price of CDN$0.15 per share was paid.
   
• During the year ended, 486,610 share purchase warrants were exercised at an exercise price of CDN$0.10.
   
• During the year ended stock options in the amount of 89,600 were exercised at a price of CDN$0.08 per share.

There were no shares or financing activities for the fiscal period ended January 31, 2003.

During 2002 the Company completed a private placement for 3,428,923 units at CDN $0.13 per unit, which netted the Company $277,713. Each unit consists of one common share and one share purchase warrant which allow the holder to acquire 3,428,923 additional common shares for CDN $0.17 in the first year, CDN $0.18 in the second year, and CDN $0.20 in the third year through fifth year following issuance of the units. Proceeds from the financing were primarily utilized for ongoing exploration work at the NorthMet Property of $606,162 and for general administrative expenses of $595,076.

(c)     Research and Development, Patents and Licenses, Etc.

Not applicable. See Item 4, Information on the Company, D. Property, Plant and Equipment, for a review of the Company’s exploration activities.

(d)     Trend Information

There are no trends, commitments, events or uncertainties presently known to management that are reasonably expected to have a material effect on the Company’s business, financial condition or results of operation other than uncertainty as to the speculative nature of the business (Refer to the heading entitled “Risk Factors”).

(e)     Off-Balance Sheet Arrangements

Not applicable.

(f)     Tabular Disclosure of Contractual Obligations

Not applicable.

(g)     Safe Harbour

Not applicable.

ITEM 6.     DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A.     Directors and Senior Management

Each Director serves until the next annual general meeting or until his/her successor is duly elected, unless his/her office is vacated in accordance with the Articles of the Company. The laws/regulations of British Columbia require that a majority of the members of the Board of Directors consist of Canadian residents.

Casual vacancies on the Board of Directors are filled by election from nominees by the remaining Directors and the persons filling those vacancies hold office until the next Annual General Meeting, at which time they may be re-elected or replaced.

The following table sets out the name of the directors as at July 15, 2003,the country in which each is ordinarily a resident, all office of the Company now held by each of them, their principal occupations, the period of time for which each has been a director of the Company, and the number of common shares of the Company beneficially owned by each, directly or indirectly, or over which control or direction is exercised, as at the date hereof.

		Common
Name, Occupation, Present Position(s) with the Company,	Date(s) Served	Shares
Resident Country	as a Director	Held(4)
William F. Murray, P.Eng(2);
Mining Executive, director and officer	March 17, 2003	95,238
of a private engineering and management firm,
director of several public resource companies;
Director, President and CEO of the Company.
Canada
P. Terry O’Kane(2), , Mining Executive, director
of several	March 17, 2003	95,238
public resource companies,
director of a capital pool company;
Director of the Company
Canada
George Molyviatis(1)(3), Financier ,
Banker, President	March 17, 2003	3,816,983
of an international lumber company;
Director of the Company
Geneva
Ian Forrest(1)(3), Chartered Accountant,
director of several	Oct. 3, 2003	250,000
public resource companies
Director of the Company
Geneva
Dr. David Dreisinger(1) )(2) (3) Ph.D., a professor
of the	Oct. 3, 2003	Nil
Faculty of Applied Science, Department of Metal
and Materials Engineering at University of
British Columbia.
Director of the Company
Canada

1. Member of the Audit Committee
2. Member of the Compensation Committee
3. Member of Corporate Governance Committee
4. Shares beneficially owned, directly or indirectly, or over which control or direction is exercised, as at April 14, 2004, based upon information furnished to the Company by individual Directors. Unless otherwise indicated, such shares are held directly.

STATEMENT OF EXECUTIVE COMPENSATION

The Company has one (1) Named executive officer. The Statement of Executive Compensation required under Form 51-904F to the Securities Act requires disclosure of compensation for each Chief Executive Officer and for each of the Company’s (including subsidiaries) four most highly compensated executive officers, other than the CEO, provided that disclosure is not required for an executive officer where total salary and bonus does not exceed $100,000.

Summary Compensation Table

Name and principal position	Year	Annual Compensation			Long-term compensation
		Salary ($)	Bonus ($)	Other ($)	Awards		Payouts	All other Compensation ($)
					Securities Under Option (#)	Restricted Shares or Restricted Share Units ($)	LTIP payouts ($)
William Murray President/CEO	2004 2003 2002	US$45,810 N/A N/A	Nil N/A N/A	Nil N/A N/A	956,600 N/A N/A	Nil N/A N/A	Nil N/A N/A	Nil N/A N/A
Dr. Donald W. Gentry Former President/CEO	2004 2003 2002	NIL US$103,288 US$115,000	Nil nil nil	Nil nil nil	500,000 541,052 541,052	Nil nil nil	Nil nil nil	Nil nil nil

Effective March 17, 2003, Mr. Donald W. Gentry resigned and William F. Murray was appointed President and CEO.

Long Term Incentive Plan (LTIP) Awards

The Company does not have a LTIP, pursuant to which cash or non-cash compensation intended to serve as an incentive for performance (whereby performance is measured by reference to financial performance or the price of the Company’s securities) was paid or distributed to the Named Executive Officer during the most recently completed financial year.

Option/Stock Appreciation Rights (“SAR”) Grants
During the Most Recently Completed Financial Year

Name	Securities Under Option/SARs Granted (#)	% of Total Options/SARs Granted to Employees in Financial Year	Exercise or Base Price ($/Security)	Market Value of Securities Underlying Options/SARs on the Date of Grant ($/Security)	Expiration Date
William Murray	656,600	20%	CDN $0.10	CDN $0.10	July 18, 2008
William Murray	300,000	9%	CDN $0.13	CDN $0.10	October 3, 2008

Aggregated Options/SAR Exercises in Last Financial Year
and Financial Year-End Option/SAR Values

The following table (presented in accordance with the Rules) sets forth details of all exercises of stock options during the most

recently completed financial year by each of the Named Executive Officers and the number of unexercised options held by the Named Executive Officers.

Name	Securities Acquired on Exercise (#)	Aggregate Value Realized ($)	Unexercised Options/ SARs at Fiscal Year-End ($) Exercisable/Unexercisable	Value of Unexercised In-the-Money Options/ SARs at Fiscal Year-End ($) Exercisable/Unexercisable
William F. Murray	Nil	Nil	956,600	153,682

Option Re-Pricing

Pursuant to an Independent Contractor Agreement dated 1 August 2002, the Company contracted for the services of its former president/chief executive officer for a term of one year to 31 July 2003. Under the terms of the agreement, the compensation included the retention of 541,052 previously granted options to purchase shares of the Company wherein the, 541,052 options were re-priced to CDN $0.10 and extended to 17 March 2007.

Defined Benefit or Actuarial Plan Disclosure

There is no pension plan or retirement benefit plan that has been instituted by the Corporation and none are proposed at this time.

Compensation Committee

The Compensation Committee, consisting of William Murray, Terry O’Kane and David Dreisinger, determines the compensation of the executive officers of the Company. See “Report on Executive Compensation” for further details.

Compensation of Directors

The Company has no arrangements, standard or otherwise, pursuant to which Directors are compensated by the Company or its subsidiaries for their services in their capacity as Directors, or for committee participation, involvement in special assignments or for services as consultant or expert during the most recently completed financial year or subsequently, up to and including the date of this information circular.

The Company does have a formalized stock option plan (the “Plan”) for the granting of incentive stock options to the officers,

employees and Directors. The purpose of granting such options is to assist the Company in compensating, attracting, retaining and motivating the Directors of the Company and to closely align the personal interests of such persons to that of the shareholders.

The following stock options were outstanding to directors of the Company at the most recently completed financial year:

	Number of	Exercise Price
Date Granted	Shares under Option	Per Share	Expiry Date
7/18/03	1,641,500	CDN $0.10	7/18/08
10/3/03	950,000	CDN $0.13	10/3/08

Bonus Share Agreements

The Company, subject to regulatory acceptance, has established a share incentive plan for its Directors and Key Employees. The plan provides for share bonuses to be issued to the individuals upon the Company reaching certain identifiables in its business plan, and is intended to reward the individuals for their unique expertise and experience in achieving these milestones. The Board of Directors is of the view that, from a corporate governance perspective, it is more appropriate to provide a reward mechanism of this nature than to provide incentive to insiders exclusively in the form of stock options, since the Company’s share price can vary in accordance with a range of external factors not related to the performance of management and key employees.

The milestones have been established as follows:

Milestone 1: Completion of an agreement with Cleveland Cliffs for the use or purchase of what is referred to as the Cliffs Erie Facility. This consist of certain real property located near Hoyt Lakes, Minnesota (the “Erie Site”), on which are located various ore processing facilities formerly operated by LTV Steel Mining Company as part of that company’s taconite mining and processing operations (the “Property”). The Property will be used to process mineral products from the Company’s Northmet property, in nearby Babbitt, Minnesota.

Share Bonus: On achievement of Milestone 1, 1,500,000 shares will be issued to the Directors as a group and an additional 90,000 shares will be issued to the Key Employees.

Milestone 2: Negotiation and completion of an off-take agreement with a senior metals producer for the purchase of the nickel hydroxide concentrate produced from the Northmet
 

Property, and/or an equity investment in the Company by such a producer or producers.

Share Bonus: On achievement of Milestone 2,900,000 shares will be issued to the Directors as a group and an additional 400,000 shares will be issued to the Key Employees.

Milestone 3: Completion of a bankable feasibility study which indicates that production from the Northmet Property is commercially feasible.

Share Bonus: On completion of Milestone 3, 1,500,000 shares will be issued to the Directors as a group and an additional 950,000 shares will be issued to the Key Employees.

Milestone 4: Commencement of Commercial Production of the Northmet Property.

Share Bonus: On completion of Milestone 4, 2,400,000 shares will be issued to the Directors as a group and an additional 840,000 shares will be issued to the Key Employees.

The Company received shareholder approval for the Bonus Share Plan on May 28, 2004 and is currently awaiting regulatory approval.

Other Remuneration

During the last financial year there was not any other remuneration paid or payable, directly or indirectly by the Company and any of its subsidiaries pursuant to an existing plan or arrangement to its directors or Named Executive Officer.

Report on Executive Compensation

As part of its responsibilities, the Compensation Committee reviews the Company’s overall compensation plan and the policies pertaining thereto to ensure that they are consistent with the Company’s goals of attracting and retaining the best available people, align the employee’s interests with those of the Company, and pay for performance. In establishing levels of remuneration and in granting stock options, the executive’s performance, level of expertise, responsibilities, length of service to the Company and comparable levels of remuneration paid to executives of other companies of comparable size and development within the industry are taken into consideration.

See “Report on Executive Compensation Table” for more information on remuneration of Named Executive Officer.

Defined Benefit or Actuarial Plan Disclosure

There is no pension plan or retirement benefit plan that has been instituted by the Corporation and none are proposed at this time.

C.     Board Practices

CORPORATE GOVERNANCE PRACTICES

Board of Directors

During the 2004 reporting period the board of directors of the Company (the “Board”) was comprised of two related and three unrelated members.

The Board is committed to a high standard of corporate governance and, although not listed on The Toronto Stock Exchange (“TSE”), the Board follows the Guidelines for Improved Corporate Governance adopted by the TSE.

Two Directors, namely, William Murray, the President and Chief Executive Officer and Terry O’Kane, the Chief Financial Officer are related directors. Mr. George Molyviatis, Ian Forrest and David Dreisinger are unrelated Director as that term is used in the TSE Guidelines.

Committees of the Board

The Company’s Board shall be comprised of five directors, of which three can be defined as “unrelated director” or “director who is independent of management and if free from any interest an any business or other relationship which could, or could reasonably be perceived to, materially interfere with the directors’ ability to act with a view to the best interests of the Company, other than interests and relationships arising from shareholdings” and do not have interests in or relationships with the Company.

The Board has established three standing committees, the Audit Committee, Compensation Committee and Corporate Governance Committee.

The main objective for the Compensation Committee is to attract, retain and appropriately motivate the Company’s Executive Officers to maximize shareholder value. Having regard to the Company’s present state of development and limited financial resources, the compensation of Executive Officers has two

components, namely, a salary and stock options. The Corporate Governance Committee’s mandate is to enhance the Company’s governance through continuing assessment of the Company’s approach to corporate governance. The Committee is responsible for recommending to the Board, candidates for nomination as Directors, and the composition of various Board committees, and reviews the Company’s structures to ensure that the Board is able to function independent of management.

D.     Employees

From January 2002 to the end of July 2002, the Company had one employee. From August 2002 to March 17, 2003, the Company utilized the services of one non-salaried executive officer and all financial/accounting activities were contracted to a consultant. None of the Company's employees were covered by a collective bargaining agreement. Subsequent to the change of management the President is paid as a consultant along with an independent consultant for administrative and accounting activities.

E.     Share Ownership

See B. Compensation.

ITEM 7.     MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A.     Major Shareholders

To the best of the knowledge of the directors and senior officers of the Company, the following is the only shareholder of the Company that beneficially owns, directly or indirectly, or exercises control over, shares carrying more than 5% of the outstanding voting rights attached to the Company's Common Shares as at July 22, 2004.

Name of Shareholder	No. of Shares	% of Issued Shares
Northern Securities Limited	3,251,600	.06%

As at July 22, 2003, there were 390 holders of record of the Company's Common Shares of which 300 were U.S. residents owning 9,828,726 (18%) of the Company's outstanding shares.

The Registrant is a publicly owned Canadian corporation, the shares of which are owned by Canadian residents, US residents, and residents of other countries. The Registrant is not owned or controlled directly or indirectly by another corporation or any

foreign government. There are no arrangements, known to the Company, the operation of which may at a subsequent date result in a change of control of the Company.

B.     Related Party Transactions

The Company has conducted transactions with officers, directors and persons or companies related to directors as follows:

a) Paid or accrued amounts as follows:

	2004		2003		2002
Administration fees and wages	$	52,388	$	103,288	$	188,710

b) As at 31 January 2004, accounts payable included $NIL (2003 - $18,750) owed to a director.

c) Issued 2,143,906 shares and 1,881,476 warrants to related parties on private placements during the year ended 31 January 2004 for cash in the amount of $99,925.

C.     Interest of experts and counsel

Not applicable.

ITEM 8.     FINANCIAL INFORMATION

A.     Consolidated Statements and Other Financial Information

See Item 17

Legal Proceedings

The Company does not know of any material active or pending legal proceedings against them; nor is the Company involved as a plaintiff in any material proceeding or pending litigation. The Company knows of no active or pending proceedings against anyone that might materially adversely affect an interest of the Company.

Dividend Policy

Since its incorporation, Polymet has not declared or paid, and has no present intention to declare or to pay in the foreseeable future, any cash dividends with respect to its Common Shares. Earnings will be retained to finance further growth and development of the business of Polymet. However, if the Board of Directors declares dividends, all Common Shares will participate

equally in the dividends, and, in the event of liquidation, in the net assets, of Polymet.

B.     Significant Changes

The Company issued 145,400 common shares on exercise of options at CDN $0.08 for proceeds of approximately $8,750.

The Company issued 95,238 common shares on exercise of warrants at CDN $0.10 for proceeds of approximately $7,150.

The Company granted 620,000 options at CDN $0.40 to employees and officers, expiring 3 March 2008.

On May 28, 2003 the Company received shareholder approval to amend its Plan to a maximum number of shares to a rolling 10% of the Company’s issued and outstanding shares.

In addition the Company received shareholder approval to establish a bonus share plan for a maximum of 8,580,000 shares over a three-year time frame (the “Bonus Plan”). The bonus shares are intended as an incentive and compensation for certain critical achievements related to the development of the Company’s NorthMet project. The Bonus Plan is subject to further regulatory approval.

On June 17, 2004 the Company announced the closing of a non-brokered private placement for a total of 1,550,000 Units (the "Units"), each Unit comprised of one common share and one-half of one non-transferable share purchase warrant, in the capital stock of the Company at $0.80 per unit to net the treasury an aggregate of $1,240,000 took place effective June 8, 2004. One full share purchase warrant entitles the investors to purchase one additional common share of the Company for a period of 18 months from the closing at $1.20 per share. A finder's fee in the amount of 7.5% of the gross proceeds with respect to the placement of 825,000 units has been paid in the form of 61,875 shares in the capital stock of the Company at a deemed price of $0.80 per share.

On July 5, 2004 the Company granted 1,175,000 options at CDN $0.66 ( a Discounted Market Price in accordance with the policies of the TSX Venture Exchange) to various directors, employees and consultants, expiring 5 July 2009. The options are subject to a four month hold period.

ITEM 9.     THE OFFER AND LISTING

A.     The Offer and Listing Details

The following table outlines the annual high and low market prices for the five most recent fiscal periods:

Fiscal Period	High	Low
January 31, 2004	.30	.25
January 31, 2003	.12	.04
January 31, 2002	.66	.10
January 31, 2001	1.25	.42
January 31, 2000	2.87	.95

The following table outlines the high and low market prices for each fiscal financial quarter for the two most recent fiscal periods and any subsequent period:

Fiscal Quarter	High	Low
April 30, 2004	.89	.82
January 31, 2004	.30	.25
October 31, 2003	.17	.14
July 31, 2003	.09	.08
April 30, 2003	.08	.05
January 30,2003	.08	.045
July 31, 2002	.27	.10
April 30, 2002	.12	.08

The following table outlines the high and low market prices for each of the most recent six months:

Month	High	Low
June 30, 2004	.83	.80
May 31, 2004	.81	.78
April 30, 2004	.89	.82
March 31, 2004	.80	.74
February 28, 2004	.55	.475

B.     Plan of Distribution

Not applicable.

C.     Markets

The Company's common shares trade on the TSX Venture Exchange in British Columbia, Canada under the symbol "POM”. The Company's common shares commenced trading April 1984. In August 2000, the Company listed on the OTCBB under the symbol “POMGF”.

D.     Selling Shareholders

Not applicable.

E.     Dilution

Not applicable.

F.     Expense of the issue

Not applicable.

ITEM 10.     ADDITIONAL INFORMATION

A.     Share Capital

Not applicable.

B.     Memorandum and articles of association

The Company’s Certificate of Incorporation and Articles/By-Laws are Incorporated by Reference to Form 20-FR. The Company confirms no changes have been made the Company’s Articles/ByLaws.

C.     Material Contracts

The Company has not entered into any material contracts for the past two fiscal periods ending January 31, 2004 and January 31, 2003 other than those contracts entered into in the ordinary course of business.

D.     Exchange Controls

There are currently no governmental laws, decrees, regulations or other legislation of Canada, which affects the import or export of capital, including the availability of cash and cash equivalents for use by the Company. For a general discussion of the remittance of dividends, interest or other payments to non-resident holders of the Common Shares. See "E. Taxation".

E.     Taxation

Taxation - The following summary of the material Canadian federal income tax considerations generally applicable in respect of the common shares reflects the Company’s opinion. The tax consequences to any particular holder of common shares will vary according to the status of that holder as an individual, trust, corporation or member of a partnership, the jurisdiction in which that holder is subject to taxation, the place where that holder is resident and, generally, according to that holder’s particular circumstances. This summary is applicable only to holders who are resident in the United States, have never been resident in

Canada, deal at arm’s length with the Company, hold their common shares as capital property and who will not use or hold the common shares in carrying on business in Canada. Special rules, which are not discussed in this summary, may apply to a United States holder that is an issuer that carries on business in Canada and elsewhere.

This summary is based upon the provisions of the Income Tax Act of Canada and the regulations thereunder (collectively, the “Tax Act, or ITA”) and the Canada-United States Tax Convention as amended by the Protocols thereto (the “Tax Convention”) as at the date of the Annual Report and the current administrative practices of Revenue Canada, Customs, Excise and Taxation. This summary does not take into account Canadian provincial income tax consequences.

This summary is not exhaustive of all possible income tax consequences. It is not intended as legal or tax advice to any particular holder of common stock and should not be so construed. Each holder should consult his own tax advisor with respect to the income tax consequences applicable to him in his own particular circumstances.

North American Free Trade Agreement (Canada) - The Investment Act was amended with the North American Free Trade Agreement (NAFTA) to provide for special review thresholds for Americans (including “American-controlled “entities” as defined in the Investment Act). Under the Investment Act, as amended, an investment in the Registrant’s common shares by an American would be review able only if it was an investment to acquire control of the Registrant and the value of the assets of the Registrant was equal to or greater than a specified amount (the “Review Threshold”), which increases in stages. The Review Threshold is currently $150 million.

Disposition of Common Shares - If a non-resident were to dispose of common shares of the Company to another Canadian corporation which deals or is deemed to deal on a non-arm’s length basis with the non-resident and that, immediately after the disposition, is connected with the Company (i.e., which holds shares representing more than 10% of the voting power and more than 10% of the market value of all issued and outstanding shares of the Company), the amount by which the fair market value of any consideration (other than any shares of the purchaser corporation) exceeds the paid-up capital of the common shares sold will be deemed to be taxable as a dividend paid by the purchasing corporation, either immediately or eventually by means of a deduction in computing the paid-up capital of the purchasing corporation, and subject to withholding taxes as described below.

Under the Tax Act, a gain from the sale of common shares by a non-resident will not be subject to Canadian tax, provided the shareholder (and/or persons who do not deal at arm’s length with the shareholder) have not held a “substantial interest” in the Company (25% or more of the shares of any class of the Company’s stock) at any time in the five years preceding the disposition. Generally, the Tax Convention will exempt from Canadian taxation any capital gain realized by a resident of the United States, provided that the value of the common shares is not derived principally from real property situated in Canada.

Dividend - In the case of any dividends paid to non-residents, the Canadian tax is withheld by the Company, which remits only the net amount to the shareholder. By virtue of Article X of the Tax Convention, the rate of tax on dividends paid to residents of the United States is generally limited to 15% of the gross dividend (or 5% in the case of certain corporate shareholders owning at least 10% of the Company’s voting shares upon ratification of the Protocol amending the treaty. In the absence of the Tax Convention provisions, the rate of Canadian withholding tax imposed on non-residents is 25% of the gross dividend. Stock dividends received by non-residents from the Company are taxable by Canada as ordinary dividends and therefore the withholding tax rates will be applicable.

Where a holder disposes of common shares to the Company (unless the Company acquired the common shares in the open market in the manner in which shares would normally be purchased by any member of the public), this will result in a deemed dividend to the U.S. holder equal to the amount by which the consideration paid by the Company exceeds the paid-up capital of such stock. The amount of such dividend will be subject to withholding tax as described above.

Capital Gains - A non-resident of Canada is not subject to tax under the ITA in respect of a capital gain realized upon the disposition of a share of a class that is listed on a prescribed stock exchange unless the share represents “taxable Canadian property” to the holder thereof. A common share of the Company will be taxable Canadian property to a non-resident holder if, at any time during the period of five years immediately preceding the disposition, the non-resident holder, persons with whom the non-resident holder did not deal at arm’s length, or the nonresident holder and persons with whom he/she did not deal at arm’s length owned 25% or more of the issued shares of any class or series of the Company. In the case of a non-resident holder to whom shares of the Company represent taxable Canadian property and who is resident in the United States, no Canadian tax will be payable on a capital gain realized on such shares by reason of the Tax Convention unless the value of such shares is derived

principally from real property situated in Canada or the nonresident holder previously held the shares while resident in Canada. The Company believes that the value of its common shares is not derived from real property situated inside Canada.

Certain United States Federal Income Tax Consequences - The following is a discussion of certain possible United States Federal income tax consequences, under the law, generally applicable to a U.S. Holder (as defined below) of common shares of the Company. This discussion does not address all potentially relevant Federal income tax matters and it does not address consequences peculiar to persons subject to special provisions of Federal income tax law, such as those described below as excluded from the definition of a U.S. Holder. In addition, this discussion does not cover any state, local or foreign tax consequences.

The following discussion is based upon the sections of the Internal Revenue Code of 1986, as amended (“the Code”), Treasury Regulations, published Internal Revenue Service (“IRS”) rulings, published administrative positions of the IRS and court decisions that are currently applicable, any or all of which could be materially and adversely changed, possibly on a retroactive basis, at any time. In addition, the discussion does not consider the potential effects, both adverse and beneficial, of possible legislation which, if enacted, could be applied, possibly on a retroactive basis, at any time. The following discussion is for general information only and is not intended to be, nor should it be construed to be, legal or tax advice to any holder or prospective holder of common shares of the Company and no opinion or representation with respect to the United States Federal income tax consequences to any such holder or prospective holder is made. Accordingly, holders and prospective holders of common shares of the Company should consult their own tax advisors about the federal, state, local, and foreign tax consequences of purchasing, owning and disposing of common shares of the Company.

U.S. Holders - As used herein, a (“U.S. Holder”) includes a holder of common shares of the Company who is a citizen or resident of the United States, a corporation created or organized in or under the laws of the United States or of any political subdivision thereof and any other person or entity whose ownership of common shares of the Company is effectively connected with the conduct of a trade or business in the United States. A U.S. Holder does not include persons subject to special provisions of Federal income tax law, such as tax-exempt organizations, qualified retirement plans, financial institutions, insurance companies, real estate investment trusts, regulated investment companies, broker-dealers, non-resident

alien individuals or foreign corporations whose ownership of common shares of the Company is not effectively connected with the conduct of a trade or business in the United States and shareholders who acquired their stock through the exercise of employee stock options or otherwise as compensation.

Distributions on Common Shares of the Company - U.S. Holders receiving dividend distributions (including constructive dividends) with respect to common shares of the Company are required to include in gross income for United States Federal income tax purposes the gross amount of such distributions to the extent that the Company has current or accumulated earnings and profits, without reduction for any Canadian income tax withheld from such distributions. Such Canadian tax withheld may be credited, subject to certain limitations, against the U.S. Holder’s United States Federal Income tax liability or, alternatively, may be deducted in computing the U.S. Holder’s United States Federal taxable income by those who itemize deductions. (See more detailed discussion at “Foreign Tax Credit” below). To the extent that distributions exceed current or accumulated earnings and profits of the Company, they will be treated first as a return of capital up to the U.S. Holder’s adjusted basis in the common shares and thereafter as gain from the sale or exchange of the common shares. Preferential tax rates for long-term capital gains are applicable to a U.S. Holder which is an individual, estate or trust. There are currently no preferential tax rates for long-term capital gains for a U.S. Holder which is a corporation.

Dividends paid on the common shares of the Company will not generally be eligible for the dividends received deduction provided to corporations receiving dividends from certain United States corporations. A U.S. Holder which is a corporation may, under certain circumstances, be entitled to a 70% deduction of the United States source portion of dividends received from the Company (unless the Company qualifies as a “foreign personal holding company” or a “passive foreign investment company”, as defined below) if such U.S. Holder owns shares representing at least 10% of the voting power and value of the Company. The availability of this deduction is subject to several complex limitations which are beyond the scope of this discussion.

Foreign Tax Credit - A U.S. Holder who pays (or has withheld from distributions) Canadian income tax with respect to the ownership of common shares of the Company may be entitled, at the option of the U.S. Holder, to either a deduction or a tax credit for such foreign tax paid or withheld. Generally, it will be more advantageous to claim a credit because a credit reduces United States Federal income taxes on a dollar-for-dollar basis, while a deduction merely reduces the taxpayer’s income subject

to tax. This election is made on year-by-year basis and applies to all foreign income taxes (or taxes in lieu of income tax) paid by (or withheld from) the U.S. Holder during the year. There are significant and complex limitations which apply to the credit, among which is the general limitation that the credit cannot exceed the proportionate share of the U.S. Holder’s United States income tax liability that the U.S. Holder’s foreign source income bears to his/her or its worldwide taxable income. In the determination of the application of this limitation, the various items of income and deduction must be classified into foreign and domestic sources. Complex rules govern this classification process. There are further limitations on the foreign tax credit for certain types of income such as “passive income”, “high withholding tax interest”, “financial services income”, “shipping income”, and certain other classifications of income. The availability of the foreign tax credit and the application of the limitations on the credit are fact specific and holders and prospective holders of common shares of the Company should consult their own tax advisors regarding their individual circumstances.

Disposition of Common Shares of the Company - A U.S. Holder will recognize gain or loss upon the sale of common shares of the Company equal to the difference, if any, between (i) the amount of cash plus the fair market value of any property received, and (ii) the shareholder’s tax basis in the common shares of the Company. This gain or loss will be capital gain or loss if the common shares are capital asset in the hands of the U.S. Holder, which will be a short-term or long-term capital gain or loss depending upon the holding period of the U.S. Holder. Gains and losses are netted and combined according to special rules in arriving at the overall capital gain or loss for a particular tax year. Deductions for net capital losses are subject to significant limitations. For U.S. Holders which are individuals, any unused portion of such net capital loss may be carried over to be used in later tax years until such net capital loss is thereby exhausted. For U.S. Holders which are corporations (other than corporations subject to Subchapter S of the Code), an unused net capital loss may be carried back three years from the loss year and carried forward five years from the loss year to be offset against capital gains until such net capital loss is thereby exhausted.

Other Considerations - In the following four circumstances, the above sections of the discussion may not describe the United States Federal income tax consequences resulting from the holding and disposition of common shares of the Company. However, on the basis of (a) the number of shareholders of its common shares, (b) the majority ownership of its shares by Canadian residents, and c) the majority of its assets are actively managed (not passively

held), the Company believes that its is neither a “Foreign Personal Holding Company”, “Foreign Investment Company”, “Passive Foreign Investment Company”, nor a “Controlled Foreign Corporation”.

Foreign Personal Holding Company - If at any time during a taxable year more than 50% of the total combined voting power or the total value of the Company outstanding shares is owned, actually or constructively, by five or fewer individuals who are citizens or residents of the United States and 50% or more of the Company’s gross income for such year was derived from certain passive sources (e.g. from dividends received from its subsidiaries), the Company would be treated as a “foreign personal holding company”. In that event, U.S. Holders that hold common shares of the Company would be required to include in gross income for such year their allowable portions of such passive income to the extent the Company does not actually distribute such income.

Foreign Investment Company - If 50% or more of the combined voting power or total value of the Company outstanding shares are held, actually or constructively, by citizens or residents of the United States, United States domestic partnerships or corporations, or estates or trusts other than foreign estates or trusts (as defined by the Code Section 7701(a)(31)), and the Company is found to be engaged primarily in the business of investing, reinvesting, or trading in securities, commodities, or any interest therein, it is possible that the Company might be treated as a “foreign investment company” as defined in Section 1246 of the Code, causing all or part of any gain realized by a U.S. Holder selling or exchanging common shares of the Company to be treated as ordinary income rather than capital gains.

Passive Foreign Investment Company - As a foreign corporation with U.S. Holders, the Company could potentially be treated as a passive foreign investment company (“PFIC”), as defined in Section 1297 of the Code, depending upon the percentage of the Company’s income which is passive, or the percentage of the Company’s assets which is held for the purpose of producing passive income. Certain United States income tax legislation contains rules governing PFICs which can have significant tax effects on U.S. shareholders of foreign corporations. These rules do not apply to non-U.S. shareholders. Section 1297(a) of the Code defines a PFIC as a corporation that is not formed in the United States and, for any taxable year, either (i) 75% or more of its gross income is “passive income”, which includes interest, dividends and certain rents and royalties or (ii) the average percentage, by fair market value (or, if the company is a controlled foreign corporation or makes an election, by adjusted tax basis), of its assets that produce or are held for the

production of “passive income” is 50% or more. The taxation of a US shareholder who owns stock in a PFIC is extremely complex and is therefore beyond the scope of this discussion. US persons should consult with their own tax advisors with regards to the impact of these rules.

Controlled Foreign Corporation - If more than 50% of the voting power of all classes of stock or the total value of the stock of the Company is owned, directly or indirectly, by citizens or residents of the United States, United States domestic partnerships and corporations or estates or trusts other than foreign estates or trusts, each of whom own 10% or more of the total combined voting power of all classes of stock of the Company or the total value of the stock of (“United States shareholder”), the Company could be treated as a controlled foreign corporation” under Subpart F of the Code.

This classification would effect many complex results including the required inclusion by such United States shareholders in income of their pro rata share: of “Subpart F Income” (as specially defined by the Code) of the Company; of the Company’s earnings invested in U.S. property; and of earnings invested “excess passive assets” (as specifically defined by the Code). The Company, in addition, under Section 1248 of the Code, gain from the sale or exchange of common shares of the Company by a U.S. person who is or was a United States shareholder (as defined in the Code) at any time during the five years period ending with the sale or exchange is treated as ordinary dividend income to the extent of earnings and profits of the Company attributable to the stock sold or exchanged. Because of the complexity of Subpart F, and because it is not clear that the Company is a controlled foreign corporation, a more detailed review of these rules is outside of the scope of this discussion.

F.     Dividends and Paying Agents

Not applicable.

G.     Statements by Experts

Patrick G. Downey,P.Eng. of Patrick Downey & Associates Ltd. graduated with an Honours Degree of Bachelor of Science in Engineering from Queen University of Belfast, Ireland in 1982 and is a registered Professional Engineer (No. 18474) by the Association of Professional Engineers and Geoscientists of British Columbia and has worked as an Engineer for a total of 22 years since graduation from university.

Patrick Downey, by reason of education, affiliation with a professional association (as defined in NI 43-101) and past relevant work experience, fulfills the requirements to be a “qualified person” for the purposes of NI 43-101.

Patrick Downey is responsible for the preparation of the technical report entitled “Independent Technical Report on the Northmet Project” dated July 22, 2004 (the “Updated Technical Report”) relating to the Northmet Project property referenced herein and disclosure of same consented to in the Certificate of Author dated July 22, 2004.

H.     Documents on Display

All documents referred to in this Form 20-F are available for inspection at the office of the Company, listed below, during normal office hours.

Polymet Mining Corp.
#1116 – 925 West Georgia Street
Vancouver, British Columbia
V6C 3L2 Canada

The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended, and it files reports, registration statements and other information with the Securities and Exchange Commission (the "SEC").

The Company's reports, registration statements and other information can be inspected on the SEC's website at www.sec.gov, and such information can be inspected and copies ordered at the public reference facilities maintained by the SEC at the following locations:

Judiciary Plaza	500 West Madison
Room 1024	Suite 1400
Washington, DC 20549	Chicago, IL 60661

I.     Subsidiary Information

Not Applicable.

ITEM 11.     QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

The Company is exposed only to market risk from changes in foreign currency exchange, although the exposure is not considered sufficient to have a material effect on our results of

operations and financial condition. The Company’s only means of funding is by way of equity financing which would be completed in Canadian Funds. The result of which exposes the Company to foreign currency exchange rate risk as our reporting currency is the U.S. dollar. Polymet holds financial instruments in Canadian dollars. A depreciation of the Canadian dollar against the United States dollar will decrease the fair value and an appreciation of the Canadian dollar against the U.S. dollar will increase the fair value of such financial instruments.

The Company has no publicly or privately traded securities or market instruments aside from its own equity. The only publicly traded securities are the Common Shares of the Company, which trade on the TSX Venture Exchange. The Company has no debt instruments subject to interest payments, sales contracts, swaps, derivatives, or forward agreements or contracts, or inventory.

The Company has no currency or commodity contracts, and the Company does not trade in such instruments.

The Company has no cash flow or revenue from operations, the Company does not have currency or other market exposure to operating activity.

The Company has no debt instruments, which are subject to interest payments.

The Company periodically accesses the capital markets with the issuance of new shares to fund operating expenses, and the Company does not maintain significant cash reserves over periods of time that could be materially affected by fluctuations in interest rates or foreign exchange rates.

ITEM 12.     DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not Applicable.

ITEM 13.     DEFAULT, DIVIDEND ARREARAGES AND DELINQUENCIES –

None

ITEM 14.     MATERIAL MODIFICATIONS TO THE RIGHT OF SECURITY HOLDERS AND USE OF PROCEEDS

Option Re-pricing

On 5 May 2003, consent resolutions were approved to re-price the 541,052 previously granted options from CDN $0.25 to CDN $0.10 per share and to amend the expiry date to 17 March 2007, subject to regulatory approval.

Shareholder Rights Plan

Effective 4 December 2003, the Company adopted a Shareholder Rights Plan (“Rights Plan”), subject to the ratification by the Company's shareholders at a meeting to be held within six months of the date of the Rights Plan, such approval was received on May 28, 2004. Under the Rights Plan, the Company has issued one right for no consideration in respect of each outstanding common share of the Company to all holders of record of common shares on 4 December 2003. All common shares issued by the Company during the term of the Rights Plan will have one right represented by the certificates representing the common shares of the Company. The term of the Rights Plan is 10 years, unless the rights are earlier redeemed or exchanged. The Rights issued under the Rights Plan become exercisable only if a party acquires 20% or more of the Company's common shares without complying with the Rights Plan or without the approval of the Board of Directors of the Company.

Each Right entitles the registered holder thereof to purchase from the Company on the occurrence of certain events, one common share of the Company at the price of CDN$50 per share, subject to adjustment (the “Exercise Price”). However, if a Flip-in Event (as defined in the Rights Plan) occurs, each Right would then entitle the registered holder to receive, upon payment of the Exercise Price, that number of common shares that have a market value at the date of that occurrence equal to twice the Exercise Price. The Rights are not exercisable until the Separation Time as defined in the Rights Plan.

ITEM 15.     CONTROLS AND PROCEDURES

A.    Evaluation of Disclosure Controls and Procedures

The Company evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rule 13a-14(c) under the Securities Exchange Act of 1934, as amended) as of a date (the "Evaluation Date") within 90 days prior to the filing date of this report. Based upon that evaluation, the Chief Executive Officer concluded that, as of the Evaluation Date, the Company's disclosure controls and procedures were effective in timely alerting them to the material information relating to the Company (or the Company's consolidated subsidiaries) required to be included in the Company's periodic SEC filings.

B.     Changes in Internal Controls

There were no significant changes made in the Company's internal controls or, to the Company's knowledge, in other factors that could significantly affect these controls subsequent to the date of their evaluation.

ITEM 16A.    Audit Committee Financial Expert

As at the Company’s financial year ended January 31, 2004, the audit committee consisted of three directors, one of whom would be determined as a financial expert.

Ian Forrest

Mr. Forrest is a Chartered Accountant practicing in Geneva and specializing in finance, banking and tax consulting. He is a director of two Canadian public companies, Caledonian Mining Corporation and Mengold Resources Inc.

David Dreisinger

Dr. Dreisinger is a professor in the Faculty of Applied Science, Department of Metal and Materials Engineering, at the University of British Columbia and holds the prestigious Industrial Research Chair in Hydrometallurgy. In addition to his professorship, Dr. Dreisinger is a consultant to many of the major mining companies worldwide. Dr. Dreisinger is co-inventor of the PLATSOL™ process which management sees as the major discriminator in the technical success of the NorthMet project. Dr. Dreisinger will be responsible for guiding process related matters as the Company advances through feasibility study and operations.

ITEM 16B.     CODE OF ETHICS

During the Company’s current fiscal year the Board of Directors adopted it Corporate Governance Policy with included the Corporate Governance Mandate, Audit Committee Mandate, Compensation Committee Mandate and a Code of Ethics, in accordance with the requirements of this Annual Report.

The Company recently created a new and more informative website and is in the process of updating it to include its Corporate Governance Policy, Mandates and Code of Ethics on such site.

ITEM 16C.     PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following outlines the expenditures for accounting fees for the last two fiscal periods ended:

	January 31 2004	January 31 2003
Audit Fees	15,500	15,500
Audit Related Fees	0	0
Tax Fees	3,500	3,500
All Other Fees	0	0

PART III

ITEM 17.     FINANCIAL STATEMENTS

The Company's financial statements are stated in United States Dollars (USD$) and are prepared in accordance with U.S. and Canadian Generally Accepted Accounting Principles (GAAP); the application of which, in the case of the Company, conforms in all material respects for the periods presented with US GAAP, except as disclosed in footnotes to the financial statements.

The following financial statements and notes thereto required under ITEM #17 are attached hereto and found immediately preceding the signature page of this Form 20-F Annual Report.

Audited Financial Statements for Fiscal 2004/2003/2002 ended January 31^st.

ITEM 18.     FINANCIAL STATEMENTS

Not Applicable

ITEM 19.     EXHIBITS

1.	Certificate of Incorporation and Articles/By-Laws -- Incorporated by Reference to Form 20-FR, Form 20-F Annual Reports, and Form 6-K's --
2.	Instruments defining the rights of holders of equity or debt securities being registered. -- Refer to Exhibit No. 1 --
3.	Material Contracts: -- Incorporated by Reference to Form 20-FR, Form 20-F Annual Reports, and Form 6-K's --
4.	Foreign Patents: Not Applicable
5.	Diagram of Parent and Subsidiaries -- Incorporated by Reference to Form 20-FR, Form 20-F Annual Reports, and Form 6-K's –
6.	Technical Report dated July 22, 2004 prepared by Patrick Downey & Associates Ltd. Attached.
7.	Code of Ethics
8.	Other Exhibits: -- Incorporated by Reference to Form 20-FR, Form 20-F Annual Reports, and Form 6-K's --
12.1	Section 302 Certification of Chief Executive Officer
12.2	Section 302 Certification of Chief Financial Officer
13.1	Section 906 Certification of Chief Executive Officer
13.2	Section 906 Certification of Chief Financial Officer

SIGNATURES

The Registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and has duly caused and authorized the undersigned to sign this Annual Report on its behalf.

Dated: July 28, 2004.

POLYMET MINING CORP.

/s/ William Murray
Name: William Murray
Title: Chief Executive Officer

POLYMET MINING CORP.

An Exploration Stage Company

CONSOLIDATED FINANCIAL STATEMENTS

31 JANUARY 2004

U.S. Funds

F-1

AUDITORS’ REPORT

To the Shareholders of PolyMet Mining Corp.:

We have audited the consolidated balance sheets of PolyMet Mining Corp. as at 31 January 2004 and 2003 and the consolidated statements of shareholders’ equity, loss and cash flows for the years ended 31 January 2004, 2003 and 2002, and cumulative from inception (4 March 1981) through 31 January 2004. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in Canada and the United States. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at 31 January 2004 and 2003 and the results of its operations and cash flows for the years ended 31 January 2004, 2003 and 2002, and cumulative from inception (4 March 1981) through 31 January 2004 in accordance with Canadian generally accepted accounting principles.

Vancouver, B.C.	STALEY, OKADA & PARTNERS
30 March 2004	CHARTERED ACCOUNTANTS

COMMENTS BY AUDITORS FOR U.S. READER ON CANADA - U.S. REPORTING CONFLICT

In the United States, reporting standards for auditors require the addition of an explanatory paragraph (following the opinion paragraph) when financial statements are affected by future events, the outcome of which is indeterminable. As discussed in Note 1, the Company’s continued existence as a going concern is dependent upon the future economic success of its exploration and development activities, the Company’s ability to continue to secure adequate financing and the Company achieving a positive cash flow and profitable operations. Our report to the shareholders dated 30 March 2004, is expressed in accordance with Canadian reporting standards, which do not require a reference to such going concern considerations in the auditors’ report when the situation is adequately disclosed in the financial statements.

Vancouver, B.C.	STALEY, OKADA & PARTNERS
30 March 2004	CHARTERED ACCOUNTANTS

F-2

PolyMet Mining Corp.	Statement 1
An Exploration Stage Company
Consolidated Balance Sheet
As at 31 January
U.S. Funds

ASSETS		2004		2003
Current
Cash	$	495,551	$	3,187
Accounts receivable		21,881		6,216
Prepaid expenses		5,466		-
		522,898		9,403
Investments (Note 4)		253		253
Property, Plant and Equipment (Note 6)		501,786		41,971
	$	1,024,937	$	51,627
LIABILITIES
Current
Accounts payable	$	99,372	$	82,628
Continued Operations (Note 1)
SHAREHOLDERS’ EQUITY (DEFICIENCY)
Share Capital - Statement 2 (Note 7)
Authorized:
1,000,000,000 common shares without
Issued and fully paid:

	2004	2003
	44,089,554	31,755,026	shares		15,177,765		14,129,447
For cash
For property	902,500	902,500	shares		54,003		54,003
For stock-based
compensation	-	-	Shares		55,048		-
	44,992,054	32,657,526	shares		15,286,816		14,183,450
					(14,361,251	)	(14,214,451	)
Deficit - Cumulative Net Losses Since
Inception - Statement 2					925,565		(31,001	)
				$	1,024,937	$	51,627

ON BEHALF OF THE BOARD:

                                        “William Murray”                                        
Director

                                        “David Dreisinger”                                        
Director

- See Accompanying Notes -

F-3

PolyMet Mining Corp.	Statement 2
An Exploration Stage Company
Consolidated Statement of Shareholders’
Equity
U.S. Funds

	Common Shares
		Issued and Fully
	Authorized	Paid
	Shares	Shares		Amount			Deficit			Total
Balance -
31 January 2001	1,000,000,000	29,228,603	$	13,905,737		$	(12,587,010	)	$	1,318,727
Loss for the year
- Statement 3	-	-		-			(1,155,762	)		(1,155,762	)
Shares issued for
cash:
Private
placements	-	3,428,923		286,405			-			286,405
Less: Issuance
costs	-	-		(8,692	)		-			(8,692	)
Balance -
31 January 2002	1,000,000,000	32,657,526		14,183,450			(13,742,772	)		440,678
Loss for the year
- Statement 3	-	-		-			(471,679	)		(471,679	)
Balance -
31 January 2003	1,000,000,000	32,657,526		14,183,450			(14,214,451	)		(31,001	)
Loss for the year	-	-		-			(146,800	)		(146,800	)
Shares issued for
cash:
Private
placements	-	11,648,318		1,035,071			-			1,035,071
Less: Issuance
costs	-	-		(42,946	)		-			(42,946	)
Exercise of
warrants	-	486,610		40,808			-			40,808
Exercise of
options	-	89,600		5,210			-			5,210
Shares issued to
settle debt	-	50,000		3,634			-			3,634
Shares issued for
finders’ fee	-	60,000		6,541			-			6,541
Stock-based
compensation	-	-		55,048			-			55,048
Balance -
31 January 2004	1,000,000,000	44,992,054	$	15,286,816		$	(14,361,251	)	$	925,565

- See Accompanying Notes -

F-4

PolyMet Mining Corp.	Statement 3
An Exploration Stage Company
Consolidated Statement of Loss
For the Years Ended 31 January
U.S. Funds

										Cumulative
										From
										Inception
										(4 March 19
										81		)
										Through
										31 January
		2004			2003			2002			2004
General and Administrative
Administration fees and wages	$	84,508		$	143,146		$	259,606		$	2,048,352
Professional fees		58,806			27,358			59,330			702,066
Stock-based compensation expense		55,048			-			-			55,048
Travel and automotive		25,278			10,074			33,987			316,635
Consulting fees		21,278			27,267			47,226			188,248
Transfer agent and filing fees		20,221			7,205			6,510			157,741
Office and telephone		9,106			51,942			51,685			596,807
Rent		8,767			26,158			30,376			727,499
Shareholders’ information		5,032			14,880			72,120			471,848
Interest expense (income), net		380			15,413			(25,973	)		(517,776	)
Amortization		275			5,606			20,517			109,431
Licenses, dues and taxes		-			1,882			3,072			93,915
Investor relations and financing		-			955			36,175			659,139
Conventions		-			-			445			68,611
Property search		-			-			-			124,454
Bad debts		-			-			-			37,493
Loss Before the Undernoted		288,699			331,886			595,076			5,839,511
Other Expenses (Income)
Pre-feasibility exploration costs
- Schedule 1		91,616			112,318			606,162			9,020,542
Loss (gain) on disposal of investments		-			5,717			(45,476	)		(378,115	)
Write down of investments to market value		-			-			-			197,884
Gain on foreign exchange conversion		(22,230	)		-			-			(22,230	)
Loss (gain) on sale of resource properties		(219,925	)		-			-			(337,219	)
Loss (gain) on sale of property, plant and		8,640			21,758			-			40,878
		(141,899	)		139,793			560,686			8,521,740
Loss for the Year	$	146,800		$	471,679		$	1,155,762		$	14,361,251
Loss per Share	$	(0.00	)	$	(0.01	)	$	(0.04	)
Weighted Average Number of Shares		35,452,26			32,657,52			31,943,55

- See Accompanying Notes -

F-5

PolyMet Mining Corp.	Statement 4
An Exploration Stage Company
Consolidated Statement of Cash Flows
For the Years Ended 31 January
U.S. Funds

										Cumulative
										From
										Inception
										(4 March 19
										81		)
										Through
										31 January
		2004			2003			2002			2004
Operating Activities
Loss for the year	$	(146,800	)	$	(471,679	)	$	(1,155,762)		$	(14,361,251	)
Adjustments to reconcile loss to net cash
Amortization		275			6,321			22,233			119,839
Stock-based compensation expense		55,048			-			-			55,048
Loss (gain) on disposal of investments		-			5,717			(45,476	)		(378,115	)
Write-down of investments to market		-			-			-			197,884
Loss (gain) on sale of resource		(219,925	)		-			-			(337,219	)
Loss (gain) on sale of property, plant		8,640			21,758			-			40,878
Changes in current assets and liabilities
Accounts receivable		(15,665	)		16,021			(9,540	)		(21,881	)
Prepaid expenses		(5,466	)		18,649			2,619			(5,466	)
Accounts payable		20,378			19,583			(359,203	)		103,006
Net cash used in operating
activities		(303,515	)		(383,630	)		(1,545,129	)		(14,587,277	)
Financing Activities
Share capital - for cash		1,044,684			-			277,713			15,174,131
Net cash provided by financing activities		1,044,684			-			277,713			15,174,131
Investing Activities
Purchase of property, plant and equipment		(502,061	)		-			(2,456	)		(755,798	)
Proceeds on disposal of property, plant		33,331			48,301			-			93,295
Proceeds on disposal of investments		-			15,908			51,540			842,009
Proceeds on sale of resource property		219,925			-			-			219,925
Purchase of investments		-			-			-			(490,734	)
Net cash used in investing activities		(248,805	)		64,209			49,084			(91,303	)
Net Increase (Decrease) in Cash		492,364			(319,421	)		(1,218,332	)		495,551
Cash Position - Beginning of year		3,187			322,608			1,540,940			-
Cash Position - End of Year	$	495,551		$	3,187		$	322,608		$	495,551
Schedule of Non-Cash
Investing and Financing
Activities
Share capital issued for debt settlement	$	3,634		$	-		$	-		$	3,634
Share capital issued for resource property	$	-		$	-		$	-		$	54,003
Investments received on sale of resource
properties	$	-		$	-		$	-		$	171,297

- See Accompanying Notes -

F-6

PolyMet Mining Corp.	Schedule 1
An Exploration Stage Company
Consolidated Schedule of Pre-Feasibility
Exploration Costs
For the Years Ended 31 January
U.S. Funds

												Cumulative
												From
												Inception
												(4 March
												1981)
		NorthMet		Marathon								Through
		Minnesota		Ontario								31 January
		U.S.A.		Canada		2004		2003		2002		2004
Direct
Amortization	$	-	$	-	$	-	$	715	$	1,716	$	10,408
Camp and general		4,750		-		4,750		6,745		64,569		795,176
Cost recovery		-		-		-		-		-		(295,607	)
Drilling		-		-		-		20,726		80,123		2,125,352
Environmental		-		-		-		-		2,172		394,144
Field transportation		-		-		-		3,963		2,300		573,658
Geological and
geophysical		-		-		-		-		49,310		1,783,331
Government grants		-		-		-		-		-		(111,961	)
Land lease, taxes and
licenses		-		1,154		1,154		1,851		2,884		387,503
Metallurgical		10,712		-		10,712		1,545		81,195		1,741,214
Mine planning		-		-		-		-		-		203,720
Staking and periodic
option payments
- Cash		75,000		-		75,000		76,773		95,361		1,075,404
- Shares		-		-		-		-		-		54,003
Roadwork		-		-		-		-		-		112,975
Sampling, survey and
studies		-		-		-		-		226,532		1,145,059
Total Costs for the
Year		90,462		1,154		91,616		112,318		606,162		9,994,379
Option Payments and
Sales Proceeds		-		-		-		-		-		(973,837	)
Net Costs for the Year	$	90,462	$	1,154	$	91,616	$	112,318	$	606,162	$	9,020,542

- See Accompanying Notes -

F-7

PolyMet Mining Corp.
An Exploration Stage Company
Notes to Consolidated Financial Statements
31 January 2004
U.S. Funds

1. Continued Operations These consolidated financial statements have been prepared on the basis of accounting principles applicable to a “going concern”, which assumes that the Company will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of operations. The Company has incurred significant operating losses over the past several fiscal years, has cumulative net losses since inception of $14,361,251, has significant expenditure requirements to continue its exploration and development activities on the NorthMet property and has significant cash requirements to complete its option agreement on the Cleveland Cliffs property, plant and equipment. These consolidated financial statements do not reflect adjustments that would be necessary if the going concern assumption were not appropriate because management believes that the actions already taken or planned, will mitigate the adverse conditions and events which raise doubts about the validity of the going concern assumption used in preparing these consolidated financial statements. If the going concern assumption were not appropriate for these consolidated financial statements, then adjustments would be necessary to the carrying value of the assets and liabilities, the reported revenue and expenses and the balance sheet classifications used.

2.	Significant Accounting Policies
	a)	Consolidation These consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, PolyMet Mining, Inc. and Fleck Minerals, Inc. The purchase method of accounting is used to consolidate these subsidiaries. PolyMet Mining, Inc. was incorporated in Minnesota, U.S.A. to hold the NorthMet Lease (Note 5a).

b) Mineral Operations The Company is in the process of exploring its mineral properties and has not yet determined whether these properties contain ore reserves that are economically recoverable. Exploration expenses incurred prior to determination of the feasibility of mining operation, periodic option payments and administrative expenses are expenses are expended as incurred. Mineral property acquisition costs and exploration and development expenditures incurred subsequent to the determination of the feasibility of mining operation are deferred until the property is placed into production, sold, allowed to lapse or abandoned. Acquisition costs include cash and fair market value of common shares. These capitalized costs will be amortized over the estimated life of the property following commencement of commercial production or written off if the property is sold, allowed to lapse or abandoned or when an impairment of values has occurred. Ownership in mineral interests involves certain inherent risks due to the difficulties of determining the validity of certain claims as well as the potential for problems arising from the frequently ambiguous conveyance history characteristic of many mineral interests. The Company has investigated ownership of its mineral interests and, to the best of its knowledge, ownership of its interests are in good standing.

F-8

PolyMet Mining Corp.
An Exploration Stage Company
Notes to Consolidated Financial Statements
31 January 2004
U.S. Funds

2.	Significant Accounting Policies - Continued
	c)	Amortization The Company provides for amortization of its property, plant and equipment as follows: Furniture and equipment - Straight-line over 5 - 10 years Computers - Straight-line over 5 years Assets are not amortized by the Company until they are put into use.
	d)	Investments The Company carries its long-term portfolio investments at cost. Investments are written down to net realizable value when there has been a loss in value of the investment, which is other than a temporary decline.
	e)	Loss Per Share Basic earnings (loss) per share is computed by dividing income (loss) available to common shareholders by the weighted average number of common shares outstanding during the year. The computation of diluted earnings per share assumes the conversion, exercise or issuance would have a dilutive effect on earnings per share. The dilutive effect of convertible securities is reflected in diluted earnings per share by application of the “if converted” method. The dilutive effect of outstanding options and warrants and their equivalents is reflected in diluted earnings per share by application of the treasury stock method.
	f)	Conversion of Foreign Currency The accounts of the Company are prepared in U.S. funds and the company’s Canadian operations are translated into U.S. dollars as follows: Monetary assets and liabilities at year-end rates, All other assets and liabilities at historical rates, and Revenue and expense items at the average rate of exchange prevailing during the year. Exchange gains and losses arising from these transactions are reflected in income or expense in the year.
	g)	Environmental Expenditures The operations of the Company 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. Both the likelihood of new regulations and their overall effect upon the Company vary greatly and are not predictable. The Company’s policy is to meet or, if possible, surpass standards set by relevant legislation, by application of technically proven and economically feasible measures. Environmental expenditures that relate to ongoing environmental and reclamation programs are charged against earnings as incurred or capitalized and amortized depending on their future economic benefits. Estimated future removal and site restoration costs, when the ultimate liability is reasonably determinable, are charged against earnings over the estimated remaining life of the related business operation, net of expected recoveries.

F-9

PolyMet Mining Corp.
An Exploration Stage Company
Notes to Consolidated Financial Statements
31 January 2004
U.S. Funds

2.	Significant Accounting Policies - Continued
	h)	Management’s Estimates The preparation of financial statements in conformity with Canadian generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reported periods. Actual results could differ from those estimates.
	i)	Share Capital

i)	The proceeds from the exercise of stock options, warrants and escrow shares are recorded as share capital in the amount for which the option, warrant or escrow share enabled the holder to purchase a share in the Company.
ii)	Share capital issued for non-monetary consideration is recorded at an amount based on fair market value reduced by an estimate of transaction costs normally incurred when issuing shares for cash, as determined by the board of directors of the Company.

j) Income Taxes Income taxes are calculated using the asset and liability method. Temporary differences arising from the difference between the tax basis of an asset or liability and its carrying amount on the balance sheet are used to calculate future income tax liabilities or assets. Future income tax liabilities or assets are calculated using tax rates anticipated to apply in the periods that the temporary differences are expected to reverse. Temporary differences arising on acquisitions result in future income tax liabilities or assets. The benefits of losses available for carry-forward to future years for tax purposes are recognized to the extent that realization of such benefits is more likely than not.

k) Stock-Based Compensation – Change in Accounting Policy The Company adopted the recommendations of CICA Handbook Section 3870, Stock-Based Compensation and Other Stock-Based Payments, effective for all awards granted on or after 1 February 2003. This established standards for the recognition, measurement and disclosure of stock-based compensation and other stock-based payments made in exchange for goods and services. As encouraged by CICA Handbook Section 3870, the Company has enacted prospectively early adoption of the fair value based method of accounting for awards issued to employees for the fiscal year beginning 1 February 2003. The new standard requires that all stock-based awards made to employees and non-employees be measured and recognized using a fair value based method. In prior years, stock-based compensation expense was only recognized when stock-based compensation awards were made to non-employees, while pro-forma disclosure was acceptable for awards made to employees.

F-10

PolyMet Mining Corp.
An Exploration Stage Company
Notes to Consolidated Financial Statements
31 January 2004
U.S. Funds

2.	Significant Accounting Policies - Continued
	l)	Cash and Cash Equivalents For purposes of reporting cash flows, the Company considers cash and cash equivalents to include amounts held in banks and highly liquid debt investments with remaining maturities at point of purchase of three months or less. The Company places its cash and cash investments with institutions of high credit worthiness. At times, such investments may be in excess of federal insurance limits.

3. Fair Value of Financial Instruments The carrying value of cash, accounts receivable, accounts payable and investments (Note 4) approximates the fair value of these financial instruments due to their short-term maturity or capacity of prompt liquidation.

4. Investments Details are as follows:

		Market		2004		2003
		Value
American Platinum Inc.	$	-	$	1	$	1
Aloak Corp.		25		252		252
	$	25	$	253	$	253

	These investments represent minority interests of less than 10% in the respective companies.
5.	Resource Property Agreements The Company’s material resource property agreements are as follows:

a) NorthMet, Minnesota, U.S.A. - Lease By an agreement dated 4 January 1989 and a subsequent amendment, the Company entered into a lease agreement with USX Corporation (“USX”) on certain lands in St. Louis County, Minnesota. The term of the lease is 20 years and calls for total annual lease payments of $1,475,000. All lease payments have been paid or accrued to 31 January 2004. The lessor has indicated that the Company does not have the required appropriate insurance coverage pursuant to the terms of the agreement. The Company intends to acquire appropriate insurance coverage as it re-activates field programs and feasibility study work in the 2005 fiscal year. The agreement requires future annual lease payments of $75,000 by 4 January 2005 and $150,000 from 4 January 2006 to 2009.

F-11

PolyMet Mining Corp.
An Exploration Stage Company
Notes to Consolidated Financial Statements
31 January 2004
U.S. Funds

5.	Resource Property Agreements - Continued
	a)	NorthMet, Minnesota, U.S.A. – Lease, continued The Company can, at its option, terminate the lease at any time by giving written notice to the lessor not less than 90 days prior to the effective termination date or can extend the 20-year term by continuing to make $75,000 annual lease payments on each successive anniversary date. The lease payments are considered advance royalty payments and shall be deducted from future production royalties payable to the lessor, which range from 3% to 5% based on the net smelter return received by the Company. The Company’s recovery of the advance royalty payments is subject to the lessor receiving an amount not less than the amount of the annual lease payment due for that year. Subsequent to the year, USX assigned the lease to RGGS Land & Minerals Ltd., L.P.
	b)	Cleveland Cliffs Option, Minnesota, U.S.A. By a Memorandum of Understanding dated 5 December 2003, the Company has obtained an option to acquire certain equipment from Cleveland Cliffs of Cleveland, Ohio (“Cliffs”) located near the Company’s NorthMet projects as well as certain other infrastructure facilities. Under the terms of the agreement Cliffs will maintain available designated elements of the facility while the Company develops its feasibility study on the NorthMet project (Note 5a). As consideration for the exclusive option, the Company has agreed to a cash payment of $500,000 by 31 January 2004 (paid) and the issuance to Cliffs of 1,000,000 common shares (issued 30 March 2004) to maintain the exclusive rights until 30 June 2006. Within six months of completion of a bankable feasibility study for the NorthMet project the Company shall complete the acquisition for agreed upon consideration. In due course, the Company will assume all environmental liabilities and obligations relating to those facilities and lands, with a view to Cliffs being released therefrom by the State of Minnesota. The Memorandum of Understanding is subject to approval by the Board of Directors of the Company (obtained) and by Canadian regulatory authorities (obtained). The parties are currently drafting a formal option agreement (signed 16 February 2004). Either party may terminate the agreement if the property transfers have not occurred by 30 June 2006 unless a written extension has been agreed upon. Such extension may not be unreasonably refused.

F-12

PolyMet Mining Corp.
An Exploration Stage Company
Notes to Consolidated Financial Statements
31 January 2004
U.S. Funds

5.	Resource Property Agreements - Continued
	c)	Other properties - Marathon, Ontario, Canada By an agreement dated 6 November 2000, the Company granted a third party the option to acquire a 50% working interest in certain leased mineral properties located in Ontario, Canada referred to as the Marathon property. During the year ended 31 January 2004, the Company received termination notification from the optionee. By an agreement dated 12 September 2003, which closed on 21 January 2004, the Company sold the Marathon leases and related land for proceeds of $250,000. Details of the related gain (loss) on sale are as follows:

	Marathon		Marathon
	Leases		Land			Total
Proceeds	$	219,925	$	30,075		$	250,000
Cost		-		(38,582	)		(38,582	)
Gain (loss) on sale	$	219,925	$	(8,507	)	$	211,418

6. Property, Plant and Equipment Details are as follows:

					2004		2003
				Accumulated		Net Book		Net Book
		Cost		Amortization		Value		Value
Cleveland Cliffs option (Note 5 b)	$	500,000	$	-	$	500,000	$	-
Land		-		-		-		38,582
Furniture and equipment		2,061		275		1,786		1,017
Computers		-		-		-		2,372
	$	502,061	$	275	$	501,786	$	41,971

7.	Share Capital
	a)	The share issuances during 2004 included three private placements for a total of 11,648,318 shares at prices ranging from CDN $0.0525 to CDN $0.15 per share for proceeds of $1,035,071. Each of the private placements included share purchase warrants (Note 7d). Share issuance costs in the amount of $42,946 were incurred in respect of these private placements. No shares were issued during the year ended 31 January 2003.
	b)	The Company has a stock option plan that covers its employees and directors. The options are granted for varying terms ranging from two to five years. During the year, the Company increased the maximum number of common shares under the stock option plan to 3,754,574 and granted 2,591,500 (2003 - 550,000) options and re-priced 541,052 options.

F-13

PolyMet Mining Corp.
An Exploration Stage Company
Notes to Consolidated Financial Statements
31 January 2004
U.S. Funds

7.	Share Capital - Continued
		Details of stock option activity is as follows:

	2004		2003
	Options		Options
Outstanding - Beginning of year	1,851,052		1,858,552
Granted	2,591,500		550,000
Re-priced and extended expiry	541,052		-
Cancelled options for re-pricing
and extension	(541,052	)	-
Forfeited or expired	(810,000	)	(557,500	)
Exercised	(89,600	)	-
Outstanding - End of year	3,542,952		1,851,052

As at 31 January 2004, the following director, former director and employee share purchase options were outstanding:

	Prior
	Exercise	Exercise
	Price	Price
Expiry Date	(CDN)	(CDN)	Number
17 March 2007	$ 0.25	$ 0.10	441,052
17 March 2007	$ 0.46	$ 0.10	100,000
7 January 2008	-	$ 0.08	410,400
18 July 2008	-	$ 0.10	1,641,500
3 October 2008	-	$ 0.13	950,000
			3,542,952

As at 31 January 2004 all options had vested and were exercisable, except for the 950,000 options granted during the year at CDN $0.13 per share. These options may not be exercised until approved by the shareholders at the next annual general meeting. The weighted average exercise price per option was CDN $0.11 per share and the weighted average remaining contractual life of the options was 4.26 years.

c)

Stock-Based Compensation During the year ended 31 January 2004, the Company re-priced 541,052 options to CDN $0.10 and issued 1,641,500 options to directors, officers, and employees with an exercise price of CDN $0.10 per option. The fair value of stock option compensation is $55,048, which has been recorded in the accounts of the Company. The weighted average grant-date fair value of options granted is CDN $0.05. This value is estimated at the date of the grant using the Black-Scholes Option Pricing Model with the following weighted average assumptions:

Risk-free interest rate	2.68%
Expected dividend yield	Nil
Expected stock price volatility	103%
Expected option life in years	4 to 5

F-14

PolyMet Mining Corp.
An Exploration Stage Company
Notes to Consolidated Financial Statements
31 January 2004
U.S. Funds

7.	Share Capital - Continued
		During the year ended 31 January 2004, the Company also granted an additional 950,000 options at CDN $0.13 per share. These options are not exercisable until shareholder approval is obtained at the next annual general meeting. Accordingly, the related fair value of stock-based compensation of $70,265 will not be recorded until the grant is approved and the options become exercisable. During the prior year ended 31 January 2003, the Company issued 500,000 options to a director with an exercise price of CDN $0.08 and 50,000 options to an officer with an exercise price of CDN $0.10 per option. Had the fair value based method been used to value these options, the Company’s loss and loss-per-share amounts for the year would have been adjusted to the pro forma amounts as follows:

		2003
As Reported	$	471,679
Pro forma	$	489,992
Loss Per Share
As Reported	$	0.01
Pro forma	$	0.01

The fair value of each option granted was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:

	2003
Risk-free interest rate	4.08%
Expected dividend yield	NIL
Expected stock price volatility	93%
Expected life of options	5 years

	The weighted average grant-date fair value of options granted in the prior year was CDN $0.05 per option.
d)	Details of stock purchase warrant activity is as follows:

	2004		2003
	Warrants		Warrants
Outstanding - Beginning of year	3,428,923		3,428,923
Issued - April 2003 private placement	1,904,760		-
- July 2003 private placement	1,373,446		-
- January 2004 private placement	3,498,333		-
Exercised - April 2003 private placement	(486,610	)	-
Outstanding - End of year	9,718,852		3,428,923

As at 31 January 2004, the following share purchase warrants were outstanding:

	Per Common
	Share			Common
	Exercise Price		Warrants	Share
Expiry Date		(CDN)	Outstanding	Entitlement
16 November 2006	$	0.20	3,428,923	3,428,923
8 May 2004	$	0.10	1,418,150	1,418,150
24 September 2005 (i)	$	0.15	1,373,446	1,373,446
2 February 2006 (ii)	$	0.25	3,498,333	3,498,333
			9,718,852	9,718,852

(i)	The exercise price in the first year to 24 September 2004 at $0.15 per common share and in the second year to 24 September 2005 at $0.17 per common share.
(ii)	The exercise price is $0.25 per share and the expiry date is 2 February 2006, provided that should the Company’s shares trade on the TSX Venture Exchange at over CDN$0.50 per share for over 25 consecutive trading days, the warrants will terminate 30 days thereafter.

e) Shareholder Rights Plan Effective 4 December 2003, the Company adopted a Shareholder Rights Plan (“Rights Plan”), subject to the ratification by the Company's shareholders at a meeting to be held within six months of the date of the Rights Plan. Under the Rights Plan, the Company has issued one right for no consideration in respect of each outstanding common share of the Company to all holders of record of common shares on 4 December 2003. All common shares issued by the Company during the term of the Rights Plan will have one right represented by the certificates representing the common shares of the Company. The term of the Rights Plan is 10 years, unless the rights are earlier redeemed or exchanged. The Rights issued under the Rights Plan become exercisable only if a party acquires 20% or more of the Company's common shares without complying with the Rights Plan or without the approval of the Board of Directors of the Company. Each Right entitles the registered holder thereof to purchase from the Company on the occurrence of certain events, one common share of the Company at the price of CDN$50 per share, subject to adjustment (the “Exercise Price”). However, if a Flip-in Event (as defined in the Rights Plan) occurs, each Right would then entitle the registered holder to receive, upon payment of the Exercise Price, that number of common shares that have a market value at the date of that occurrence equal to twice the Exercise Price. The Rights are not exercisable until the Separation Time as defined in the Rights Plan.

F-15

PolyMet Mining Corp.
An Exploration Stage Company
Notes to Consolidated Financial Statements
31 January 2004
U.S. Funds

8.	Related Party Transactions In addition to transactions disclosed elsewhere in these financial statements, the Company has conducted transactions with officers, directors and persons or companies related to directors as follows:
	b)	Paid or accrued amounts as follows:

	2004		2003			2002
Administration fees and
wages	$	52,388	$	103,288	$	188,710

	b)	As at 31 January 2004, accounts payable included $NIL (2003 - $18,750) owed to a director.
	c)	Issued 2,143,906 shares and 1,881,476 warrants to related parties on private placements during the year ended 31 January 2004 for cash in the amount of $99,925.
9.	Income Taxes
	a)	The Company has approximately CDN $3,769,000 of resource related expenditures in Canada that may be carried forward indefinitely and used to reduce prescribed taxable income in future years. The Company’s U.S. subsidiary has approximately $5,416,000 of resource related expenditures, which may be used to reduce prescribed taxable income in future years. The benefit of these expenditures has not been recorded in the accounts.
	b)	The Company and its U.S. subsidiary also have tax losses carried forward available to reduce future taxable income. The benefit of these losses has not been recorded in the accounts and expire as follows:

	Parent
	Company		U.S.
	Amount		Subsidiary
Year		(CDN)	Amount
2005	$	-	$	8,700
2006		-		14,500
2007		728,700		17,300
2008		481,100		20,100
2009		296,600		23,100
2010		151,300		26,500
2011		324,000		27,900
2012		-		30,000
2018		-		217,600
2019		-		392,500
2020		-		496,700
2021		-		414,400
2022		-		367,400
2023		-		247,400
2024		-		124,500
	$	1,981,700	$	2,428,600

F-16

PolyMet Mining Corp.
An Exploration Stage Company
Notes to Consolidated Financial Statements
31 January 2004
U.S. Funds

10.	Differences Between Canadian and United States Generally Accepted Accounting Principles These consolidated financial statements are prepared in accordance with accounting principles generally accepted in Canada. The U.S. Securities and Exchange Commission requires that financial statements of foreign companies contain a reconciliation presenting the statements on the basis of accounting principles generally accepted in the U.S. Any differences in accounting principles as they pertain to the accompanying consolidated financial statements are not material except as follows:
	a)	Under Canadian generally accepted accounting principles, long-term portfolio investments may be reported at a cost that is in excess of market value where it is reasonable to assume that the decline in market value may be of a temporary nature. Under U.S. generally accepted accounting principles, the investments are carried at market value on an individual basis and the adjustment is credited or charged to comprehensive income.
	b)	Under Canadian generally accepted accounting principles, mineral properties may be carried at cost and written-off or written-down if the properties are abandoned, sold or if management decides not to pursue the properties. Under U.S. generally accepted accounting principles, the Company would periodically review and obtain independent reports in determining adjustments to the mineral properties and records properties at net realizable value. The Company has not yet obtained an independent report and accordingly for U.S. purposes, the properties have been written off. In the past the Company followed the method described above. During the prior year, the Company changed the accounting policy (Note 2), therefore there are no differences between Canadian and United States generally accepted accounting principles.

The effects of the differences in accounting principles on investments, net loss and comprehensive loss are as follows:

	2004			2003			2002
Investments - Canadian basis	$	253		$	253		$	21,878
Adjustment to market		(228	)		(228	)		(2,545	)
Investments - U.S. basis	$	25		$	25		$	19,333
		2004			2003			2002
Contra-equity account for unrealized gains
(losses) on investments
- Canadian basis	$	-		$	-		$	-
Unrealized holding gain (loss) on investments
- Prior years		(228	)		(2,545	)		68,153
- Current year		-			2,317			(70,698	)
Contra-equity account for unrealized gains
(losses) on investments - U.S. basis	$	(228	)	$	(228	)	$	(2,545	)
Net loss - Canadian and U.S. Basis	$	146,800		$	471,679		$	1,155,762
Adjustment of portfolio investments to market		-			(2,317	)		70,698
Net loss and comprehensive loss - U.S. basis	$	146,800		$	469,362		$	1,226,460

F-17

PolyMet Mining Corp.
An Exploration Stage Company
Notes to Consolidated Financial Statements
31 January 2004
U.S. Funds

11. Segmented Information The Company is engaged in the mineral exploration industry and conducts its exploration programs in Canada and the U.S. Segmented information on a geographic basis is as follows:

2004	Canada		U.S.		Consolidated
Segment operating loss	$	22,327	$	124,473	$	146,800
Identifiable assets	$	519,437	$	505,500	$	1,024,937
2003
Segment operating loss	$	95,217	$	376,462	$	471,679
Identifiable assets	$	40,001	$	11,626	$	51,627

12.	Subsequent Events In addition to items disclosed elsewhere in these financial statements, the Company conducted the following transactions after 31 January 2004:
	a)	The Company issued 145,400 common shares on exercise of options at CDN $0.08 for proceeds of approximately $8,750.
	b)	The Company issued 95,238 common shares on exercise of warrants at CDN $0.10 for proceeds of approximately $7,150.
	c)	The Company granted 620,000 options at CDN $0.40 to employees and officers, expiring 3 March 2008. The options are subject to shareholder approval and are not exercisable until approved at the next annual general meeting.
	d)	Subject to shareholder approval, at the next annual general meeting, the maximum number of shares under the Company’s stock option plan will be revised to a rolling 10% of the Company’s issued and outstanding shares.

F-18

EX-6

P. DOWNEY AND ASSOCIATES

INDEPENDENT TECHNICAL REPORT

on the

NorthMet Project

Located in N-E Minnesota, USA, near the town of Babbitt

     Technical Update of the NorthMet Project Incorporating the
established Cliffs-Erie crushing/milling/concentration facilities with
the Hydrometallurgical processes described in the May 2001
Pre-feasibility study.

for

POLYMET MINING INC.

PATRICK G. DOWNEY, P.ENG
P. DOWNEY AND ASSOCIATES

July 2004

1

Table of Contents

1.	Title Page
2.	Table of Contents
3.	Summary
4.	Introduction and Terms of Reference
5.	Disclaimer
6.	Property description and Location
7.	Accessibility, Climate, Local Resources, Infrastructure & Physiography
8.	History
9.	Geological setting
10.	Deposit Types
11.	Mineralization
12.	Exploration
13.	Drilling
14.	Sampling Method and Approach
15.	Sample Preparation, Analysis and Approach
16.	Data Verification
17.	Adjacent Properties
18.	Mineral Processing and Metallurgical Testing
19.	Mineral Resource and Mineral Reserve Estimates
20.	Other Relevant Data and Information
21.	Interpretation and Conclusions
22.	Recommendations
23.	References
24.	Date
25.	Additional Requirements for Technical Reports on Development Properties and Production Properties
26.	Illustrations

Appendix I	Mining- Independent Mining Consultant update report May 2003
Appendix II	Penguin Automated Systems Inc. - update report on capital and
	operating costs for process plant and infrastructure; using the Cliffs-
	Erie plant

2

GLOSSARY OF TERMS

Au	Gold
Co	Cobalt
Corps	United States Army Corps of Engineers
Cu	Copper
Definition Study Estimate	Early Estimate of Capital and Operating Costs
DNR	The Minnesota Department of Natural Resources
EIS	Environmental Impact Statement
Fleck	Fleck Resources
G & A	General and Administrative
IMC	Independent Mining Consultants Inc. of Tucson
IPGMT	International PGM Technologies Ltd.
Lakefield	Lakefield Research Limited
NRRI	Minnesota Natural Resources  Research Institute
NaHS	Sodium Hydrosulphide
Ni	Nickel
North	North Limited
NSR	Net Smelter Return
PASI	Penguin Automated Systems Inc.
PCA	Pollution Control Agency of Minnesota
PGM	Platinum Group Metals
PlatSol™ Process	Patented Pressure Oxidation Leach Process
PolyMet	PolyMet Mining Corp.
RC	Reverse Circulation Drilling
Rio Tinto	Rio Tinto Limited
SO2	Sulphur Dioxide
SRK	SRK Consulting
SX-EW	Solvent Extraction and Electro-Winning
The Company	PolyMet Mining Corp.
The Project	NorthMet Project
USX	US Steel

3

3.

Summary PolyMet Mining Corporation ("PolyMet") is currently reviewing development options for their wholly owned NorthMet project located in St. Louis County, Minnesota. The NorthMet Project (the "Project") is a large, polymetallic disseminated magmatic sulphide deposit containing copper, nickel, palladium, platinum, cobalt, gold and silver. It is located in northern Minnesota, USA, close to the Canadian border in the Duluth Complex (the world´s fourth largest layered mafic intrusive complex) and is approximately ten kilometers from large LTV Steel's Mine (now called "Cliffs-Erie") iron ore mill/concentrator with its established infrastructure. The Duluth Complex is a similar geologic setting to the very large Ni-Co-PGM Noril'sk deposit in Russia. NorthMet is one of the largest undeveloped nonferrous metals projects in North America. The geological resource at a 0.2% copper cut-off amounts to greater than 900 million tons containing low grades of copper, nickel, cobalt, platinum group metals ("PGM's"), silver and gold. The NorthMet deposit was originally targeted for copper and nickel values. With low grades and poor quality concentrates, NorthMet and other neighbouring deposits remained undeveloped. The key to advancing the NorthMet project was the development of a propriety hydrometallurgical process for the treatment of a bulk concentrate on site. This single step process, now trademarked as the PlatSol™ Process, has the advantage of extracting the PGM's in addition to the base metals. After dissolution of the metals in the PlatSol™ Process step of the process, they can then be individually extracted on site -thereby avoiding dependence on off-site smelters. A successful pilot plant using the PlatSol™ Process on NorthMet ores was completed at Lakefield Research in 2000. An independent Pre-feasibility study was subsequently completed in April 2001 under the supervision of Independent Mining Consultants ("IMC") of Tuscon, Arizona with input from several international consulting firms including AMEC Mining and Metals ("Amec"). This study, for a 50,000 tonnes per day ("tpd") mine, demonstrated unacceptable project economics due to low mined grades and high capital costs. Subsequently, due to funding restraints, PolyMet was not able to optimize the study. The reader is requested to refer to the PolyMet Pre-feasibility study of April 2001 which can be found on the SEDAR website. In March 2003, new management took over PolyMet to complete optimization work and to study ways of improving project economics. A new technical program, supervised by the author, and a project execution strategy was completed in July 2003. Recommendations included: Re-working the mining data base to produce a mine plan at the 25,000 tpd levelto increase mined head-grade. Simplification of the process circuits by only producing copper metal on site and producing separate PGM's and nickel hydroxide concentrates for off-sitetreatment. Acquiring the nearby Cliffs-Erie mothballed crusher/mill/concentrator and all ofthe land needed for stockpiles, tailings disposal, water supply and storage. This

4

facility also provides preferential electricity rates and includes a fully establishedinfrastructure of roads, rail, warehouses, offices, workshops and spare parts. SeeFigure 3.1.
• Utilizing a mining contractor, to avoid up front capital on the mining fleet.

This rework of the Pre-feasibility material indicated that a technically simpler project, with lower daily tonnage, higher grades and considerably lower up front capital could result in a viable economic project. PolyMet subsequently completed an option agreement with Cleveland Cliffs Inc. to acquire key buildings, land and equipment from the recently closed Cliffs-Erie mill/concentrator.

Figure 3.1 - Aerial photograph of the Cliffs-Erie facilities:

The area within the black line has been optioned by PolyMet

Cliffs-Erie was built in 1955 and processed 100,000 tpd of taconite ore prior to closure in 2000.

This report deals mainly with the option agreement dated February 16, 2004 whereby PolyMet has the right to acquire certain key assets of the Cliffs-Erie process plant and infrastructure (outlined in the above photograph) which are located within 10 km of PolyMet's proposed open pit. The focus of this report is on the integration of the established Cliffs-Erie infrastructure plus existing crushing, milling and flotation circuits with a new hydrometallurgical plant for on site metal recovery. In addition certain process simplifications have been made to the 2001 Pre-Feasibility. The 2001 study was based on producing nickel and cobalt metal. The current flowsheet is based on production of separate nickel metal hydroxides and PGM hydroxides, thereby greatly simplifying the process circuit.

No new work has been done on geology, exploration or resource definition. However certain relevant sections of the 2001 PolyMet Pre-feasibility study have been included for ease of reference.

5

Re-use of this "brownfields" facility and its established infrastructure could, by current estimate, enable (fully loaded) capital cost savings of approximately US$196 million, based on the figures produced for the 2001 Pre-Feasibility Study. The elimination of the circuits to produce nickel metal and a cobalt salt on site could also reduce up-front capital by approximately $60 million and use of a mining contractor could reduce the preproduction capital by approximately $95 million in capital costs based on the 2001 Pre-feasibility. Together these approaches should reduce technical risk and financial exposure. The scoping level capital required for an initial 25,000 tpd operation is estimated to be US$235 million with an expected accuracy range of +30%/-20%. The capital costs were completed by Penguin Automated Systems Inc. ("PASI") for the mill and infrastructure which were supervised and reviewed by the author. The mining capital costs are based on the original Pre-Feasibility study completed by IMC and updated to reflect a smaller tonnage throughput and contract mining.

The estimated operating cost is US$ 10.44/tonne of ore based on first quarter 2004 dollars. These costs reflect the current mine plan with mining by contractor. The costs also reflect the simplified flowsheet and current power costs for the Cliffs-Erie facility. A contingency of 5% has also been included. The operating costs exclude the selling costs, shipping and smelting costs associated with the products.

The scoping study is based on measured indicated and inferred resources that are considered too speculative geologically to have economic considerations applied to them that would enable them to be categorized as mineral reserves. Therefore there is no certainty that the results produced by this scoping study will be realized.

The results of this scoping study do indicate that the NorthMet project, integrated with the existing Cliffs-Erie, facilities, shows sufficient potential to be carried forward into the next phase of engineering, a feasibility study. The purpose of the feasibility will be to examine further all aspects of the project and establish with greater accuracy its technical and economic viability.

This conclusion is based on the resource data and order-of-magnitude capital and operating costs presented in this study.

6

4. Introduction and Terms of Reference The author was initially retained in 2000-2001 by PolyMet to review the pre-feasibility study completed for PolyMet in April 2001 and conduct a technical audit of process and infrastructure matters on behalf of PolyMet at that time. The author has therefore been intimately involved with the project with particular reference to process development of the new PlatSol™ Process, the mining program and the infrastructure required for the initial planned development. No further technical work was conducted on the NorthMet project between the completion of the 2001 Pre-feasibility and this report. The author was retained by PolyMet in 2001 to conduct a technical audit of the processing aspects of the Pre-feasibility study and visited the project site at that time. The PlatSol™ Process was developed at Lakefield Research, Ontario, under the supervision of Messrs O'Kane, Dreisinger, Fleming and Feron; who subsequently became the patent holders of PlatSol™. Amec (formerly Agra Simons - Mining & Metals group) of Vancouver, B.C., was the company responsible for developing the engineering parameters of the process as well as infrastructure aspects for the 2001 Pre-feasibility study. Ore resource calculations, mine plan and mine capital and operating costs were completed by IMC. PolyMet subsequently retained the author in May 2003 to conduct an assessment of the project whereby the infrastructure, material transport, crushing, milling and flotation elements of the original Amec study were to be replaced by the established Cliffs-Erie plant and infrastructure. The author either directly produced the new project data or supervised the work of other specialists. The results of this technical program are contained in this interim report. IMC was also retained in May 2003 to re-examine their resource data base, established for the 2001 Pre-feasibility study, and requested to produce a new mine model for a reduced production rate. This work is included as Appendix I. A scoping study by PASI was completed in April 2004 and is included as Appendix II to this report. The PASI study integrated the existing front end of the Cliffs-Erie plant and infrastructure with new hydrometallurgical plant at the Cliffs-Erie site. Capital and operating costs were updated to March 2004.

7

5. Disclaimer Amec was the company responsible for developing the engineering parameters of the process as well as infrastructure aspects for the 2001 Pre-feasibility study. Ore resource calculations, mine plan and mine capital and operating costs, were completed by IMC. A scoping study by PASI was completed in April 2004 and is included as Appendix II to this report. The author visited the NorthMet site in 2001 as part of his responsibility in completing an audit review of the process and infrastructure work conducted by Amec Engineering Co. The costs reported here have been updated to March 2004. In the recalculation of mineable grade, IMC used operating costs prepared by P. Downey and Associates but did not factor in the improved capital costs in terms of determining mineable tonnage. The author has relied on the data that was made available to him by, Lakefield Research, AMEC, IMC, PASI, the 2001 Pre-feasibility Study, and does not take any responsible for any errors or omissions. Reports that contain information relevant to this report are listed in item 23. The material supplied and that in the public domain, combined with personal knowledge-observations were sufficient to allow a comprehensive examination of the NorthMet Project. P. Downey and Associates has no propriety interest in the technology described here and does not own any equity stake in PolyMet.

8

6.

Property Description and Location

6.1

Areas and location The NorthMet project is located in northern Minnesota, USA, close to the Canadian border, in the Duluth Complex. See Figure 6-1. The NorthMet Project is located in the Great Lakes region of North America, near the town of Babbitt, Northern Minnesota, USA. The area is approximately 65 km from the Canadian border and 75 miles from a bulk materials dock on Lake Superior. Materials and supplies may be brought in by an extensive rail and road network accessing destinations across North America. The proposed NorthMet open pit lies immediately south of the mined out Cliffs-Erie taconite iron ore open pits and about 10 km to the N-S-E of the Cliffs-Erie plant. The Minnesota Iron Range extends for approximately 200 km, east to west, and the iron formations dip gently to the south at about 5 degrees. At the eastern end of the range, south of the town of Babbitt, there are certain magmatic deposits which overlie the iron formations. The deposits are low grade and polymetallic- typically 0.4% copper; 0.12% nickel; 0.05 grams per tonne (g/t) gold; 0.08 g/t platinum and 0.36 g/t palladium.

Figure 6.1 - Location of NorthMet Project

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6.2 Ownership The underlying mineral rights are owned by US Steel Corp and a 3% NSR royalty applies to production from the project. Most of the surface land is controlled by the US Forestry Service ("USFS"). The rights to the project are held by PolyMet's US subsidiary, PolyMet Mining Inc. In 1989, PolyMet (as Fleck Resources) acquired a twenty year renewable lease for the mineral rights to the NorthMet deposit from USX-see Figure 6.2. The lease is subject to a yearly lease payment before production and then to a 3 to 5% sliding scale Net Smelter Return royalty based on the value of the ore. The lease payments prior to production are considered advance royalties and will be credited to the production royalty. The USFS acquired the surface rights to the NorthMet property from USX in the 1930's and, at present, the USFS remains the surface rights owner of most of the NorthMet property. USX retained the mineral rights and the right to explore and mine on the site. As a result of this retention, while the USFS is the surface rights owner for most of the NorthMet Property, they cannot prohibit mining on the site. LTV Steel Mining Company/Cliffs Erie Mining Company owns portions of sections 10, 11 and 12 near their private railroad. However, it may be beneficial for the Project to enter into land swap arrangements with the USFS to simplify the permitting process and to allow the project access to lands for waste rock stockpiling. The use of the existing Cliffs-Erie abandoned pits for waste storage from the Northmet mine could obviate such forestry issues and this will be evaluated during the feasibility study. US regulations require an equivalent value of land to be swapped for the land to be used by the Project. The USFS has indicated to PolyMet their willingness to carry out such a land swap. Costs for completing land swap arrangements have not been included in Estimates of Capital Costs. As both the Environmental Impact Statement ("EIS") and permitting of the project will be subject to the arrangements of the land swap, PolyMet believes that this land swap with USFS should be completed in conjunction with the Bankable Feasibility Study. PolyMet therefore intend to commence those negotiations with USFS early in the Bankable Feasibility Study timetable. Table 6.2 - Land Swap
 

Task	Cost (US$ Million)	Start (Month Number)	Timing (Months)
US Forest Service Land Swap	3.5	1	24

Figure 6.3 shows surface owners in the area of the potential NorthMet pit and waste dumps. Information on the land map was compiled from preliminary work done by North Mining and from the St. Louis County Land Atlas and Plat Book (1996).

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Figure 6.2 – Mineral Rights Owners

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Figure 6.3 – Surface Owners

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6.3

Environmental During the Pre-feasibility study, PolyMet had on staff a number of environmental consultants to coordinate both the environmental studies and the permitting required to bring the NorthMet Project to production. No cultural sites were identified either from a review of existing data and literature, or from aerial photographs. The neighboring Babbitt Project (also called Minnmax) completed a full EIS which was filed as a public document by then operator Amax Mining and this study did not produce any significant findings. NorthMet completed their-own preliminary Baseline Environmental Study in April 2000. This study addressed: Wildlife Usage, including threatened and endangered wildlife; Preliminary Wetlands Survey; Ground Water Quality; and The Development of the Geochemical Study Plan. No evidence was found of any threatened or endangered animals in the area. The area was identified as a major wetland area with some 70% of the land being classified as wetlands. The wetlands that will be disturbed by operations at NorthMet will have to be replaced on at least a 1:1 ratio in terms of the existing wetland mitigation scheme. The practice of replacing wetlands is well established in the area and this can be a relatively high ongoing operating cost for a project. The use of the extensive tailings and water storage areas which are part of the Cliffs-Erie deal should mitigate most of such costs. Disturbance of the wet lands in the open pit area would be the most affected area. Table 6.3 - Estimated NorthMet Wetlands Mitigation Requirements

Area	Acres
Pit	1020
Rock Dump West -  CE Pit back fill	0
Rock Dump East -  CE Pit back fill	0
Flotation Tailings Dam -  CE permitted site	0
Hydro-Metallurgical Residue Dam -  CE existing	0
Plant and Roads -  CE existing	0
Total	1020
Wetlands Mitigation Requirement at 70%	714

In terms of the Federal and State Wetland Mitigation legislation, the NorthMet Project must replace any wetlands disturbed on the NorthMet property on at least an acre for acre basis. Initial surveys undertaken have shown 70% of the NorthMet open pit area is classified as wetlands. Land use estimates from the 2001 Pre-feasibility study by Steffen Robertson & Kirsten ("SRK") and IMC are given in Table 6.3. The use of Cliffs-Erie obviates almost all of the previous requirements from the 2001 study.

The option to use key lands and impoundments in the Cliffs-Erie deal lessens the original estimates of the Wetlands Mitigation requirements. These are currently considered to be limited to the open pit area of 1020 acres. Wetlands Mitigation is a key step in bringing the NorthMet Project into production. With this reduced Wetlands Mitigation scope the costs will now be part of the required project capital and not an up-front cost component within the Bankable Feasibility Study.

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The major steps, estimated costs and timetable required to complete all environmental matters to obtain the necessary State and Federal permits are generally described in Table 6.4 below. The use or re-use of the Cliffs-Erie site will obviate much of the costs and requirements projected in the 2001 Pre-feasibility study since critical items like tailings areas are already included. The land swap with USFS has been included separately in the cost and timing estimates given in Table 6.4. While it could have a significant impact on the EIS and permitting process, the early completion of this land swap should simplify and accelerate the EIS and permitting process . Ground water quality was also found to be very good. Given the extensive waterways and related fishing activities in Minnesota, there are exceptionally low State limits (0.0013 micrograms/litre) for mercury discharges. There was no evidence of mercury in the NorthMet ore body, and process and pilot plant test work to date have not shown any mercury in tailings or residues. During the Bankable Feasibility Study, further geochemical work on the waste rock and various process plant tailings and residues should be conducted to test for their acid forming and metal release potentials under normal climatic conditions. This work will determine storage and disposal solutions for mine and plant waste, tailings and residues. In order to enable the timely completion of project permitting and meet Federal and State environmental requirements, the EIS process will be initiated during the Bankable Feasibility Study. The Pertinent aspects of the permitting process must be constantly monitored during the feasibility study. A draft EIS will be released for public comment prior to completion of the Bankable Feasibility Study. Subject to the satisfactory completion of the EIS, the Project will then apply to obtain the necessary construction and operating permits to develop the Project. The EIS will include the following: Collection of all Baseline data for submission to EIS team; Development and submission of Plan of Operation; Minnesota Department of Natural Resources ("DNR") selection and appointment ofsub-contractor (environmental consultants) to prepare EIS; Sub-contractor preparation of draft EIS; Draft EIS released for public comment; Final EIS prepared and issued; Federal Findings of No Significant Impact and Record of Decision; Awarding of State Environmental Permits.

6.4

Permits The major permits required by the Project are: Plan of Operations/Environmental Impact Statement; Mining and Reclamation Permit (Mining and Closure Plan) issued by the DNR; Air Emissions Permits (one for construction and one for operations) issued byPollution Control Agency of Minnesota ("PCA"); State Wetlands Review;

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• Minnesota Non Ferrous Mine Permit and Five Year Operating Plan;
• Storm Water Permit;
• 401 Water Quality Certification;
• Water Discharge Permits (Surface and Ground Water) issued by PCA; and
• 404 Wetlands Mitigation Permit issued by the United States Army Corps of Engineers("Corps").

As the project moves forward PolyMet will need to work with the relevant agencies to amend existing permits where required for use on the base metal operations at NorthMet and Cliffs-Erie.

Table 6.4 - NorthMet EIS and Permitting Cost and Timing Estimates

Task	Cost                 (US$ Million)	Start  (Month  Number)	Timing         (Months)
Baseline Study	0.45	1	6-10
Plan of Operations	0.15	6	2
Preparation of Draft EIS	0.30	11	12
Preparation of Final EIS	0.60	23	6
Major Permits	0.40	8	22-29
Federal Record of Decision		30-32	1
Total	1.90		34

As can be seen from Table 6.4, the expected time line from start to receipt of the required permits for the operations could be approximately 3 years at an estimated cost of US$1.90 million. This excludes any cost of land acquisition or swapping for wetlands mitigation and the estimated cost of US$3.5 million for the USFS land swaps.

The political climate in Minnesota is favourable for permitting of a new mining operation. The communities in the Iron Ore Range have been badly affected by the recent mine closures, and the existing labour force is seeking employment. Officials throughout the Minnesota state government have indicated a strong desire to replace the lost income and jobs and to assist in getting new economic development underway in the area.

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7.	Accessibility, Climate, Local Resources, Infrastructure & Physiography
7.1	Topography, elevation and vegetation The surrounding country is flat lying with some low rolling hills. Much of the terrain has relatively poor drainage, with numerous lakes and wetlands. Much of the NorthMet pit is covered with poor quality second growth timber and the land is generally of a marshy nature and poorly drained. The deposit is within 10 km of the Cliffs-Erie crusher/mill/concentrator facility. The project area is essentially flat and at an elevation of around 490m above sea level.
7.2	Access, towns and transport
	The large iron ore mines in the area have been developed since the mid 1950's and the NorthMet project lies immediately adjacent to one of these mines. As such, there exists, fully developed transportation, infrastructure and communication systems close to the NorthMet property. A well maintained system of road and rail transport allows shipment in of supplies and export of finished product. The property is located 95 km by rail to a harbour on Lake Superior and certain materials for the NorthMet project will be subject to marine transport.
	The NorthMet property is located close to various townships that served the iron ore mines. With the closure of certain taconite operations, there is a sizeable and trained workforce available in the immediate area. The nearby town of Hoyt Lakes was built specifically for the Cliffs-Erie operation.
	The acquisition of the Cliffs-Erie site will provide greater than 80% of infrastructure required for the development of the project, including excellent road and rail access and low cost industrial power. The Cliffs-Erie rail tracks and established roads run alongside the planned NorthMet pit and a new spur and rail load-out facility will link to this existing rail infrastructure.
	The electrical distribution and sub-stations from the main feed at the plant site are fully operational and will be used for the PolyMet project. Water permits also exist for the Cliffs-Erie facility. The town of Babbitt, 10 km to the north of NorthMet, and Hoyt Lakes 10 km to the south have the community infrastructure to support the requirements of the NorthMet workforce.
	Reclaim water, utilities and services, compressed air supply, power supply and distribution, offices, warehousing and laboratories will all be provided for by existing facilities at the Cliffs-Erie plant site. New assay laboratory equipment will be purchased for the NorthMet project.
7.3	Climate The northern Minnesota climate is continental, characterized by wide variations in temperature. The temperature in Babbbit (10 miles north of the property) averages -14ºC (7ºF) in January and 19ºC (66ºF) in July. The average annual precipitation is 28 inches with about 30% during the months of November and April and 70% from May through October.

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8. History The NorthMet Project was discovered by US Steel Corp. ("USX") in 1969. Originally, it was thought to be a high-grade, underground copper-nickel resource. Drilling in the 1970's demonstrated that it was in fact a high tonnage, low grade deposit, amenable to open pit mining. The grade improved at depth. The inability to produce separate clean nickel or copper concentrates led to further process evaluation and development. At that time there was no recognition of any contained PGM's. The Minnesota Department of Natural Resources ("DNR") subsequently discovered that PGM's were associated with the nickel and copper in the resource. In 1989, Fleck Resources ("Fleck") acquired a 20-year renewable mining lease over the property from USX and commenced an investigation into the potential for mining and recovering copper, nickel and PGM's. Fleck re-assayed pulps and rejects from previous drilling to obtain data on PGM's. The encouraging potential to produce extra revenue attracted joint venture partners (Nerco and Argosy Mining) who assisted in identifying and quantifying the PGM values. However these companies were not able to develop a metallurgical process that could economically produce separate acceptable concentrates for sale to a smelter, or economically extract the contained metals from a bulk concentrate. In the mid-90's, Fleck began investigating the use of hydrometallurgical processes, including bio-leaching and pressure oxidation, to determine the benefit to the Project. Fleck Resources changed its name to PolyMet Mining Corporation in 1998 and focused on a hydrometallurgical extractive technology. This led to the development of the PlatSol™ Process in 1998. The operating conditions of the PlatSol™ Process are such that the copper, nickel, cobalt and precious metals are all placed in solution in a single operation. Since the initial PlatSol™ Process testwork, the process has evolved and testwork on concentrates other deposits around the world led to improved recoveries of PGMs from the 92% level to 97%. In July 2000, PolyMet entered into a joint venture arrangement with North Limited ("North"), a major Australian mining company, to progress the NorthMet Project to commercial production. Under the joint venture arrangement, North had the opportunity to ultimately earn an 87.5% interest in the PolyMet Project through funding and production of a Bankable Feasibility Study and funding 100% of the total capital costs to develop the project. In August 2000 Rio Tinto Limited ("Rio Tinto") completed an on-market takeover of North. Subsequently, Rio Tinto decided not to proceed with the NorthMet project and PolyMet exercised its 30-day pre-emptive right, under a "change of control" clause, to terminate the joint venture arrangement. Consequently, PolyMet has regained a 100% interest in the NorthMet Project. Following completion of the metallurgical pilot plant work in November 2000, PolyMet commissioned a Pre-Feasibility Study on the project in November 2000, based on the PlatSol™ Process. This study was completed in April 2001. The Pre-Feasibility Study was for a 50,000 tpd operation. The economics of this project were found to be unacceptably low and required a high up front capital expenditure. No further work was done until March 2003, when new management took over the company and commenced a detailed review of the project.

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9.

Geological Setting

9.1

Regional Geology The geology of northeastern Minnesota is predominantly Precambrian in age. Approximately 1.1 billion years ago, intra-continental rifting resulted in mafic volcanics and associated intrusions along a portion of the Midcontinent Rift System, which extends through the Lake Superior Region to Kansas (Figure 9.1) . The rift system is characterized by a gravity high and the thinning or absence of continental crust. The Midcontinent Rift consists of three parts: thick lava flows, intrusive rock and overlying sedimentary rock. The volcanic sequences are generally tholeiitic to sub-alkaline flood basalts derived from a mantle source. Minor felsic to intermediate flows exhibit crustal contamination. There are three major intrusive complexes: the Coldwell Complex of Ontario, the Mellen Complex along the south shore of Lake Superior and the Duluth complex along the north shore. The sedimentary rocks are mainly fluvial red beds filling the rift structure. The Duluth Complex (Figure 9.2) is the host of NorthMet mineralization. The complex lies along the projection of the Great Lakes Tectonic Zone, an Archean suture zone, the Archean Vermilion Fault and the Early Proterozoic shelf margin. It extends in an arcuate belt from Duluth to the northeastern tip of Minnesota. Emplacement of the intrusion appears to have been along a system of northeast-trending normal faults that form half-grabens stepping down to the southeast (Figure 9.3) . The magma was intruded as sheet-like bodies along the contact between the Early Proterozoic sedimentary rocks of the Animikie Group and the basaltic lava flows of the North Shore Volcanic Group.

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Figure 9.1 – Midcontinent Rift System

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Figure 9.2 - Regional Geology

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Figure 9.3 – West Edge Deluth Complex

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9.2

Local Geology and Deposit Description

9.2.1

Rock Types The Duluth Complex is represented by the Partridge River Intrusion in the NorthMet area. The intrusion consists of light to dark gray troctolitic rock varying from troctolitic anorthosite to augite troctolite, with thin layers of melatroctolite or picrite. The rock types are classified by percentage of plagioclase, olivine and clinopyroxene. The melatroctolite layers tend to be fine grained with distinct layering. The Partridge River Intrusives have been sub-divided into seven lithologic units (Figure 9.4): Unit 7 and Unit 6 – texturally homogeneous plagioclase-rich troctolite, each with apersistent ultramafic base. Unit 6 contains a mineralized horizon in the southwesternportion of NorthMet which is relatively enriched in PGM's relative to copper. Units 6and 7 are each about 400 ft. thick. Unit 5 – coarse grained anorthositic troctolite (300 ft.) grading down to Unit 4. Unit 4 – homogeneous augite troctolite and troctolite, with a less persistent ultramafichorizon. The contact between 4 and 5 is difficult to establish and the two units mayactually be a single unit. Unit 3 – the most easily recognized unit because of its mottled appearance due toolivine oikocrysts. It is fine grained troctolitic anorthosite to anorthositic troctolite. Average thickness is 250 ft. but locally can be up to 500 ft. Unit 2 – homogeneous troctolite with abundant ultramafic units and a generallypersistent basal ultramafic. This unit shows the most variation in thickness and maybe absent entirely. Unit 1 – the most heterogeneous unit, both texturally and compositionally. Grain sizeis generally coarser at the top of the unit and fines downward. The unit containsabundant inclusions of the footwall rock and is noritic towards the base. This is themain sulfide bearing unit. Two ultramafic layers are generally present. Unit 1 isprobably the result of multiple pulses of magma injection. Average thickness is about450 ft.

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Figure 9.4 – Generalized Igneous Stratigraphic Column

The footwall consists of Proterozoic sedimentary rocks of the Animikie Group, which resulted from a single depositional sequence in a transgressive sea. The oldest formation, the Pokegama Quartzite, represents well sorted clastic material deposited on a stable shelf. The Biwabik Iron Formation contains alternating sequences of ferruginous chert and slate. The Iron Formation has been extensively studied because of its importance to the iron mining industry and contains several members and sub members. The youngest formation is the Virginia Formation, consisting of argillite and graphitic argillite with interbeds of greywacke, siltstone and minor calc-silicate. The Virginia Formation appears to decrease in thickness from the surface contact with the Duluth Complex toward the interior of the Complex to the southeast. Inclusions of the Virginia Formation, as biotite hornfels, can be found in all units, but are especially abundant in Unit 1.

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9.2.2 Structure The general trend of the sedimentary rocks at the NorthMet deposit is to strike to the east-northeast and to dip to the southeast about 15-25°, and the Partridge River Intrusion appears to follow this general trend. Two east-northeast trending faults have been identified through the construction of cross sections. The faults are steeply dipping and normal in character; offset ranges from negligible to 600 ft. down to the southeast. A third major fault has been identified in the western portion of the area and can be traced to the Northshore Mine in the north. Movement on this fault is down to the east. Numerous other faults can be identified in the cross-sections, but offset is small and they lack continuity. The cross-sectional view shows considerable offset in the more southerly fault, and less offset on the more northerly fault. This relationship can vary over the strike of the deposit.

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10. Deposit Types There are two types of mineralization related to the rift system: hydrothermal and magmatic. The hydrothermal deposits include native copper in basalts and sedimentary interbeds, such as on the Keewenaw Peninsula, sediment-hosted copper sulfide and native copper, represented by the White Pine Mine of Michigan, copper sulfide veins in volcanics and polymetallic veins (Ag-Ni-Co-As-Bi) in volcanics. The magmatic deposits include Cu-Ni-PGM mineralization and Ti-Fe mineralization in the Duluth complex, uranium and rare earth elements in carbonatites and Cu-Mo in breccia pipes. More locally (Figure 10.1), the magmatic deposits lie along the northwestern contact of the Duluth Complex with the underlying sediments and Giants Range Batholith. NorthMet and the Babbit (or Minnamax) deposits are the largest of the Cu-Ni-PGM mineralization. The majority of the rock at NorthMet is unaltered, with minor alteration found along fractures and micro-fractures. Alteration consists of serpentine, chlorite and magnetite replacing olivine, uralite and biotite replacing pyroxene, and sausserite and sericite replacing plagioclase. As would be expected in a magmatic deposit of this type, sulfide mineralization does not appear to be directly related to alteration.

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Figure 10.1 – Midrift Cross Section

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11. Mineralization The metals of interest at NorthMet are copper, nickel, cobalt, platinum, palladium, gold and lesser amounts of rhodium and ruthenium. In general, the metals are positively correlated with copper mineralization; cobalt is the main exception. Mineralization occurs in four horizons throughout the NorthMet property. Three of these horizons are within basal Unit 1 and in some drill holes the horizons are indistinguishable from each other. The thickness of each of the three horizons varies from 5 to more than 200 feet. Unit 1 mineralization is found throughout the deposit. A less extensive mineralization zone is found in Unit 6 and it is relatively enriched in PGM's compared to Unit 1. Sulfide mineralization consists of chalcopyrite, cubanite, pyrrhotite and pentlandite with minor bornite, violarite, pyrite, sphalerite, galena, talnakhite, mackinawite and valleriite. Sulfide minerals occur mainly as blebs interstitial with plagioclase, olivine and augite grains, but also occur within plagioclase and augite grains, as intergrowths with silicates, or as fine veinlets. The percentage of sulfides varies from trace to about 5%. Palladium, platinum and gold are associated with the sulfides.

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12. Exploration Exploration has been on-going on the NorthMet property since the 1960's by various companies. The stage of exploration has advanced through several drill programs sufficient to complete a resource estimate and a Pre-feasibility study. Detailed discussion of the drill programs are addressed in Item 13 – Drilling. Prospectors first discovered copper and nickel near Ely, Minnesota about 20 miles north of NorthMet in the 1940's. Subsequently, Bear Creek Mining Company conducted a regional exploration program resulting in the discovery of the Babbitt or Minnamax deposit (northeast of NorthMet and within the Duluth Gabbro). US Steel (USX) stated an exploration program in the Duluth Complex in the late 1960's and over the next few years frilled 112 core holes into the NorthMet property (then called Dunka Road). USX investigated the deposit as a high-grade, underground copper-nickel resource, but it was considered to be uneconomic due to lower than expected copper and nickel grades, and the inability to produce separate, clean nickel and copper concentrates. At this time, there was no recognition of any contained platinum (PGM's) or gold in the deposit. In 1987, the Minnesota Natural Resources Research Institute ("NRRI") published data suggesting that a large resource of platinum group minerals or PGM's could be contained within the base of the Duluth Complex. PolyMet leased the NorthMet property from USX in 1989. PolyMet re-assayed pulps and rejects from the previous USX drilling to obtain data on the PGM's. Nerco Minerals and later Argosy Mining leased the property from PolyMet in the early 1990's. Work continued on the delineation of the contained PGM's and a few additional core holes were drilled. At that time there was no metallurgical process that could economically produce either (a) separate, clean copper and nickel concentrates for sale to a smelter, or (b) economically extract the various contained metals from a bulk concentrate. From 1998 to present, PolyMet has conducted three drilling programs totaling 87 holes for approximately 49,500 ft. of core and reverse circulation drilling. The third drilling program (13 holes for about 9,000 ft.) was completed in December, 2000.

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13. Summary of Drilling Programs No further drilling has occurred since the 2001 Pre-Feasibility Study however; the following is included for reference purposes. Table 13.1 summarizes the drilling campaigns for the NorthMet property. Figure 13.1 and 13.2 summarize the drill campaigns. The US Steel drilling which was done during the late 1960's. The original US Steel work was based on a copper/nickel underground mining scenario. US Steel's assaying did not include the PGM's. In 1989, PolyMet (then Fleck Resources) entered into a 20-year renewable lease with US Steel for the NorthMet (then Dunka Road) deposit. At that time, PolyMet did some logging and considerable re-assaying, including gold and PGM assays, but did not drill additional holes. Nerco Mineral Co. leased the property from PolyMet during 1990 and drilled 4 holes (2 were unsampled metallurgical holes) and did a resource calculation as part of an evaluation of the property. Nerco allowed their option to expire during 1991.
 

Table 13.1: Summary of Drilling Programs
Company	Drilling Type	No. of Holes	No. of Feet	Assay Intervals
US Steel	BX Core	112	133,909	5,037
Nerco(met only)	BQ Core	2	842	167
1998 PolyMet	RC	14	6,370	1,274
1999 PolyMet	BTW Core     RC     Mixed Core/RC	3               18               3	2,476   9,300   2,660	455       1,868       534
2000 PolyMet	BTW Core     RC	16               20	10,714   8,980	1,984       1,798
PolyMet Total		74	40,500	7,913
TOTAL		188	175,251	13,117
	Core Total     RC Total     Mixed Total	133               52               3	147,941   24,650   2,660	7,643       4,940       534

During 1998, 1999 and 2000, PolyMet did considerable additional RC core drilling, as shown in Table 13.1. Much of this drilling was to supply material for metallurgical testing, as well as resource definition.

Table 13.1 shows that the drilling through October 2000 consists of 133 core holes for 147,941 ft., 52 RC holes for 24, 650 ft. and 3 mixed holes (initial RC followed by core) for 2,660 ft. PolyMet drilled 13 core holes in November-December 2000 that are not included in this Pre-feasibility study.

Figure 13.3 is a map showing the locations of the US Steel and PolyMet drilling. The NERCO holes are also posted, but they are not obvious since they twinned US Steel

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holes. The map shows that the PolyMet drilling is mostly in the area where the deposit is near the surface (since the deposit strikes about N57^oE and dips 25^o to 36^oSE. The only deep drilling is provided by the US Steel holes.

Figure 13.4 shows a cross section of the deposit with the rock type geology included. It can be seen that the geologic interpretation consists of 20^o dipping rock units offset by near vertical faulting. Copper grades are also shown on the section.

Figure 13.1 – Area 1999 - 2000 Drilling

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Figure 13.2 – Location of Metallurgical Samples

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Figure 13.3 – US Steel and PolyMet Drilling

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33

Figure 13.4 – Cross Section Drill Holes

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14. Sampling Method and Approach This was reported on in the 2001 Pre-Feasibility Study. There is nothing further to report.

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15. Sample Preparation, Analysis and Security This was reported on in the 2001 Pre-Feasibility Study. There is nothing further to report.

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16. Data Verification This was reported on in the 2001 Pre-Feasibility Study. There is nothing further to report.

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17. Adjacent Properties This section is not applicable to PolyMet as it does not own any adjacent properties.

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18.

Mineral Processing and Metallurgical Testing

18.1

Process Technology The PlatSol™ Process metallurgical extraction process was developed in 1998/99 at Lakefield Research Ltd. In May 2000, a continuous, fully integrated pilot plant testing program was initiated at Lakefield to demonstrate this hydrometallurgical extraction process for the NorthMet Project. Both bench and pilot plant testwork for NorthMet used mineralized material obtained from reverse circulation ("RC") drilling samples. A total of 26 tonnes of RC cuttings was used for the bench tests and a further 33 tonnes of RC cuttings was used for the pilot plant tests. For the pilot plant tests, the 33 tonnes of RC cuttings were milled to the prescribed fine grind size and concentrated into a bulk concentrate of 839 kg using flotation. This bulk concentrate, combined with the remaining concentrate from the bench tests, was treated in an autoclave under the PlatSol™ Process operating conditions. The PlatSol™ Process entails an autoclave operating at 225oC with 100 psi oxygen over pressure. The addition of a small amount of chloride creates a unique leaching environment whereby all the base metals (copper, nickel and cobalt) and precious metals (gold, silver, platinum, palladium, etc.) are brought into solution in one step. The ability to recover the PGM's into solution is what makes the PlatSol™ Process unique and patentable. The metals can then be recovered sequentially from the solution, commencing with the PGM's. The precious metals (PGM's, silver and gold) are precipitated using sodium hydro-sulphide. The copper recovery uses well established solvent extraction and electro-winning ("SX-EW") techniques. In its new approach, PolyMet has elected not to recover nickel metal on site. The process circuits have been dramatically simplified to convert the remaining metals in solution after copper SX/EW (dominantly nickel with small amounts of cobalt, copper and zinc) into a nickel concentrate. PolyMet is currently planning to produce a nickel hydroxide which is a precipitate. The precipitate will be filtered, dried and shipped off-site to a metal refinery. Production of nickel sulphide is an alternative to hydroxide. In general, mineral recoveries and values for the bulk concentrate produced in the pilot plant confirmed the results obtained in the bench top testwork. Nickel recovery in the flotation concentrate was lower than expected. Mineralogical testwork showed that this was due to nickel in association with silicates which is not amenable to flotation recovery. Overall flotation and hydrometallurgical recoveries for the pilot plant tests are given in Table 18.1.

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Table 18.1 - Pilot Plant Metal Recoveries

	Percent			Grams/Tonne
	Cu	Ni	Co	Au	Pt	Pd
Ore Grade	0.43	0.12	0.009	0.05	0.08	0.36
Flotation
Conc. Recovery	93.7	69	42	75.7	76.9	79.6
Conc. Grade	14.6	3.1	0.15	1.4	2.3	10.4
PlatSol™ Process
Process Recovery	98.1	96.9	92	88.4	95	93.6
Overall Recovery	91.9	66.9	38.6	66.9	73.1	74.5

PolyMet has attempted to keep the new operation as simple as possible. The crushing, grinding and flotation processes proposed for the NorthMet Project are tried and tested and are used extensively in other processing plants worldwide. The Cliffs-Erie mill concentrator which functioned efficiently prior to shut down in 2001 will be utilized for these process steps. Similarly, the SX-EW process which will be used to produce cathode copper on site is industry standard.

Copper will be the only metal produced on the NorthMet site. Since copper is the largest contributor to revenue, the project is being characterized as a copper project - with important credits obtained from nickel and the PGM's. The PGM's are recovered first and precipitated as sludge immediately prior to copper SX/EW. After copper extraction, the metals remaining in solution are principally nickel with small amounts of copper, cobalt and zinc. This solution is first treated to remove iron. Magnesium oxide is then added which causes the remaining metals to precipitate as the hydroxide. When filtered and dried, nickel hydroxide concentrate can be shipped off - site for treatment in an established facility. This eliminates the complex circuits for nickel and cobalt recovery described in the original 2001 flow sheet. The objective is to start the project with minimum technical risk.

The proposed autoclave circuit for the pressure oxidation process at NorthMet is similar to several other operations - principally the gold autoclaves operating at Barrick's mines in Nevada and a new copper project at Phelps Dodge's Bagdad operation in Arizona.

The PlatSol™ Process uses relatively low levels of chloride in the leach solution which allows efficient leaching of the PGM's and precious metals (gold and silver) as well as the base metals. Process recoveries of PGM's in the 2000 pilot plant have been improved from approximately 94% to 98% in recent test programs. International PGM Technologies Ltd. ("IPGMT"), an Ontario, Canada, corporation developed the PlatSol™ Process and has patented the technology in a number of countries. PolyMet has an agreement with IPGMT for the use of this technology, free of any royalty charge.

41

The PlatSol™ Process performed well during the continuous, fully integrated pilot plant operations conducted in 2000. The simultaneous leaching of base and precious metals in the autoclave from the bulk concentrate was confirmed. Optimum operating conditions established in the pilot plant were:

•	% solids	10.5 – 11%
•	temperature	225°C
•	oxygen overpressure	100 psi
•	retention time	120 minutes
•	chloride concentration	9 g/l

Under the optimized operating conditions tested in the autoclave, the leach efficiencies obtained for all the pay metals, with the exception of gold, were either equal to or better than those achieved in bench testing in 1999.

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19.

Mineral Resource and Mineral Reserve Estimates

19.1

Resource estimates and categorization The resource estimates were completed by Independent Mining Consultants Inc. of Tucson ("IMC") for the 2001 Pre-feasibility study and the May 2003 re-statement for a lower tonnage higher grade pit are shown in Table 19.1, below. IMC used the assumptions detailed in Appendix I to prepare the estimates in this summary and their May 2003 report is included as Appendix I. It should be noted that in this mine modeling, completed in May 2003, IMC did not factor in the benefit of reduced capital by use of the Cliffs-Erie facilities because this had not been finalized at the time. In their limited review, at lower daily tonnages, IMC also did not introduce smaller scale mining equipment for a selective mining approach. They continued to use the same scale of equipment as described in the 50,000tpd (2001) Pre-feasibility study with attendant high dilution factors. For this 2003 technical update, IMC were directed to produce a mine plan with smaller daily tonnage, reduced mine life - all in an attempt to obtain higher metal grades. The pit resource completed by IMC has a maximum 50 degree pit wall slope angle. IMC's estimates show a measured, indicated and inferred resource of 139 million tonnes. There is the potential to add to this resource base, as the deposit is open at both ends and at depth (see Appendix I). The drilling to date has been adequate to complete the Pre-feasibility level work required for mine planning. It is proposed to complete further in-fill drilling, sufficient to establish a mineable pit reserve, as part of a Bankable Feasibility Study.

Table 19.1 

Status	Ktonnes Above Cutoff	% Of Total	Average Grades								Total  Ktonnes	Waste To Ore Ratio
			NSR	CuEq	Cu	Ni	Co	Pd	Pt	Au
			US$/t	%	%	%	g/t	G/t	%	g/t
Geologic Resource
Measured	315,618	33.05%	11.82	0.847	0.333	0.086	66.00	0.298	0.081	0.042
Indicated	295,601	30.96%	12.76	0.914	0.338	0.087	61.39	0.336	0.094	0.049
Inferred	343,509	35.99%	13.16	0.943	0.347	0.088	58.88	0.355	0.096	0.050
Total	954,738		12.59	0.903	0.333	0.087	62.01	0.330	0.090	0.047
Preliminary Pit Resource
Measured, Indicated & Inferred	139,145	100%	10.00	0.97	0.40	0.11	0.009	0.361	0.133	0.082	720,770	4.18:1

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20.

Other Relevant Data and Information

20.1

Mining The original mine plan for the Pre-feasibility study of 2001 was for a mining rate of 20,075 ktons per year (55,000 tpd for 365 days). This plan was modified for the current update to 9,125 ktonnes per annum (25,000 tpd for 365 days). The mine is scheduled to operate 360 days per year. The new mine plan is based on using a mine contractor to complete all mining operations with PolyMet staff supervising mine plan operations and mine geology. Mine development will generally follow that outlined by IMC in the Pre-feasibility study with the exception that Phase 6 and 7 will only occur if metal prices and capital and operating costs warrant this development. The goal of the phases is to develop the mine in a logical order by commencing the mine with the higher grade material which also has lower strip ratio. The mine plan will then progress to higher strip ratios. Phase 1 is in the northeastern part of the deposit with phase 2 in the southwestern portion. The remaining three phases will push the hanging wall south. Exits will be maintained to the south during all phases of mining so that access can be obtained to the rail load-out facility. Waste rock will be stored in dumps located to the north and east of the main ore body The waste dumps will be located outside of any potential ore body extensions should PolyMet decide to expand the pit. Waste facilities will be constructed in 7m lifts with an overall slope angle of 22° (2.5H:1V) . Mining operations will be carried out by a mining contractor. The contractor will provide all necessary fleet requirements for a turn-key mining operation based on the required annual mine production schedule. Work activities will include: Construction of the initial out-of-pit access roads from the pit area to the rail load-outfacility and the mine rail spur and to the waste rock storage areas. Removal of all topsoil from the mine and waste storage areas. Replace topsoil on thewaste storage areas at completion of mining as part of ongoing mine reclamation. Pre-production development required to expose ore for initial production. Mine and transport ore to the rail load-out facility. Maintain all mine work areas, in-pit haul roads, and external haul roads. Maintain waste storage areas. The major mine fleet will consist of nine 185 t trucks, one 18m3 and one 11m3 loaders, two 23 m3 shovels and two blasthole drills. Support equipment will include track dozers and motor graders to maintain road surfaces, dumps and operating benches. Mining will be conducted year round based on three 8 hour shifts per day. Mine operating costs are based on data from similar mining operations and contract mining costs. The costs cover all general labour and consumable costs, amortization of initial equipment capital investment, equipment depreciation and contractor profit. The costs associated with PolyMet mine personnel and administration associated with direct mine operations are included separately within the operating cost section.

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20.2

Process Plant A revised process plant design has been completed by PASI. The revised flowsheets are based on a throughput of 25,000 tpd and utilizing the existing Cliffs-Erie crushing and grinding facilities. The flotation plant and all downstream process will be new but will generally utilize existing buildings and infrastructure within the Cliffs-Erie facilities as follows: one circuit of the rail dump pocket and the 60" gyrosphere crusher; the withdrawal feeder and the transfer conveyors to the coarse ore bins; 2-7' standard cone crushers and associated feeders; 4-7' short head cone crushers and associated feeders and screens; belt conveyors and tripper to the fine ore bins; 8 sets of rod/ball mill circuits; three regrind mills (two for concentrate regrind and one for limestone); ancillary facilities and offices; infrastructure including power supply and distribution; and tailing storage and reclaim water facility. An overall mass balance was developed for the NorthMet process based on the hydrometallurgical mass balance provided by PolyMet, which set the feed headgrades and recoveries for copper, nickel, cobalt and PGM's at and a throughput of 9,125,000 tonnes per annum. The development of the flowsheet and equipment sizing for the crushing, grinding and flotation process facilities was based on flowrates derived from this mass balance, plus process design criteria developed from the AMEC study and information by SGS Lakefield who were responsible for the pilot plant flotation trials. The flowsheet for the hydrometallugical facilities – pressure oxidation, solid-liquid separation, PGM recovery, copper SX/EW and nickel/cobalt hydroxide recovery – was derived primarily from the AMEC study with equipment resized accordingly for the new plant throughput. Testwork data from SGS Lakefield was reviewed for sizing of thickeners and filters. Work indices used for crushing and grinding circuit calculations are estimates provided by SGS Lakefield based on limited grinding testwork. Process Design Criteria The detailed process design criteria is presented in Appendix II and the key criteria is summarized in Table 20.1.

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Table 20.1 - Process Design Criteria Summary

Parameter	Design Criteria
Annual mill throughput	9,125,000 tonnes
Average daily mill throughput	25,000 tpd dry
Plant Availability	91.34 %
Operating Hours per day	24
Hourly Throughput	1140 tph dry
Concentrate produced	703 tpd dry
Rod mill work index	14 kWh/t
Ball mill work index	17 kWh/t
Regrind work index	7.5 kWh/t
Feed size to flotation	200 micron
Feed size to pressure leach	15 micron
Pressure leach residence time	2 hours
Autoclave operating temperature	225 C
Autoclave operating pressure	475 psig
H2SO4 concentration	50-60 g/l
Cl concentration	10 g/l
Cu SX plant	2 extraction; 1 wash; 2 strip
Organic / Acid ratio	1.5:1
PLS Cu	18.4 g/l
Raffinate Cu	0.99 g/l
SX Cu recovery	94.62 %
E/W current density	260 amp/m²
Cathodes per cell	54
Total cells required	125

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Process Description

The overall process flow is described in Figure 20.1.

Crushing

Run of mine ore will be delivered by rail to the Cliffs-Erie process plant and dumped into the primary crusher surge pocket. From the surge pocket, the ore will flow to a single existing 60" by 89" gyratory crusher set to produce a nominal coarse ore product with a P₈₀ sizing of 6 inches. The existing secondary gyratory crushers will be removed and a surge pocket will be constructed allowing the crushed ore to discharge onto an existing apron feeder. The apron feeder will in turn discharge onto the exiting coarse ore surge bin feed conveyor. Ore from the coarse ore surge bin will discharge via the existing vibrating feeders onto existing belt feeders feeding two existing 7' standard cone crushers. Each 7' cone will discharge onto two existing vibrating feeders, each feeding an existing 6' x 10' vibrating screen. Screen oversize discharges into one of four existing 7' shorthead cone crushers. The minus ¼" discharge from the tertiary shorthead crushers will combine with the screen undersize onto the existing feed conveyor to the existing fine ore bin.

Grinding

Ore from the fine ore bin will discharge via existing vibrating and belt feeders to the existing rod and ball mill circuits. For the design throughput of 25,000 tpd, 8 of the existing 12 circuits will be utilized. Each rod mill will operate in open circuit, with the rod mill discharge feeding a ball mall in closed circuit with new hydrocylones. The grinding circuit will produce a flotation feed of 30% solids at a P₈₀ sizing of 200 micron.

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Figure 20.1 – Blocked Flowsheet

48

Flotation and Regrind

Cyclone overflow from the grinding circuits combine to feed a conditioning tank with a 5-minute retention time. The conditioner will feed a single bank of 4-160m³ rougher tank cells providing a total residence time of approximately 8 minutes. Rougher discharge will feed 2 parallel banks of 5-160m³ tank cells providing a residence time of 20 minutes.

Rougher concentrate combines with re-cleaner tail to feed the first cleaner flotation circuit. The cleaner flotation circuit will consist of a single bank of four 20m³ conventional cells providing 16 minute retention time. Scavenger concentrate, mixed with cleaner tail, will be reground in an existing regrind ball mill to a target P₈₀ of 30 micron prior to recirculation back to the conditioning tank. Cleaner concentrate will be fed to a single re-cleaner column cell, providing 16-minute retention time, for final concentrate cleaning. Cleaner concentrate will report to the concentrate regrind mill where the concentrate will be reground to the target P₈₀ sizing of 15 micron, prior to pressure oxidation. A second existing regrind mill (using ceramic balls as grinding media to reduce iron contamination) will be used for this purpose.

Reground concentrate thickened to 50% solids and stored in a concentrate storage tank, which provides 12 hours of surge capacity between the flotation circuit and downstream hydrometallurgical processing.

Flotation tailings will be pumped to the existing Cliffs-Erie tailings impoundment. The flotation circuit reagents (MIBC, PAX, Flex 31, and WW1 752) are based on the AMEC study and was developed for effective base metal recoveries with associated high PGM recovery.

Pressure Leaching

Pressure Leaching is based on standard Autoclave technology and utilizes the patented PlatSol™ Process. Concentrate will be blended in the autoclave feed tank with sodium chloride prior to pumping into the autoclave at 50% solids. Recycled copper SX/EW raffinate will be pumped into the autoclave to maintain temperature control.

The two autoclaves will provide the required 2-hour residence time for the feed slurry. Each autoclave will have 6 compartments, and will be designed to operate at 225°C and approximately 475 psig. These pressures and temperatures are standard for autoclave design in the refractory gold ore/concentrate oxidation process. The NorthMet autoclave design will comprise a mild steel pressure vessel with a polymer-thermoplastic membrane corrosion barrier and two layers of acid resistant brick for thermal and abrasion resistance. This design follows the reported design of the Phelps Dodge copper concentrate autoclave at Bagdad, Arizona. The Phelps Dodge autoclave has been designed for temperatures up to 235°C and pressures of up to 4000 kPa.

49

The slurry is cooled to below 63°C via a single stage let down and slurry coolers prior to downstream metal extraction processes.

Leach Residue

Prior to metal recovery, the leach residue will be separated from the pregnant leach solution (PLS) to provide a high recovery of solute via filtration and washing of the leach residue. To accomplish this, the circuit will include a primary thickener followed by a pressure plate filter unit. A wash ratio of 4:1 will be used to maintain high solute recoveries. Autoclave residue filter cake will be re-pulped and fed to a scavenger flotation circuit to recover residual PGM's. The PGM concentrate will be re-circulated back to the feed end of the autoclave and the flotation tailing will be pumped to a new hydromet tailings impoundment constructed inside the existing tailings impoundment.

PGM Recovery

The PLS will be mixed with S0₂ to ensure total reduction of oxidized iron species in solution (Fe (III) is reduced by Fe (II) in solution by SO₂). The SO₂ will be produced by a packaged sulphur burner system. After ferric iron reduction, the solution will be processed through a two-stage pipe reactor system, with the addition of NaHS, to precipitate the platinum and precious metals. After filtration, the PGM precipitate will be releached in a sulfuric acid solution in a batch autoclave to leach any co-precipitated base metals (Cu, Ni, Co) and sulfur/sulfides to produce a high grade PGM precipitate for toll refining. Batch autoclave leach solution will be recirculated back to the PLS surge tank before precious metal recovery to ensure full recovery of valuable metals.

Neutralization

The PLS filtrate from the PGM precipitation system will require neutralization to pH 2 prior to copper solvent extraction. Filtered PLS will be pumped from the neutralization surge tank to the solution neutralization cascade that consists of three tanks with a total retention of 180 minutes. Limestone is added to maintain a pH of 2 and prepare the solution for copper solvent extraction.

The slurry exiting the precipitation tanks will be pumped to a thickener. Thickener underflow is filtered using an automatic plate and frame pressure filter package. The filter cake solids (saleable grade gypsum) will be discharged to a conveyor and stockpiled prior to re-sale.

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Copper Solvent Extraction and Electrowinning

Copper PLS from the neutralization circuit will be stored in the copper SX feed tank providing 4 hours of surge capacity. PLS will be filtered to avoid crud formation in the SX circuit. The filtration will use multi-media pressure filters and the backwash will be returned to the gypsum thickener. Copper will be extracted from the PLS into an organic solution.

The extraction circuit consists of three mixer settlers, in which the aqueous feed and the barren organic flow counter-current to one another. Raffinate leaving the final extractor will report to the copper raffinate tank, from which solution will either be recirculated back to pressure oxidation for use as cooling liquid, or sent forward to bleed treatment.

Copper loaded organic is pumped from the first stage extractor to the loaded organic tank where entrained aqueous solution will have the chance to settle out. Solution recovered in this way will be collected in a sump at the bottom of the tank and periodically returned to the extraction circuit.

Loaded organic will be contacted, in a two-stage copper strip circuit, with lean electrolyte recycled from copper EW. The stripped organic will pass through to extraction, while the rich electrolyte will be pumped through organic recovery columns, and anthracite based multi-media filters to coalesce any residual organic, before discharging into the electrolyte recirculation tank.

Rich electrolyte will be trim heated to approximately 120°F before entering the tankhouse EW cells, using an indirect hot water heating system. A 125-cell tankhouse will provide the capacity required to harvest 33,000 tonnes per year of cathode copper.

Cathodes from the EW cells will be harvested on a daily basis, after a 7-day growth cycle. The copper sheets will be mechanically stripped from the stainless steel blanks using a standard fully automatic cathode washing and stripping machine. The stripping machine will also provide mechanical stacking, strapping, and weighing of the cathode bundles in preparation for shipping to market.

Nickel-Cobalt Hydroxide

Iron and aluminum must be removed from copper SX raffinate bleed solution before the extraction of nickel and cobalt.

In the first of three precipitation cascades, iron will be removed as goethite. In order for goethite to be formed, the bleed stream will be pre-heated to 170°F by direct steam injection into a tank with 45 minutes retention time. Direct injection will be used to negate the problem of gypsum scaling on the solution side of a shell and tube heat exchanger.

Hot solution from the pre-heat tank will enter the first of five tanks in the iron precipitation cascade. Limestone will be added to the first tank to neutralize free acid in the copper raffinate, and will result in gypsum precipitation. Air is sparged

51

into tanks l, 2 and 5 to facilitate ferrous oxidation, allowing ferric precipitation as goethite. In the third and fourth tanks ferrous oxidation will be enhanced using a mixture of oxygen and sulfur dioxide. More limestone will be added to neutralize the acid generated by the goethite precipitation and maintain a discharge pH of 3.5. At this pH a significant percentage of the aluminum hydrolyses and precipitates while loss of the valuable metals (Ni, Co, Zn) is minimized.

Overflow from the fifth tank will be pumped to a thickener where the solids settle to a density of 40% by weight. A significant portion of the thickened underflow will be returned to the precipitation cascade, where the solids act as seeds to facilitate the growth of larger particles, which in turn improves settling and filtration characteristics. The balance of the thickener underflow will be filtered through a plate-type pressure filter. After washing to recover entrained nickel and cobalt, the cake will discharge into a tank where it is slurried with reclaim water and pumped to a new tailings impoundment on the existing tailings dam

Overflow from the iron thickener will be neutralized with magnesium oxide in two stirred tanks to precipitate a combined nickel/cobalt hydroxide. Slurry will discharge from the second tank into a thickener. Thickener underflow is filtered in a plate-type pressure filter. The filter cake will be collected and steam dried prior to bagging for dispatch to an off site nickel/cobalt refinery.

Thickener overflow will be treated with lime in two stirred tanks to precipitate any remaining valuable metal content. Slurry will discharge from the second tank to a thickener. Thickener underflow will be recycled back to the leach residue thickener. Thickener overflow will be pumped to a new tailings impoundment on the existing tailings dam.

The valuable metals (Ni, Co) will be redissolved under the strong acid conditions prevailing in the leach residue thickener.

Tailings

The existing tailings facility at Cliffs-Erie will be used to contain tailings products from the NorthMet process plant. Flotation plant tailings will form the bulk of the tailings products and will be discharged to the existing dam using the existing pumping and piping arrangement.

There will be three new hydromet tailings produced:

• leach residue flotation tailings,
• iron/aluminum gypsum sludge; and
• solution from the hydroxide precipitation circuit.

Each of these tailings will be contained in separate lined ponds constructed on the existing tailings dam. Each pond will have an initial capacity of 3 years storage.

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Reagents

Included on the equipment list are the proposed reagent systems to support the process plant operations. Reagent systems included are:

• Limestone: Rail receipt and off-load, conveying, crushing and grinding,slurry storage and distribution loop. (An existing mill will be used forgrinding.)
• MIBC: Bulk liquid storage and distribution.
• PAX: Mixing, storage and distribution.
• Flex 31: Bulk liquid storage and distribution.
• WW 1752: Bulk liquid storage and distribution.
• Flocculent: Mixing, storage and distribution
• Sulfuric Acid: Bulk liquid storage and distribution.
• NaHS: Bulk liquid storage and distribution.
• NaCl: Mixing, storage and distribution.
• MgO: Mixing, storage and distribution.
• CaO: Mixing, storage and distribution.
• Sulphur: Bulk storage, burner, distribution and SO 2scrubbing.

Capital and Operating Cost Estimates

Estimates of capital and operating costs were generated at the Pre-feasibility level in the April 2001 Pre-Feasibility Study led by IMC. Since the project was taken over by new management in March 2003, four critical elements have been revised as follows:

1.	Smaller higher grade mine plan.
2.	Elimination of complex nickel cobalt recovery circuits and conversion to nickel hydroxide.
3.	Securing the mothballed Cliffs-Erie Mill concentrator.
4.	Use of a contract miner.

Based on the above, P. Downey and Associates, with the assistance of PASI and IMC, have revised the 2001 capital and operating costs and updated to current first quarter 2004 pricing.

Capital Costs

The revised capital is summarized in Table 20.2.

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Table 20.2 - Revised Capital Cost Estimate

Description	Totals (US$ Millions)
Mining- using contract miner	5.76
Crushing/Milling/Flot'n (Existing Cliffs/Erie)	24.91
PlatSol™ Process-	31.05
Copper SX/EW Plant	25.19
PGM Recovery Circuit	20.62
Nickel Hydroxide recovery circuits	6.00
Tailings, Water & Services (Existing Cliffs-Erie)	4.55
Plant Site Utilities & Facilities (Existing Cliffs-Erie)	12.59
Sub Total Direct Costs	130.67
Indirect Costs (Inc. Fees, working capital & 20% Contingency)	73.13
Other Acquisition-incl. land and infrastructure	31.00
Total Project Costs	234.80

The capital cost estimate includes the estimated direct cost for equipment, material and labour. In addition, cost estimates were developed for the project indirect costs including EPCM, start up, construction indirects, first fill, spares and contingency. The estimate was developed based on a site visit and inspection of existing equipment and facilities, and the following main sources of information:

• Contract Mining and Associated Services.
• Process Design Criteria by PASI.
• Process Flow Sheets.
• Facility General Arrangement Drawings.
• Electrical and Mechanical Equipment List.
• Budget Quotations from Equipment Suppliers.
• Current Labour and Material Costs for the Area.
• The AMEC Simons Mining & Metals 2001 Prefeasibility Report.

54

Operating Costs

The 2001 Pre-Feasibility Study estimate of operating costs included an owner operated mining fleet, an all new processing plant, infrastructure and G&A costs associated with the on-site production of a PGM concentrate, copper cathode, nickel cathode and cobalt sulphide.

The current revised project operating costs use the same basic project data updated to 2003 but are based on a simplified flowsheet whereby only copper cathode is produced on site. The revised operating costs also reflect a contract mining operation and use of the Cliffs-Erie crusher/mill/concentrator. The Cliffs-Erie facility also received a beneficial electrical power rate for the first 25 MW of usage and this rate has been carried in the current operating cost estimate. Labour rates are based on data available from Minnesota Iron Range mines. The operating cost estimates include a 5% contingency, as detailed in Table 20.3.

Table 20.3 – Revised Operating Cost Estimate

Cost Area	Annual Cost  (US$ Millions)	Cost/Tonne Ore  (US$/Tonne/Ore)
General & Administrative ("G & A")	4,856,600
Subtotal G & A	4,856,600	0.53
Mine
Contract miner
Sub Total Mine	28,938,000	3.21
Mill & Process
Reagents & consumables	22,142,258
Labour Costs	10,977,823
Operating Supplies	400,000
Maintenance Supplies	1,915,896
Environmental	300,000
Sub Total Mill & Process	35,735,977	3.91
Power	16,746,886	1.84
Total Operating Costs	86,277,463	9.49
5% Contingency	4,313,873	0.95
Total Operating Costs	90,591,336	10.44

The following items are not included in the direct cash operating cost estimate:

• Product delivery to smelters or copper cathode end users
• Selling and marketing costs
• Corporate overhead
• Depreciation, amortization and depletion
• Interest charges

Manpower requirements were estimated in detail for each area of the mine, process plant and administration. Allowances were made to cover vacations, sick time and other types of leave such as training.

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The following Table 20.4 summarizes the overall manpower requirements for the operation. Salary and overhead costs were based on data from the recently closed Cliffs-Erie operation and from data from other similar sized operations.

Table 20.4 Manpower Requirements

Administration Staff	29
G& A Salaried	22
Process Plant Staff	27
Process Plant Salaried	140
Total	218

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21. Interpretation and Conclusions The results of this scoping level study indicate that the NorthMet project, as currently defined, shows sufficient potential to be carried forward to the next phase which is a feasibility study. The purpose of the feasibility study will be to examine all aspects of the project development and to establish with greater accuracy its economic and technical viability. This conclusion is solely based on the resource data and the order of magnitude capital and operating costs developed for this study.

57

22. Recommendations It is recommended that PolyMet proceed to the next stage of development of the NorthMet Project which is the Feasibility Study level stage. This will include sufficient drilling to bring the current resources to the reserve category. Additional test work will also be required to further refine the ore process prior to completion of a bankable Feasibility Study.

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23.	References
	-	Independent Mining Consultants, Inc., April 2001, NorthMet Project, Minnesota Pre- Feasibility Study
	-	AMEC Simons Mining & Metals, April 2001, Pre-Feasibility Report for the NorthMet Project Process Plant Facilities
	-	Penguin Automated Systems Inc., April 2004, NorthMet Project Processing Facilities Scoping Study
	-	Lakefield Research, February 1, 2001, A Pilot Plant Investigation into the Recovery of Copper, Nickel, Gold and PGM's from NorthMet Bulk Concentrate – Progress Report No. 1

59

24. The date of this report is July 22^nd, 2004.

60

25. Additional Requirements for Technical Reports on Development Properties and Production Properties There is no information to report for this item in the Pre-feasibility stage of exploration.

61

26.	Illustrations
	Figure 3.1 - Aerial photograph of the Cliffs-Erie facilities
	Figure 6.1 - Location of NorthMet Project
	Figure 6.2 – Mineral Rights Owners
	Figure 6.3 – Surface Owners
	Figure 9.1 – Midcontinent Rift System
	Figure 9.2 - Regional Geology
	Figure 10.1 – Midrift Cross Section
	Figure 9.3 – West Edge Duluth Complex
	Figure 9.4 – Generalized Igneous Stratigraphic Column
	Figure 13.1 – Area 1999 - 2000 Drilling
	Figure 13.2 – Location of Metallurgical Samples
	Figure 13.3 – US Steel and PolyMet Drilling
	Figure 13.4 – Cross Section Drill Holes
	Figure 20.1 – Block Flowsheet
	Table 6.2 – Land Swap
	Table 6.3 – Estimated NorthMet Wetlands Mitigation Requirements
	Table 6.4 – NorthMet EIS and Permitting Cost and Timing Estimates
	Table 13.1 – Summary of Drilling Programs
	Table 18.1 – Pilot Plant Metal Recoveries
	Table 19.1 – Lower Tonnage Higher Grade
	Table 20.1 – Process Design Criteria Summary
	Table 20.2 – Revised Capital Cost Estimate
	Table 20.3 – Revised Operating Cost Estimate
	Table 20.4 – Manpower Requirements

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APPENDIX I

MINING – INDEPENDENT MINING CONSULTANT UPDATE REPORT

MAY 2003

63

1

MEMO

TO: Terry O'Kane, Bill Murray, Don Gentry
FROM: M. Hester, H. Welhener
DATE: May 25, 2003
SUBJECT: Project Summary

Summary

PolyMet Mining Corporation (PolyMet) requested that Independent Mining Consultants, Inc. (IMC) update the April 2001 mine pre-feasibility study with new economics and develop a scoping level trial mine production schedules. The project approach has shifted from processing the polymetalic ore to final metals on the property to generating three concentrates: copper, nickel-cobalt and a PGM. The copper concentrate would be further processed on site using SXEW to produce copper metal. The other two concentrates would be shipped off site for further processing.

Table 1 shows the new economic input parameters. The metal prices have changed from the 2001 study with increases for most of the metals except palladium, which dropped significantly. The new prices were incorporated into the cash flow of the 2001 study and show a large drop in the project economics (Tables 3 and 4).

The block model was updated to better reflect the selectivity near the NSR cutoff grade for the present economics. The 2001 model ore zones were based on a $4.00 NSR ore-waste boundary. The current economics have a $7.42 NSR internal cutoff grade. The ore-waste boundaries were re-set in the block model using a $6.00 NSR to better reflect selectivity at a higher NSR value.

Floating cones were run and the results are summarized on Table 5. Based on the cone geometries, five mining phases were designed, three in the southwest pit area and two in the northeast. Unlike the 2001 study, the two pit areas do not join. The sum of the five phases (the total pit) contains 176,199 ktons of measured, indicated and inferred ore using the $7.42 NSR/t cutoff grade, and 720,199 ktons of total material. The inferred class material is included in this scoping study to show the best potential of the project.

Preliminary production schedules were developed for 15,000 tpd and 25,000 tpd ore rates. The 25,000 tpd schedules show a better NPV during the early years of the trial schedules. Schedules at 25,000 tpd have an average mine life of 19 years and the 15,000 tpd schedules extend the mine life to 32 years.

INDEPENDENT 
MINING CONSULTANTS, INC.

2

Economic Parameters

Table 1 summarizes the economic parameters used for this study.

Table 1: Economic and Recovery Parameters
Base Mining Cost Per Total Ton	$0.534
Lift Cost Per Total Ton Per Bench Below 1580 Elevation	$0.009
Benches Mined Per Year / Annual Discount Rate	12/12%
G&A Cost Per Ore Ton	$0.51
Processing Cost Per Ore Ton	$6.91
Flotation Recoveries:
Copper	93.7%
Nickel	69.0%
Cobalt	42.0%
Palladium	79.6%
Platinum	76.9%
Gold	75.7%
Copper Refining Cost Per Payable Pound	Included In Price
Nickel/Cobalt Refining Cost Per Payable Pound
PGM Refining Cost Per Payable Ounce	$15.00
Process Recoveries (Payables):
Copper	97.6%
Nickel	96.9%
Cobalt	92.0%
Palladium	94.0%
Platinum	95.0%
Gold	94.0%
Metals Prices:
Copper Per Pound	$0.80
Nickel Per Pound (70% of $4.00)	$2.80
Cobalt Per Pound (70% of $10.00)	$7.00
Palladium Per Troy Ounce/Gram	$150/4.82
Platinum Per Troy Ounce/Gram	$600/19.29
Gold Per Troy Ounce/Gram	$350/11.25

The recovery, price, and processing cost parameters were provided by NorthMet personnel.

The mining cost was estimated by IMC based on the engineered cost estimate prepared for the Preliminary Feasibility Study (PFS). First, mining costs estimated for each

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mining year of that study were plotted against the average mining elevation to obtain the base and lift (elevation related) components of the cost. Second, mining costs were examined by cost center (drilling, blasting, loading, hauling, auxiliary equipment, general mine, general maintenance, and mine supervision) and a fixed and variable component of each were extracted. These were used to scale the base mining cost from that of the 70 to 100 million annual tons of the preliminary study to the 40 to 50 million annual tons contemplated for this revised study. Third, the costs were escalated 2.5% per year for two years to obtain 2^nd quarter 2003 US dollars. Overall mining cost is anticipated to be about $0.60 per ton for this revised study, about the same as the average for the PFS. The expected higher cost of the lower mining rate is countered by the elimination of the longest truck hauls off the back end of the larger project.

The table also shows a time value of money component of the parameters that was used with some of the floating cones. For these cones, a mining rate of 12 benches per year and an annual interest rate of 12% were assumed for a discounting factor of 1 % per mining bench. This was used to discount the revenues and costs as a function of pit depth. For the PFS the maximum advance rates were about 10 benches per year from a mining phase.

An NSR value was calculated for each block and used in the floating cones, tonnage tabulations, and production scheduling. Table 2 shows the factors applied to each metal for the PFS and for this current study. The NSR for each block for the current study was calculated as:

NSR	=	14.63 x copper (%)	+	37.44 x nickel (%)
	+	0.0054 x cobalt (ppm)	+	2.95 x palladium (ppm)
	+	12.47 x platinum (ppm)	+	6.95 x gold (ppm)

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Table 2: NSR Factors for Prefeasibility and Current Study
	Prefeasibility	Current
NSR Factor for Copper ($/%)	13.95	14.63
NSR Factor for Nickel ($/%)	29.23	37.44
NSR Factor for Cobalt ($/ppm)	0.0055	0.0054
NSR Factor for Palladium ($/ppm)	11.73	2.95
NSR Factor for Platinum ($/ppm)	10.44	12.47
NSR Factor for Gold ($/ppm)	5.17	6.95
Internal NSR Cutoff Grade ($US)	$4.31	$7.42

It can be seen that the relative value of nickel has increased significantly from the PFS. Moderate increases are also noted for copper, platinum, and gold. The relative value of the palladium has reduced significantly.

The NSR value represents the value of the ore after paying for SXEW, refining, and freight charges. The NSR value needs only to pay for mining, G&A, and processing costs that are common to every ore ton (crushing, grinding, flotation, pressure oxidation, and tailings, etc). The NSR factors shown on Table 2 are calculated from the Table I parameters as follows:

Copper:	($0.80)(0.937)(0.976)(20)(Cu%)	14.63 x Cu%
Nickel:	($2.80)(0.69)(0.969(20)(Ni%)	37.44 x Ni%
Cobalt:	($7.00)(0.42)(0.920)(20)(Co ppm)/10000	0.0054 x Co ppm
Palladium	($150 - $15)(0.796)(0.94)(Pd ppm)/34.285	2.95 x Pd ppm
Platinum:	($600 - $15)(0.769)(0.95)(Pt ppm)/34.285	12.47 x Pt ppm
Gold:	($350 - $15)(0.757)(0.94)(Au ppm)/34.285	6.95 x Au ppm

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It can be seen that the metal recoveries, prices, and refining costs are accounted for in the NSR calculation.

Prefeasibility Study Economic Model With Current Prices

The metal prices proposed for this updated study were incorporated into the detailed cash flow model of the PFS. The prices used are as shown on Table 1 with $4.00 for nickel and $10.00 for cobalt.

Table 3 shows the financial results for the before-tax case.

Table 4 shows the financial results for the after-tax case.

It can be seen that the changes in metal prices have a significant negative impact on the PFS case.

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Block Model Update

The block model for the PFS was developed by manually selecting drillhole composites inside the ore zone based on a $4.00 NSR cutoff grade. These composites were then used to select the ore zone blocks using an indicator kriging approach. The model was optimized to be accurate at about a $4.00 NSR cutoff grade.

Table 1 shows that with the revised economics the internal NSR cutoff grade is about $7.42 per ore ton (processing plus G&A). It is likely that the PFS model will be slightly over-smoothed (slightly high on ore tonnage and slightly low on metal grades) at the cutoff grades of current interest.

For this study, the block model was updated based on a $6.00 NSR cutoff grade. Drillhole composites were re-examined and those inside a $6.00 NSR ore zone were selected. A revised ore zone boundary was developed and grades of the various metals re-estimated based on the same methods used for the PFS. Resource classifications were also re-assigned using the same methods as the PFS model.

The section of this memo titled "Changes in Reserves - Preliminary Feasibility Study Case to Current" documents the change in reserves attributed to this revised model.

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Floating Cone Evaluation

Table 5 summarizes the results of floating cone runs on the NorthMet deposit at various metal prices and other conditions.

Cases 1 through 5 are floating cones at various metal prices without time value of money discounting and with an hangingwall slope angle of 50 degrees. Mechanically, the various metal prices were handled by applying a recovery factor to the block NSR value, i.e. 100% of NSR is the base case prices, 80% of NSR is 80% of base case prices, etc. Only measured and indicated resources were allowed to contribute to economics to develop floating cone geometries. However, inferred resource within the developed geometries is included on the Table x tabulations. The inferred resource generally amounts to slightly over 10% of the total resource. It can be seen that ore tonnes range from 194.5 million tons to 55.8 million tons for these cases with the largest break occurring between Cases 4 and 5. Total tons range from 760 million to 145 million. The base case cone for the PFS contained 498.3 million ore tons within a geometry with 1.8 billion total tons. It is evident that the revised economics significantly reduce the size of the project.

Cases 6 and 7 include time value of money discounting of 1% and Y2% per bench. In both cases the results fall in between the results for Cases 2 and 3. Case 8 examines a reduced slope angle on the hangingwall to account for more road on that wall than originally contemplated. It does not have a large impact on results.

In general, as effective metal prices are decreased in Cases 1 through 5, the cone targets more profitable material. It is important to note that metal grades do not change significantly in these cases. Higher profitability comes from reduction in strip ratio. The implication is the general lack of significant higher grade ore zones in the NorthMet deposit resource model. This could be a reflection of the true geologic character of the deposit, or alternatively it could be partially due to insufficient density of drilling data and over-smearing of the available data.

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Another aspect of the NorthMet deposit that is not evident from Table 5, but is evident from examining measured, indicated, and inferred resources by category is that the grade of measured resources is less than the grade of indicated resources and the grade of indicated resources is less than the grade of indicated resources. This implies that grade increases with depth, which is not the desirable case for a mining project. For example, for the Case 1 cone the copper grade of measured, indicated, and inferred resource is 0.360%, 0.383%, and 0.398% respectively. This is also evident for nickel, palladium, platinum, and gold; only cobalt reverses this trend and exhibits decreasing grade at less confident resource classes.

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Table 5

Table x
Floating Cone Resources at Various Metal Prices (Based on Percent Recovery of Available NSR Value)
Measured and Indicated Resource Only Used to Develop Cone Geometry
Tabulation Includes Inferred Material in the Geometry
Resources Tabulated at $US 7.42 NSR Cutoff Grade

Case	% of NSR	Discount  Rate	HVV Slope Angle	Ore  Ktons	NSR ($US)	Copper  (%)	Nickel  (%)	Cobalt (ppm)	Palladium  (ppm)	Platinum (ppm)	Gold (ppm)	Cu Eq  (%)	Total     Ktons	Strip  Ratio
1	100%	none	50	194,500	12.16	0.370	0.097	66.14	0:372	0.105	0.052	0.901	759,857	2.91
2	95%	none	60	186,019	12.25	0.374	0.097	68.07	0.374	0.105	0 .053	0.908	720,358	2.87
3	90%	none	50	141,030	12.37	0.378	0.098	68.51	0.374	0.107	0.054	0.915	497,612	2.53
4	85%	none	50	119,361	12.47	0.382	0.098	68.12	0.379	0.108	0.055	0.926	403,264	2.38
5	80%	none	50	55,808	12.40	0.375	0.099	69.00	0.379	0.108	0.053	0.914	144,763	1.59
6	100%	1 %/ben	50	159,873	12.18	0.371	0.097	68.64	0.370	0.104	0.053	0.898	576,836	2.61
7	100%	0.5%/ben	50	181,405	12.17	0.371	0.097	68.52	0.370	0.104	0.052	0.900	690,709	2.81
8	100%	0.5%/ben	42	164,166	12.20	0.372	0.097	68.42	0.371	0.105	0.053	0.901	639,643	2.90

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Mine Phase Designs

Five mining phases were designed. Table 6 summarizes the tonnage and grade results for each phase at the internal NSR cutoff grade ($7.42/t) . The floating cones indicated that the most profitable material was in the south of the orebody; the first three mining phases are located in the south. The final two mining phases are in the north. The final geometry includes a north and a south final pit that are not connected. Note that starting of mining in the south is different than the PFS case, which started in the north. This change is due to the revised economics and change in relative importance of the various metals.

The final pit contains 176,199 ktons of measured, indicated and inferred ore using a $7.42 NSR/t cutoff grade and 720,199 ktons of total material. In terms of ore tonnage it approximates floating cone Cases 2 and 7. It is also close to Case 2 in terms of total tons. The final pit strip ratio is a bit higher than the cones. The 50 degree hangingwall slope angle used in the cones was steeper than could be achieved during pit design due to haulage roads.

Table 7 shows the phase tonnages at higher NSR cutoff grades. Increasing the NSR cutoff grade from $7.42/t to $12.00/t reduces the contained measured, indicated and inferred ore from 176.2 million tonnes to 83.2 million tonnes. Raising the NSR cutoff to $15.00/t drops the contained ore tonnage to 25.6 million tonnes.

Table 8 shows the measured and indicated only ore tonnage within the mining phases at various NSR cutoff grades. Removing the inferred ore grade material has the largest impact on phases 1-South and 3-South.

The net value of each mining phase was calculated to rank the phases and determine the best mining sequence for mine production schedules. The net value was calculated at the internal NSR cutoff grade of $7.42/t. The floating cone input costs of $0.60/t mining and

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$7.42/t for processing and property G&A were used to calculate the costs. Table 9 shows the results on a net value and a value per ton of ore (at internal cutoff grade) calculation. The net value per ton of ore shows that the mining sequence should be south pit and then north pit.

Figure 1 shows the final geometry of the South pit (combination of south phases 1, 2, and 3. Figure 2 shows the final North Pit (north phases 1 and 2). Figure 3 shows the relationship of the 5 mining phases on the 1500 bench.

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Table 6
Mining Phase Resources
Includes Measured, Indicated, and Inferred Resources
Tabulated at $US 7.42 NSR Cutoff Grade

Phase	Name	Ore Ktons	NSR ($US)	Copper (%)	Nickel (%)	Cobalt (ppm)	Palladium  (ppm)	Platinum (ppm)	Gold (ppm)	Cu Eq (%)	Total Ktons	Strip Ratio
1	ph1sthtr4	23,283	13.50	0.407	0.091	58.59	0.447	0.162	0.070	1.065	109,070	3.68
2	ph2sthtrl	20,911	11.20	0.346	0.096	73.25	0.287	0.081	0.042	0.783	47,937	1.29
3	ph3sthtr2	62,883	12.66	0.398	0.096	66.91	0.372	0.111	0.057	0.941	277,004	3.41
4	phlnthtrl	26,684	11.71	0.350	0.103	71.55	0.337	0.084	0.047	0.845	110,208	3.13
5	ph2nthtrl	42,438	11.48	0.342	0.098	70.88	0.366	0.086	0.043	0.842	175,980	3.15
TOTAL		176,199	12.17	0.372	0.097	68.22	0.365	0.104	0.052	0.900	720,199	3.09

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Table 7

Polymet Mining - MorthMet Project, May 2003 Update
Summary of Mining Phases by NSR Cutoff Values

MEASURED, INDICATED & INFERRED

Table 8

Polymet Mining - MorthMet Project, May 2003 Update
Summary of Mining Phases by NSR Cutoff Values

MEASURED AND INDICATED ONLY

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Table 9

Net Value of Mining Phases

Mining Phase	Bottom Bench	ORE (=+ $7.42 NSR)				Waste	Total	Phase Net Value	Phase, Net  Value per  ton of Ore
		Ore ktons	NSR, $	Cu, %	CuEq, %	ktons	ktons	$ x 1000	$
PH 1 South	880	35,151	$13.52	0.412	1.061	130,944	166,095	$114,765	3.26
PH 2 South	1200	30,911	$11.20	0.346	0.783	27,026	47,937	$50,281	2.40
PH3South	700	51,015	$12.44	0.393	0.915	168,962	219,976	$124,517	2.43
PH 1 North	1040	26,684	$11.71	0.350	0.845	83,524	110,208	$48,350	1.81
H 2 North	840	42,438	$11.48	0.342	0.842	133,542	175,980	$66,710	1.57

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Mine Production Schedules

Preliminary mine production schedules were developed using the tonnage tabulations of the five mining phases for ore production rates of 15,000 tons per day (tpd) and 25,000 tpd. It is assumed that the plant will operate 365 days per year, thus the annual ore rate is 5,475,000 tons per year (tpy) for the 15,000 tpd case and 9,125,000 tpy for the 25,000 tpd schedules. The year 1 ore rate is at 85% of the nominal throughput rate and includes any ore mined during pre-production.

The mining sequence is phases 1, 2 and 3 in the south, then phases 1 and 2 in the north pit. Phases 1 and 2 in the south are independent phases and either one of them could be mined ahead of the other. Schedules were tried for both alternatives and starting with Phase 1 give a much higher net value during the earlier years at both production rates. Starting with Phase 1 requires a higher pre-production tonnage but this is more than offset by the higher head grades that are achieved.

The preliminary schedules developed for the two mill throughput rates have not been optimized and are intended to give an initial impression of the response to different cutoff grade sequences. Five cutoff grade schedules were run for each mill rate and the present value of the schedule at the end of years 5, 10 and end of mining was tabulated. This net value includes an allowance for the mine fleet capital (assuming new equipment) using a cost of $1.05 per ton of mining capacity. A discount rate of 8% was used to calculate the present value of the future revenues.

The NSR cutoff sequence used for the five production schedules summarized in Tables 10, 11 and 12 are: Schedule 1: All years at internal cutoff grade of $7.42 Schedule 2: Pre-production through Year 2 at $10.00, Years 3 to 7 at $9.00, Years 8 through 10 at $8.00, and all years after Year 10 at $7.42 Schedule 3: Pre-production through Year 5 at $10.00, Years 6 to 8 at $9.00, Years 9 and 10 at $8.00, and all years after Year 10 at $7.42

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Schedule 4: Pre-production through Year 5 at $9.00, Years 6 through 10 at $8.00, and all years after Year 10 at $7.42

Schedule 5: Pre-production through Year 10 at $8.00, and all years after Year 10 at $7.42

Higher cutoffs than $10.00 NSR were not evaluated because of the rapid decline of ore tonnage as the cutoff is increased, as seen on Table 7. For the sum of the South and North pits, the ore tonnage decreases by 37 million tons when the cutoff is raised from $7.42 to $10.00; this is a 21% decrease. When the cutoff is raised to $12.00, an additional 56 million tons is lost, or 40% of the ore tonnage at the $10.00 cutoff. The corresponding increase in NSR value per ton of ore is $0.80 (7%) when the cutoff is raised from $7.42 to $10.00, and an increase of $1.34 (10%) for the cutoff change from $10.00 to $12.00. The tonnage decrease is faster than the increase in net value as the cutoff is raised.

Table 10 is a summary of the preliminary schedules at 15,000 tpd ore and shows that there is some increase in the net value of the project with a modest increase in the cutoff grade in the early years. A smaller Phase 1 south was developed for the 15,000 tpd ore schedules to see if a smaller pre-production tonnage would improve the economics. Schedules with this sequence of phase designs are shown on Table 11. The smaller preproduction does improve the Year 5 NPV, but by Year 10 it and the schedules shown on Table 10 are similar. The smaller Phase 1 south was not used for the 25,000 tpd schedules because mining would occur too quickly through the benches in the phase.

The 25,000 tpd schedules are shown in Table 12 and show that a less aggressive cutoff grade strategy might be better at the higher throughput rate. The higher rate moves faster through the relative higher grade ore in Phase 1 South, thus bringing lower grade ore forward in time at a faster rate as the cutoff grade is raised. In all cutoff grade cases tested to date, the net values are similar for the preliminary nature of the input data. A 25,000 tpd rate was run with the smaller Phase 1 South and the NPV at Year 5 was about

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half of that shown on Table 12 for the sequence of cutoff grade trials. This is because of reduced amount of higher grade ore in the smaller phase 1.

Table 13 shows a 25,000 tpd ore schedule that has been refined from the preliminary schedules on Table 11. The total mining rate has been smoothed, but at this time is does not match the assignment of integer loading units per mining area. Additional refinements can be made to this schedule.

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Table 13

Mine Production Schedule at 25,000 TPD Ore Rate

	ORE					WASTE	TOTAL
Year	Cutoff	ktons	NSR,$US	Cu, %	CuEq, %	ktons	Ktons
PP	9.00	2,093	13.94	0.401	1.132	25,907	28,000
1	9.00	5,663	12.92	0.384	1.001	31,161	36,824
2	9.00	9,125	12.86	0.391	0.985	29,875	39,000
3	9.00	9,125	12.94	0.396	1.000	29,875	39,000
4	9.00	9,125	12.63	0.387	0.967	29,875	39,000
5	8.00	9,125	11.75	0.356	0.869	29,875	39,000
6	8.00	9,125	12.49	0.382	0.922	29,875	39,000
7	8.00	9,125	11.87	0.370	0.824	29,875	39,000
8	8.00	9,125	11.90	0.373	0.585	29,875	39,000
9	8.00	9,125	12.30	0.395	0.882	29,875	39,000
10	8.00	9,125	12.18	0.394	0.877	29,875	39,000
11	8.00	9,125	12.83	0.413	0.939	29,875	39,000
12	8.00	9,125	12.83	0.396	0.956	29,875	39,000
13	8.00	9,125	13.09	0.392	1.003	29,875	39,000
14	8.00	9,125	11.98	0.354	0.885	29,875	39,000
15	7.42	9,125	11.52	0.339	0.843	29,875	39,000
16	7.42	9,125	11.45	0.338	0.835	29,875	39,000
17	7.42	9,125	11.13	0.327	0.783	27,798	36,923
18	7.42	9,125	11.24	0.338	0.814	10,478	19,603
19	7.42	9,125	12.58	0.389	0.970	3835	12,960
20	4.42	724	13.37	0.417	1.057	163	887
Total		172,730	12.25	0.375	0.907	547,467	720,197

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Changes in Reserves - Preliminary Feasibility Study Case to Current

The purpose of this section is to document the changes in the stated potential minable resources from the Preliminary Feasibility Study published in April 2001 versus the current potential minable resource and to show the sources of the changes. Table 13 shows the resource change due to several different items.

Item 1 shows the potential minable resource at a $4.31 NSR cutoff grade as published in the PFS document. It shows 486.8 million ore tons in a total pit of 1.9 billion tons.

Item 2 shows the impact of excluding inferred resources as per the rules written in Canadian National Instrument 43-101 that became law about the time the PFS was completed. It can be seen that this amounted to 82.3 million tons of ore and the material was at higher average grades than the measured and indicated resources for all metals except cobalt.

Item 3 shows results due to a model developed in March 2001 with 13 additional holes. This model was documented in appendices to the original PFS, but was not the base case model used for that study. It can be seen that the impact was small as 4.7 million tons of low grade ore were added.

Item 4 shows the impact of the revised metal prices, recoveries, and process costs introduced during this May 2003 update. Note that the NSR cutoff grade increased from $4.31 to $7.42 with the revised economics. This resulted in the reduction of 99.7 million ore tons that were at quite low metal grades. Note that compared to Case 3 the metal grades increased significantly, but the NSR value did not increase. There were actually two components in Item 4. The first was the change to prices and recoveries. This caused a large change in NSR values but did not have much impact on ore tons. The second was the change to the process cost which caused the change to NSR cutoff grade. Almost all of the ore decrease is due to this second factor. The "N.A.'s" on the table mean that the calculation is nonsensical due to changes in base parameters between cases.

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Item 5 shows the impact of the May 2003 revision to the model, due to designing ore zones at the higher cutoff grades, as discussed previously. This resulted in a 52.9 million ton decrease in ore tons, but an increase in grade since the ore lost was at marginal values.

Note that Items 1 through 5 were all tabulated inside the PFS final pit design. Note also that the strip ratio increased from 2.95 to 6.49 with the various changes. Item 6 shows the results of a re-design of the final pit to be more appropriate for the current economic conditions. It can be sent that the pit size was decreased by 1.2 billion total tons and that 102.7 million ore tons were lost in the change. The strip ratio is back down to 3.68.

Item 7 shows the effect of adding back inferred material in the pit design. This adds 22.3 million ore tons. The final ore tons and grade shown, as well as total tons, are the same as on Table 6. The strip ratio is similar to the original Item 1 results.

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PolyMet Mining Corporation

NorthMet Project
Processing Facilities Scoping Study

PolyMet Mining Corporation

NorthMet Project
Processing Facilities Scoping Study

Table of Contents

Section		Page
1.0 Introduction
	1.1 Background and Scope of Work	1-1
	1.2 Basis of Design	1-2
2.0 Summary		2-1
	2.1 Introduction	2-1
	2.2 Project Location and Access	2-2
	2.3 Process Plant	2-4
	2.4 Capital Cost	2-5
	2.5 Operating Cost	2-6
3.0 Process Plant
	3.1 Existing Facilities at Cliffs Erie	3-1
	3.2 Metallurgical Testwork and Design	3-3
	3.3 Process Design Criteria	3-5
	3.4 Process Description	3-6
	3.5 Equipment List	3-14
4.0 Operating Cost Estimates
	4.1 Summary	4-1
	4.2 Basis of Estimate	4-2
5.0 Capital Cost Estimates
	5.1 Summary	5-1
	5.2 Basis of Estimate	5-3
Appendices
	Appendix 1- Process Design Criteria
	Appendix 2- Drawings
	Appendix 3- Equipment List
	Appendix 4- Operating Costs
	Appendix 5- Capital Costs

1.0 Introduction

NorthMet Project Processing Facilities Scoping Study

1.0 Introduction

1.1 Background and Scope of Work

PolyMet Mining Corporation (PolyMet) intends to develop the NorthMet deposit located in the Mesabi Iron Range in Northeastern Minnesota. The project is located approximately 70 miles north of Duluth. The NorthMet Project is a polymetallic magmatic sulfide deposit containing platinum, palladium, gold, copper, nickel, cobalt, and silver. The deposit is hosted near the base of the Duluth Mafic Complex and is one of the largest undeveloped non-ferrous metal project in the U.S.

In 2001, (AMEC) (formerly AGRA Simons Inc.) completed a pre-feasibility level study for the NorthMet project. In 2003, a new management team review of the pre-feasibility work concluded that a technically simpler, lower tonnage project would be more appropriate to advance the project to feasibility level. As part of the strategy of the new management team, Polymet has secured an option to purchase and utilize the processing facilities available at the Cliffs Erie site in Hoyt Lakes, Minnesota. These assets were formerly owned by LTV Steel Mining Company, which permanently closed its iron ore mining and palletizing operations in January 2001. The Cliffs Erie site historically processed 100,000 st/day of iron ore through crushing, grinding and flotation. The Cliffs Erie plant acquisition therefore provides the "front end" of the proposed Polymet plant for treatment of NorthMet ore as well as land, buildings (for concentrate processing and metal recovery). Rail access and tailings dam facilities. As part of this revised approach, Polymet intend to utilize part of the existing processing facilities at the Cliffs Erie site in Hoyt Lakes, Minnesota. These assets were formerly owned by LTV Steel Mining Company, which permanently closed its iron ore mining and pelletizing operations in January 2001.

Penguin Automated System Inc. (Penguin ASI) was contracted in January 2004 to prepare a scoping level study for the NorthMet process plant facilities based on the revised concept as a prelude to proceeding to a feasibility study.

Penguin Automated Systems Inc. 1-1

NorthMet Project Processing Facilities Scoping Study

The Scope of Work was defined in the proposal issued January 21^st 2004 and is summarized as follows:

• Develop scoping level capital and operating cost estimates for a stand aloneconcentrator capable of treating 9,125,000 tonnes per annum and utilizing parts of theexisting Cliffs Erie processing facilities.



• Prepare preliminary flowsheets, material balances, process design criteria, equipmentsizing and process plant layouts to support the development of the capital andoperating costs.

This study is based on the AMEC pre-feasibility report, testwork reports from SGS Lakefield, metallurgical data supplied by Polymet and site visits and discussions with key personnel at the Cliffs Erie site.

1.2 Basis of Design

The basis of design was to develop capital and operating costs to a scoping level estimate of +/- 30 %.

The capital cost estimates are based on flowsheets and layouts. Process equipment costs are based on preliminary budget quotes or factored from the previous study.

Operating cost estimates are based upon the estimated manpower requirements and reagent and consumable quantities developed jointly between Polymet and Penguin ASI and updated to reflect current cost data. Power costs are based on data gathered from site.

All currency amounts are stated in first quarter 2004 US dollars. All units of measurement are in metric units unless otherwise noted.

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2.0 Summary

NorthMet Project Processing Facilities Scoping Study

2.0 Summary

2.1 Introduction

The NorthMet Project is a large disseminated polymetallic deposit located North of Duluth Minnesota. It is proposed that the project be developed to exploit the mineral resources to produce the following three primary products:

• copper cathode,



• a nickel/cobalt hydroxide and



• a concentrate containing platinum group metals (PGM's).

The project will utilize crushing, grinding and flotation processes followed by a standard autoclave circuit based on the patented PlatSol process. The copper metal will be recovered utilizing a conventional SX/EW circuit.

The nickel/cobalt and PGM concentrates will be refined offsite. The process will also produce significant quantities of gypsum and carbon dioxide gas as potentially saleable by-products. This is something that will be examined more completely during feasibility.

The average daily milling rate will be 25,000 tonnes per day based on a 91% overall plant availability equivalent to 9,125,000 tonnes per annum. Grades, recoveries and metal production are summarised in Table 2.1.

Table 2.1 NorthMet Production

	Cu	Ni	Co	Au	Pt	Pd
Head grade Recovery to concentrate Concentrate grade Pressure Leach Extraction Recovery from Leach Solution Overall Recovery Metal Production tonnes per year	0.4% 93.7% 14.6% 99.6% 99.0% 92.4% 33,723	0.11% 69.0% 2.94% 98.9% 99.0% 67.6% 6,755	0.0088% 42.0% 0.14% 96.0% 99.0% 39.9% 319	0.0g/t 75.7% 1.6g/t 96.0% 99.0% 72.0% 0.36	0.11g/t 76.9% 3.32g/t 96.0% 99.0% 73.1% 0.74	0.38g/t 79.6% 11.82g/t 96.0% 99.0% 75.7% 2.63

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2.2 Project Location and Access

The NorthMet deposit is located in northeastern Minnesota, St. Louis County, 100 miles north of Duluth and 4 miles south of Babbitt (see Figures 2.1 and 2.2) . The famous large-scale open-pit Mesabi Range iron mining operations are within two miles of the project. The Polymet process plant will be constructed on the site of the existing Cliffs Erie iron ore facilities located some 5 miles away by railroad from the deposit. The assets were formerly owned by LTV Steel Mining Company, which permanently closed its iron ore mining and pelletizing operations in January 2001. Founded as Erie Mining Company, LTV Steel Mining Company was one of the first taconite production facilities in Minnesota and in the iron mining industry. The construction of the Hoyt Lakes mine, plant, loading dock and the power plant facilities at Taconite Harbor was completed in 1957 at a cost of $300 million. Polymet has already acquired ownership of certain land, crushing and concentrating facilities, as well as shops, warehouses and other assets at the Cliffs Erie location and also has access to already established roads, tailings disposal facilities, water, electricity, offices and rail service. Rail lines connect to ports on nearby Lake Superior, all of USA and Canada.

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Figure 2.1 NorthMet Deposit Location

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NorthMet Project Processing Facilities Scoping Study

Figure 2.2 NorthMet Deposit Location

Accommodations and full services are located nearby in both Hoyt Lakes and Babbitt. Experienced general construction and operations labour can be obtained from the local area population.

2.3 Process Plant

The NorthMet Project will utilize parts of the existing processing facilities at the Cliffs Erie site for crushing and grinding of the ore. A new flotation plant will be installed in the existing concentrator building with new facilities and equipment installed for the downstream hydrometallurgical processes. The existing infrastructure and plant services will be utilized for the project.

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2.4 Capital Cost

A scoping level capital cost estimate for the process facilities was prepared. The capital cost of the processing facilities was estimated to be $199,426,621. This estimate is summarized in the following table 2.4.1.

Table 2.4.1 NorthMet Project Initial Capital Cost

Item	Cost ($000)
Crushing	3,082
Grinding	4,282
Flotation & Regrind	17,546
Pressure Leaching	31,052
Solid / Liquid Separation	6,667
PGM Recovery	5,082
Neutralization	8,867
Solvent Extraction	6,439
Electrowinning	18,749
Fe & Hydroxide Precipitation	6,003
Infrastructure & Auxiliary Services	12,587
Tailings	4,549
Mining	5,760
Subtotal Direct Costs	130,665
EPCM	19,600
Construction Indirects	2,872
Capital Spares	4,323
First Fills	4,000
Vendor Representatives	1,319
Freight	2,499
Start Up and Commissioning	910
Contingency	33,238
Total Project Cost	$199,426

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The capital cost estimate includes the estimated direct cost for equipment, material and labour and cost estimates for the project indirect costs including EPCM, start up, construction indirects, first fill, spares and contingency.

2.5 Operating cost

The annual operating costs for the processing facilities were estimated to be $60.2 million including a 5% contingency or $6.59 per ton milled. The processing operating cost estimate is summarized in the following table 2.5.1.

Table 2.5.1 Operating Cost Summary

Description	Total Cost US$	US$/tonne
Consumables	22,142,258	2.43
Labour	10,977,823	1.20
Power	16,746,886	1.84
Plant Operating Supplies	400,000	0.04
Maintenance Supplies	1,915,896	0.21
Environmental Monitoring	300,000	0.03
G&A	4,856,600	0.53
Sub total	57,339,463	6.28
Contingency 5 %	2,866,973	0.31
Total	60,206,436	6.59

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3.0 Process Plant

NorthMet Project Processing Facilities Scoping Study

3.0 Process Plant

3.1 Existing Facilities at Cliffs Erie

The polymet process will incorporate standard crushing, grinding and flotation to produce a concentrate for hydromettalurgical processing to produce copper cathodes, nickel cobalt hydroxide and a PGM concentrate.

The NorthMet project process facility will be located within the existing Cliffs Erie plantsite making use of the following:

• one circuit of the rail dump pocket and the 60" gyrosphere crusher;
• the withdrawal feeder and the transfer conveyors to the coarse ore bins;
• 2-7' standard cone crushers and associated feeders;
• 4-7' short head cone crushers and associated feeders and screens;
• belt conveyors and tripper to the fine ore bins;
• 8 sets of rod/ball mill circuits;
• three regrind mills (two for concentrate regrind and one for limestone);
• ancillary facilities and offices;
• infrastructure including power supply and distribution;
• tailing storage and reclaim water facility.

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Photograph 3.1.1 Overall Facilities at Cliffs Erie

Photograph 3.1.2 Concentrator Building

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NorthMet Project Processing Facilities Scoping Study

In early January 2004, the facilities were visually inspected by Equipment Specialist Dave Phelps (FFE Minerals) and Mickey Trader (Penguin ASI) and found to be in good standing. The plant is generously designed with good maintenance and service crane access to all major equipment.

It was noted that the previous operators kept excellent records of all equipment maintenance and spare parts.

3.2 Metallurgical Testwork and Design

Polymet conducted benchscale and pilot plant work at SGS Lakefield in preparation for the AMEC feasibility study. This work was reviewed and evaluated by T.O'Kane of Polymet and was reported separately at the same time as the AMEC study. The metallurgical testwork results, recommendations and flowsheet design as provided by Mr O'Kane were incorporated into the AMEC process facility design and equipment list without audit by AMEC. In compiling this scoping study, Penguin ASI has relied on process design criteria data in the AMEC report and in the hydrometallurgical mass balance provided by Polymet and has not audited or confirmed this data except for the following:

• Penguin ASI reviewed the filtration data from the pilot plant work and used theappropriate filtration rates for sizing the leach residue and gypsum filters
• Penguin ASI reviewed the calculation accuracy and completeness of thehydrometallurgical mass balance but did not conduct a metallurgical audit

In the next phase of the project a full review of all testwork completed to date will be required. Based upon the limited review that has been completed, Penguin ASI recommends the following additional testwork:

• Grinding testwork to confirm work indices of the ore and concentrate, and
• Filtration testwork on PGM concentrates to determine filtration rates.

There may be other areas that require additional or confirmatory work. This can only be assessed after a full review of all testwork completed to date.

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Penguin ASI developed an overall mass balance for the NorthMet process based on the hydrometallurgical mass balance provided by Polymet, which set the feed headgrades and recoveries for copper, nickel, cobalt and PGM's at and a throughput of 9,125,000 tonnes per annum.

The development of the flowsheet and equipment sizing for the crushing, grinding and flotation process facilities was based on flowrates derived from this mass balance, plus process design criteria developed from the AMEC study and information by SGS Lakefield who were responsible for the pilot plant flotation trials. The flowsheet for the hydrometallugical facilities – pressure oxidation, solid-liquid separation, PGM recovery, copper SX/EW and nickel/cobalt hydroxide recovery – was derived primarily from the AMEC study with equipment resized accordingly for the new plant throughput, plus input from T.O'Kane of Polymet for the autoclave circuit. Testwork data from SGS Lakefield was reviewed for sizing of thickeners and filters.

Work indices used for crushing and grinding circuit calculations are estimates provided by SGS Lakefield based on limited grinding testwork. These numbers will require confirmation in the next phase.

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3.3 Process Design Criteria

The detailed process design criteria is presented in Appendix 1 and the key criteria is summarized in Table 3.1.1.

Table 3.1.1 Process Design Criteria Summary

Parameter

Design Criteria

Annual mill throughput Average daily mill throughput Plant Availability Operating Hours per day Hourly Throughput Concentrate produced Rod mill work index Ball mill work index Regrind work index Feed size to flotation Feed size to pressure leach Pressure leach residence time Autoclave operating temperature Autoclave operating pressure H2 SO4 concentration Cl concentration Cu SX plant Organic / Acid ratio PLS Cu Raffinate Cu SX Cu recovery E/W current density Cathodes per cell Total cells required

9,125,000 tonnes 25,000 tpd dry 91.34% 24 1140 tph dry 703 tpd dry 14 kWh/t 17 kWh/t 7.5 kWh/t 200 micron 15 micron 2 hours 225C 475 psig 50-60 g/l 10g/l 2 extraction; 1 wash; 2 strip 1.5:1 18.4g/l 0.99g/l 94.62% 260 amp/m² 54 125

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3.4 Process Description

The overall process flow is described in the block flow diagram presented overleaf.Process flowsheets, general arrangements and site plan are provided in Appendix 2.

3.4.1 Crushing

Run of mine ore will be delivered by rail to the Cliffs Erie process plant and dumped into the primary crusher surge pocket. From the surge pocket, the ore will flow to a single existing 60" by 89" gyratory crusher set to produce a nominal coarse ore product with a P₈₀ sizing of 6 inches. The existing secondary gyratory crushers will be removed and a surge pocket will be constructed allowing the crushed ore to discharge onto an existing apron feeder. The apron feeder will in turn discharge onto the exiting coarse ore surge bin feed conveyor. Ore from the coarse ore surge bin will discharge via the existing vibrating feeders onto existing belt feeders feeding two existing 7' standard cone crushers. Each 7' cone will discharge onto two existing vibrating feeders, each feeding an existing 6' x 10' vibrating screen. Screen oversize discharges into one of four existing 7' shorthead cone crushers. The minus ¼" discharge from the tertiary shorthead crushers will combine with the screen undersize onto the existing feed conveyor to the existing fine ore bin.

3.4.2 Grinding

Ore from the fine ore bin will discharge via existing vibrating and belt feeders to the existing rod and ball mill circuits. For the design throughput of 25,000 tpd, 8 of the existing 12 circuits will be utilized. Each rod mill will operate in open circuit, with the rod mill discharge feeding a ball mall in closed circuit with new hydrocylones. The grinding circuit will produce a flotation feed of 30% solids at a P₈₀ sizing of 200 micron.

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Figure 3.1 Block Flowsheet

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3.4.3 Flotation and Regrind

Cyclone overflow from the grinding circuits combine to feed a conditioning tank with a 5-minute retention time. The conditioner will feed a single bank of 4-160m³ rougher tank cells providing a total residence time of approximately 8 minutes. Rougher discharge will feed 2 parallel banks of 5-160m³ tank cells providing a residence time of 20 minutes.

Rougher concentrate combines with re-cleaner tail to feed the first cleaner flotation circuit. The cleaner flotation circuit will consist of a single bank of four 20m³ conventional cells providing 16 minute retention time. Scavenger concentrate, mixed with cleaner tail, will be reground in an existing regrind ball mill to a target P₈₀ of 30 micron prior to recirculation back to the conditioning tank. Cleaner concentrate will be fed to a single re-cleaner column cell, providing 16-minute retention time, for final concentrate cleaning. Cleaner concentrate will report to the concentrate regrind mill where the concentrate will be reground to the target P₈₀ sizing of 15 micron, prior to pressure oxidation. A second existing regrind mill (using ceramic balls as grinding media to reduce iron contamination) will be used for this purpose.

Reground concentrate thickened to 50% solids and stored in a concentrate storage tank, which provides 12 hours of surge capacity between the flotation circuit and downstream hydrometallurgical processing.

Flotation tailings will be pumped to the existing Cliffs Erie tailings impoundment.

The flotation circuit reagents (MIBC, PAX, Flex 31, and WW1 752) are based on the AMEC study and was developed for effective base metal recoveries with associated high PGM recovery.

Flotation circuit metallurgical accounting will be accomplished using the sample data from an on-stream analyzer, and automated shift sample collection that will be obtained from sample multiplexers on the on-stream analyzer system.

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3.4.4 Pressure Leaching

Pressure Leaching is based on standard Autoclave technology and utilizes the patented PlatSol process. Concentrate will be blended in the autoclave feed tank with sodim chloride prior to pumping into the autoclave at 50% solids. Recycled copper SX/EW raffinate will be pumped into the autoclave to maintain temperature control.

The two autoclaves will provide the required 2-hour residence time for the feed slurry. Each autoclave will have 6 compartments, and will be designed to operate at 225°C and approximately 475 psig. These pressures and temperatures are standard for autoclave dsign in the refractory gold ore/concentrate oxidation process. The NorthMet autoclave design will comprise a mild steel pressure vessel with a polymer-thermoplastic membrane corrosion barrier and two layers of acid resistant brick for thermal and abrasion resistance. This design follows the the reported design of the Phelps Dodge copper concentrate autoclave at Bagdad, Arizona. The Phelps Dodge autoclave has been designed for temperatures up to 235C and pressures of up to 4000 kPa.

Autoclave utilities and ancillary equipment include a packaged steam boiler for start-up heating, agitator seal water systems, compressed air, water treatment units, and oxygen blowout vessels. Oxygen supplied, at 98% purity, to the pressure oxidation circuit will be delivered via an "over the fence" type contract.

The slurry is cooled to below 63° C via a single stage let down and slurry coolers prior to downstream metal extraction processes.

3.4.5 Leach Residue

Prior to metal recovery, the leach residue will be separated from the pregnant leach solution (PLS) to provide a high recovery of solute via filtration and washing of the leach residue. To accomplish this, the circuit will include a primary thickener followed by a pressure plate filter unit. A wash ratio of 4:1 will be used to maintain high solute recoveries. Autoclave residue filter cake will be re-pulped and fed to a scavenger flotation circuit to recover residual PGM's. The PGM

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concentrate will be re-circulated back to the feed end of the autoclave and the flotation tailing will be pumped to a new hydromet tailings impoundment constructed inside the existing tailings impoundment.

3.4.6 PGM Recovery

PLS will be mixed with S0₂ to ensure total reduction of oxidize iron species in solution (Fe (III) is reduced by Fe (II) in solution by SO₂). The SO₂ will be produced by a packaged sulphur burner system. After ferric iron reduction, the solution will be processed through a two-stage pipe reactor system, with the addition of NaHS, to precipitate the platinum and precious metals. After filtration, the PGM precipitate will be releached in a sulfuric acid solution in a batch autoclave to leach any co-precipitated base metals (Cu, Ni, Co) and sulfur/sulfides to produce a high grade PGM precipitate for toll refining. Batch autoclave leach solution will be recirculated back to the PLS surge tank before precious metal recovery to ensure full recovery of valuable metals.

3.4.7 Neutralization

The PLS filtrate from the PGM precipitation system will require neutralization to pH 2 prior to copper solvent extraction. Filtered PLS will be pumped from the neutralization surge tank to the solution neutralization cascade that consists of three tanks with a total retention of 180 minutes. Limestone is added to maintain a pH of 2 and prepare the solution for copper solvent extraction.

The slurry exiting the precipitation tanks will be pumped to a thickener. Thickener underflow is filtered using an automatic plate and frame pressure filter package. The filter cake solids (saleable grade gypsum) will be discharged to a conveyor and stockpiled prior to re-sale.

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3.4.8 Copper Solvent Extraction and Electrowinning

Copper PLS from the neutralization circuit will be stored in the copper SX feed tank providing 4 hours of surge capacity. PLS will be filtered to avoid crud formation in the SX circuit. The filtration will use multi-media pressure filters and the backwash will be returned to the gypsum thickener. Copper will be extracted from the PLS into an organic solution containing 30% by volume of Cognis LIX-984.

The extraction circuit consists of three mixer settlers, in which the aqueous feed and the barren organic flow counter-current to one another. Raffinate leaving the final extractor will report to the copper raffinate tank, from which solution will either be recirculated back to pressure oxidation for use as cooling liquid, or sent forward to bleed treatment.

Copper loaded organic is pumped from the first stage extractor to the loaded organic tank where entrained aqueous solution will have the chance to settle out. Solution recovered in this way will be collected in a sump at the bottom of the tank and is periodically returned to the extraction circuit.

Loaded organic will be contacted, in a two-stage copper strip circuit, with lean electrolyte recycled from copper EW. The stripped organic will pass through to extraction, while the rich electrolyte will be pumped through organic recovery columns, and anthracite based multi-media filters to coalesce any residual organic, before discharging into the electrolyte recirculation tank.

The copper EW circuit reflects ISA stainless steel cathode tankhouse technology. Rich electrolyte will be trim heated to approximately 120°F before entering the tankhouse EW cells, using an indirect hot water heating system. A 125-cell tankhouse will provide the capacity required to harvest 33,000 tonnes per year of cathode copper.

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Cathodes from the EW cells will be harvested on a daily basis, after a 7-day growth cycle. The copper sheets will be mechanically stripped from the stainless steel blanks using a standard fully automatic cathode washing and stripping machine. The stripping machine will also provide mechanical stacking, strapping, and weighing of the cathode bundles in preparation for shipping to market.

3.4.9 Nickel-Cobalt Hydroxide

Iron and aluminum must be removed from copper SX raffinate bleed solution before the extraction of nickel and cobalt.

In the first of three precipitation cascades, iron will be removed as goethite. In order for goethite to be formed, the bleed stream will be pre-heated to 170° F by direct steam injection into a tank with 45 minutes retention time. Direct injection will be used to negate the problem of gypsum scaling on the solution side of a shell and tube heat exchanger.

Hot solution overflows the pre-heat tank and will enter the first of five tanks in the iron precipitation cascade. Limestone will be added to the first tank to neutralize free acid in the copper raffinate, and will result in gypsum precipitation. Air is sparged into tanks l, 2 and 5 to facilitate ferrous oxidation, allowing ferric precipitation as goethite. In the third and fourth tanks ferrous oxidation will be enhanced using a mixture of oxygen and sulfur dioxide. More limestone will be added to neutralize the acid generated by the goethite precipitation and maintain a discharge pH of 3.5. At this pH a significant percentage of the aluminum hydrolyses and precipitates while loss of the valuable metals (Ni, Co, Zn) is minimized.

Overflow from the fifth tank will be pumped to a thickener where the solids settle to a density of 40 wt%. A significant portion of the thickened underflow will be returned to the precipitation cascade, where the solids act as seeds to facilitate the growth of larger particles, which in turn improves settling and filtration characteristics. The balance of the thickener underflow will be filtered through a plate-type pressure filter. After

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washing to recover entrained nickel and cobalt, the cake will discharge into a tank where it is slurried with reclaim water and pumped to a new tailings impoundment on the existing tailings dam

Overflow from the iron thickener will be neutralized with magnesium oxide in two stirred tanks to precipitate a combined nickel/cobalt hydroxide. Slurry will discharge from the second tank into a thickener. Thickener underflow is filtered in a plate-type pressure filter. The filter cake will be collected and steam dried prior to bagging for dispatch to an off site nickel/cobalt refinery.

Thickener overflow will be treated with lime in two stirred tanks to precipitate any remaining valuable metal content. Slurry will discharge from the second tank to a thickener. Thickener underflow will be recycled back to the leach residue thickener. Thickener overflow will be pumped to a new tailings impoundment on the existing tailings dam.

The valuable metals (Ni, Co) will be redissolved under the strong acid conditions prevailing in the leach residue thickener.

3.4.10 Tailings

The existing tailings facility at Cliffs Erie will be used to contain tailings products from the NorthMet process plant. Flotation plant tailings will form the bulk of the tailings products and will be discharged to the existing dam using the existing pumping and piping arrangement.

There will be three new hydromet tailings produced:

• leach residue flotation tailings,
• iron/aluminum gypsum sludge
• solution from the hydroxide precipitation circuit.

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Each of these tailings will be contained in separate lined ponds constructed on the existing tailings dam. Each pond will have an initial capacity of 3 years storage.

3.4.11 Reagents

Included on the equipment list are the proposed reagent systems to support the process plant operations. Reagent systems included are:

• Limestone: Rail receipt and off-load, conveying, crushing and grinding, slurry storage and distribution loop. (An existing mill will be used for grinding.)
• MIBC: Bulk liquid storage and distribution.
• PAX: Mixing, storage and distribution.
• Flex 31: Bulk liquid storage and distribution.
• WW 1752: Bulk liquid storage and distribution.
• Flocculent: Mixing, storage and distribution
• Sulfuric Acid: Bulk liquid storage and distribution.
• NaHS: Bulk liquid storage and distribution.
• NaCl: Mixing, storage and distribution.
• MgO: Mixing, storage and distribution.
• CaO: Mixing, storage and distribution
• Sulphur: Bulk storage, burner, distribution and SO₂ scrubbing

3.4.12 Infrastructure and Ancillary Services

Reclaim water, utilities and services, compressed air supply, power supply and distribution, offices, warehousing and laboratories will all be provided for by existing facilities at the Cliffs Erie plant site. New assay laboratory equipment will be purchased for the NorthMet project.

3.5 Equipment List

A mechanical equipment list was developed and is presented in Appendix 3.0.

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4.0 Operating Cost

NorthMet Project Processing Facilities Scoping Study

4.0 Operating Costs

4.1 Summary

The operating cost estimate for the study is based on the following six major cost centers:

• Reagents and consumables
• Manpower
• Electrical power
• Plant operating supplies
• Maintenance supplies
• General and administration (G&A)

The development of the project mine operating costs is beyond the scope of this study and have not included.

A contingency of 5% has been applied and all costs are estimated in first quarter 2004 US dollars.

Average operating expenditures for the process plant facilities are estimated to be $60.2 million dollars per year or $6.59 per tonne milled based on an annual plant throughput of 9,125,000 tonnes. A breakdown of the costs is summarized in Table 4.1 and details are provided in Appendix 4.

Table 4.1 Operating Cost Estimates

Description	Total Cost US$	US$/tonne
Consumables	22,142,258	2.43
Labour	10,977,823	1.20
Power	16,746,886	1.84
Plant Operating Supplies	400,000	0.04
Maintenance Supplies	1,915,896	0.21
Environmental Monitoring	300,000	0.03
G&A	4,856,600	0.53
Sub total	57,339,463	6.28
Contingency 5 %	2,866,973	0.31
Total	60,206,436	6.59

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4.2 Basis of Estimate

4.2.1 Consumable Unit costs

All costs are expressed in terms of US$ and metric tonnes and are based largely on unit rates FOB mine site provided by Polymet and reviewed by Penguin. In some cases, Penguin has sourced unit rates directly from vendors. For some items, unit rates from the AMEC study have been used. In all cases, the unit cost source is listed in the detailed operating cost breakdown in Appendix 4.

4.2.2 Consumable Consumption Rates

Crusher, mill liners and grinding media

Estimated liner and steel media consumption rates are based on Penguins in-house experience. Consumption of ceramic grinding media used in the final concentrate regrind mill is based on vendor experience.

Reagents and chemicals

Unit consumption rates for flotation reagents have been taken from the AMEC study. Unit rates for the hydrometallurgical plant consumables are based on the Polymet mass balance.

4.2.3 Manpower

The total workforce for the process plant facilities is estimated to be 170 supervisory, operating and maintenance personnel. The staffing plan by component is in Table 4.2.

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Table 4.2 Staffing Plan

STAFF	No.	MAINTENANCE	No.	OPERATIONS	No.
Mill Superintendant	1	Maintenance Superintendent	1	General Foreman Operations	1
Chief Metallurgist	1	General Foreman Maintenance	1	Operations Shift Foreman	8
Metallurgist	4	Maintenance Planner	2	Mill Clerk	2
		Maintenance Clerk	2	Crusher Operator	4
MILL WAREHOUSE	No.	Millwright/Mechanic	12	Grinding Operator	8
Warehouse Supervisor	1	Millwright Apprentice	6	Flotation/ Regrind/Tails Operator	8
Warehouseman	4	Welder	4	Operator	4
Warehouse Clerk	1	Machinist	3	POX Operator	4
		Chief Electrician	1	PGM Operator	8
LABORATORY	No.	Electrician	3	Neutralization Operator	4
Chief Chemist	1	Instrumentation Tech	5	Cu SX/TF Operator	3
Chief Assayer	1			Cu EX Operator	6
Assayer	6			Cu Cathode Stripping Operator	3
Sample Prep	6			Hydroxide Operator	6
Lab Clerk	1			Limestone Plant Operator	4
				Reagents Operator	8
				Labourer	14
				Railhead Operator	4
				Janitor	1

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The process plant facility labor plan utilizes two different shift schedules:

Type I Day shift only. One shift per day, eight hours per shift, five days per week, for a total of 2,080 hours per year per employee.

Type II Shift work - 24-hour operations coverage. Three shifts per day, eight hours per shift, shift rotation for a total of 2,080 hours per year per employee.

All supervisory, technical, and warehouse personnel are on a Type I schedule, as well as most maintenance personnel except for service mechanics who are on a Type II rotation.

It is assumed that non-union labour will be employed at the NorthMet plant. Wages and salaries are based on the current ranges in the region for similar operations levels. Employees on a Type II shift rotation are paid overtime. For overtime, employees are paid at 1.5 times the base hourly rate plus any applicable shift differential. An allowance of 20% has been included in the labor operating costs for Type II employees for overtime.

Fringe benefits are estimated at 30% of the base annual cost for salaried and wage personnel, in accordance with fringe benefit costs experience by local mines.

These include allowances for the following:

• Payroll taxes
• 401 k contributions
• Group medical and life insurance
• Accidental death and dismemberment insurance and long term disability insurance
• Medical stop loss
• Worker's compensation premiums of 5%.

Fringe benefits are included in the labour cost calculation

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4.2.4 Electrical Power

The load list developed for the AMEC study was factored accordingly to reflect the current process plant design and the total load estimate required for the process plant will be 48 MW. The local utility provider, Minnesota Power, will supply power at a unit power rate of $0.033 per kWh for the first 25 MW and $0.036 thereafter.

4.2.5 Supplies

Operating and maintenance supplies are estimated on the basis of industry averages. The maintenance supplies allowance is approximately 3% of the mechanical equipment capital cost for the process plant. Operating supplies allow for general plant supplies and plant mobile equipment operations and maintenance. The operating supply annual cost for plant assay supplies and general mill supplies is estimated at $200,000. The annual expenditure for operating and maintaining the mill mobile equipment fleet is estimated at $200,000.

4.2.6 Freight

Operating consumables are to be purchased FOB at the mine site. A freight estimate of $30 per ton has been assumed for purchases of grinding media and liner steel, as well as general allowances for reagents, chemicals and other consumables.

4.2.7 Inflation

The operating cost estimates include no allowance for inflation

4.2.8 Taxes

As per the AMEC study, the only consumable subject to Minnesota State sales tax is crushing and grinding media (liners and balls). A sales tax of 6.5% has been included in the costs for these items.

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5.0 Capital Cost

NorthMet Project Processing Facilities Scoping Study

5.0 Capital Costs

5.1 Summary

The preproduction capital cost estimate for the design, procurement and construction of the NorthMet Project facilities was developed based upon the process and ancillary facilities previously defined.

The initial capital for the processing facilities and infrastructure was estimated to be $199.4 million. Table 5.1 -1 summarizes the preproduction capital costs for development of the project including direct and indirect costs associated with the construction of the facilities. Sustaining capital costs are not included. The capital cost estimate was largely based on factored estimates and is considered accurate to within +/- 30% at the summary level. All costs are in 1^st quarter, 2004 U.S. dollars. The detailed cost estimate is included in Appendix 5.

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NorthMet Project Processing Facilities Scoping Study

Table 5.1 -1: Capital Costs Breakdown

Item	Cost ($000)
Crushing	3,082
Grinding	4,282
Flotation & Regrind	17,546
Pressure Leaching	31,052
Solid / Liquid Separation	6,667
PGM Recovery	5,082
Neutralization	8,867
Solvent Extraction	6,439
Electrowinning	18,749
Fe & Hydroxide Precipitation	6,003
Infrastructure & Auxiliary Services	12,587
Tailings	4,549
Mining	5,760
Subtotal Direct Costs	130,665
EPCM	19,600
Construction Indirects	2,872
Capital Spares	4,323
First Fills	4,000
Vendor Representatives	1,319
Freight	2,499
Start Up and Commissioning	910
Contingency	33,238
Total Project Cost	$199,427

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NorthMet Project Processing Facilities Scoping Study

5.2 Basis of Estimate

The Capital Cost Estimate for the NorthMet Project was completed for the design previously specified in this report. The estimate assumes a conventional EPCM project delivery methodology. The capital cost estimate includes the estimated direct cost for equipment, material and labour. In addition, cost estimates were developed for the project indirect costs including EPCM, start up, construction indirects, first fill, spares and contingency. The estimate was developed based on a site visit and inspection of existing equipment and facilities, and the following main sources of information:

• Process Design Criteria.
• Process Flow Sheets.
• Facility General Arrangement Drawings.
• Electrical and Mechanical Equipment List.
• Budget Quotations from Equipment Suppliers.
• Current Labour and Material Costs.
• The AMEC Simons Mining & Metals 2001 Prefeasibility Report.

5.2.1 Direct Costs

The Direct Costs include the estimated costs of the equipment, material and labour required to construct the facility.

Equipment

All process equipment is considered purchased new for the project with the exception of the crushing, screening and grinding equipment, which will be reused from the existing plant. The equipment costs were based upon budget quotations where ever possible. Equipment pricing that was not based upon budget quotations were based on current data from other projects or factored from the AMEC Simons Prefeasibility Study.

Penguin Automated Systems Inc. 5-3

NorthMet Project Processing Facilities Scoping Study

The SX and EW plant equipment was factored from the AMEC study based on the revised equipment sizing for this study using commonly applied size factors. The AMEC SX and EW plant estimates include all piping, civil, structural, mechanical, piping, electrical and instrumentation requirements.

The equipment being reused for the crushing and grinding circuits will be utilized in place. An allowance for the material and labour requirements to re-start the existing crushing and grinding equipment and facilities has been included in the estimate. The allowance includes the supply and installation of new materials to cover the replacement of wear items such as liners, idlers, conveyor bets and drive components for the existing equipment as well as repairs and upgrades recommended by the previous operations personnel. The allowances were developed based on an inspection of the equipment and facility condition conducted during a visit to the facility in April 2004. The site visit included a detailed estimate review with the former plant operations personnel on a site where repair/refurbishment material costs and labour manhours were confirmed. There is a significant opportunity for cost savings by utilizing spare parts available from the previous operation. This inventory of spare parts available will require an investigation during the feasibility study.

It has been assumed that no mobile equipment is available on site. The estimate includes the purchase of new equipment for the plant operations and maintenance.

Materials

The material cost estimates were based either on quantity take-offs for areas that could be derived from the drawings or upon factored quantities from similar projects where drawing information was not available.

Concrete quantities are derived from layouts, historical factors or factored from the AMEC study adapted to the requirements of this study. Quantities are estimated as in-place, unit prices include formwork, reinforcing steel, imbedded metals, concrete supply,

Penguin Automated Systems Inc. 5-4

NorthMet Project Processing Facilities Scoping Study

transport, placing, finishing, curing and the suppliers' quality control testing. Costs for independent quality control and testing are included in the indirects.

Platework quantities were estimated from the equipment list and flowsheets and historical experience from similar projects. Structural steel quantities are factored based on square footage obtained from general arrangement drawings. The unit prices include supply, detailing, fabrication, painting and delivery.

Cost for process piping, electrical, lighting and instrumentation distribution within the facilities is factored from similar installations or the AMEC study.

Buildings

The crushing, grinding and flotation circuits will utilize portions of the existing buildings. The existing warehouse will be utilized for the solid/liquid separation, PGM recovery, neutralization, solvent extraction, electrowinning and Fe & hydroxide precipitation. The pressure leaching circuit will be constructed in a new pre-engineered insulated metal building adjacent to the existing warehouse. Where existing facilities are utilized an allowance has been made for repairs and modifications, including replacement of doors/windows, repairs to the building envelope and new openings for HVAC piping and electrical. An architectural allowance has been provided for the warehouse for installation of offices, compressor rooms and electrical rooms.

The estimate assumes the reuse of the existing administration building, truckshop, mine administration and operations office and laboratory. An allowance has been provided in the estimate for minor repairs, painting and furnishings for these existing buildings.

Labour

The labour component of the cost estimate was estimated using installation man-hours, based on historical data applied to a blended ‘all in' labour rate. The blended construction hourly labour rate was estimated at $68/hour from current rates for crew configurations for this type of industrial construction. The labour rate component

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NorthMet Project Processing Facilities Scoping Study

includes for the base pay and the payroll burden, including payroll taxes and workman's compensation. The hourly rate also includes supervision, small tools and consumables, contractor's site and home office overhead and profit. The labour rate is based on a 40 hour work week including an allowance for casual overtime; no allowance has been made for scheduled overtime. The workforce will be housed locally and no construction camp has been provided for in the estimate.

5.2.2 Indirect Costs

Indirect costs for the project were calculated for EPCM, project start up, contractor's indirects, and contingency. The indirect costs were developed from industry standard percentages and are considered reasonable for a project of this scope.

EPCM

Engineering, Procurement and Construction Management (EPCM) costs were estimated based on currently accepted percentages for these services applied to the total direct costs. The EPCM costs include allowances for subconsultant costs including geotechnical, survey and site quality control for soils and concrete testing.

Contractor's Indirects

Contractor's indirect costs for overhead are included in the calculated blended labour

rate. An equipment allowance was calculated at $6.00 per construction man-hour.

Startup and Vendors Representatives

Startup costs including commissioning were calculated as an allowance and include retaining contractor forces during the commissioning phase to assist with start up. An allowance has been included for vendor assistance during commissioning for pre-operational testing of equipment and operations and maintenance training.

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NorthMet Project Processing Facilities Scoping Study

Freight, Spare Parts

Indirect costs for freight, spare parts and initial fills were included in the project indirects. Freight costs were estimated as 3% of the direct cost for the equipment and materials. Spare parts were estimated at 5% of the process equipment. There is a significant opportunity for cost savings if spare parts are available from the previous operation for use by the project. This inventory of spare parts available is to be further investigated during the feasibility study.

Contingency

A blended contingency of 20% was applied to the Project Direct and Indirect Costs. The contingency is to cover items not adequately defined based upon the current level of engineering. This allowance is included to cover these unknowns but is not intended to cover changes in the project scope.

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Appendix 1- Process Design Criteria

PENGUINASI	DESIGN CRITERIA	April-04
NorthMet Project		Rev. C
Hoyt Lakes, Minnesota

Unit Design  Source           Note 

Key                        Source
1                           Polymet
2                           Assumption
3                           Calculation
4                           AMEC pre-feasibility report
5                           Lakefield
6                           Vendor
Ore Characteristics
Ore Specific Gravity				3.0	1
Moisture Content			%	6.4	1
Bond Work Index		Ball	kWh/mt	17	5
		Rod	kWh/mt	14	5
Production
Average daily thru'put		dry	mt/d	25,000	1
Operating days			days per year	365	2
Ore Treated	per annum	dry	mt/y	9,125,000	1
Availability			%	91.34	3
Daily Thu'put	@ 91.34% avail	dry	mt/d	27,370	3
Daily Thu'put	@ 91.34% avail	wet	mt/d	29,242	3
Primary Crushing
Crusher
Type		Existing		Gyratory
Size			inches	60"x 89"
Number				one	3
Open side setting			inches	6"
Motor			HP	900
Apron Feeder
Type		Existing
Size			mm	1500 x 4800
Number				one	3
Motor			HP	115
Secondary Crushing
Type		Existing		Cone
Size				7' standard
Number				two	3
Closed side setting				3"
Motor			HP	350
Tertiary Crushing
Type		Existing		Cone
Size				7' shorthead
Number				four	3
Closed side setting				3/4"
Motor			HP	350

PENGUINASI	DESIGN CRITERIA	April-04
NorthMet Project		Rev. C
Hoyt Lakes, Minnesota

Unit Design  Source           Note 

Primary Milling
Feed size			3/4"
Type	Existing		Rod
Size		feet	10'x 14'
Number			8	3
Motor		HP	800
Grind size	p80	micron	1000
Rod size			3"
Secondary Milling
Mills
Type	Existing		Ball
Size		feet	10'x 14'
Number			8
Motor		HP	1250
Grind Size	p80	micron	1000
Ball Size		inch	3"
Cyclones	New
Size		mm	840	3
Number	per mill		1op/1sb	3
Circulating load		%	250	2
Flotation
Reagents
Flex 31        collector		g/t	18.2	4
PAX           collector		g/t	45.5	4
MIBC          frother		g/t	40.9	4
WW1752		g/t	90.9	4
Rougher conditioning
Residence Time		mins	5	4
Tank size		m	7.5D x 8.0	3
Roughers
Residence Time		mins	8	4
Cell Volume required		m 3	640	3
Cell size		m 3	160	2
Number of cells			4	3
Cell type			Tank	4
Rougher conc prod.	Average	% mill feed	~ 7.0	4
Scavengers
Residence Time		mins	20	4
Cell Volume required		m 3	1,600	3
Cell size		m 3	160	2
Number of cells			10	3
Cell type			Tank	4
Scavenger conc prod.	Average	% mill feed	~ 3.2	4

PENGUINASI	DESIGN CRITERIA	April-04
NorthMet Project		Rev. C
Hoyt Lakes, Minnesota

Unit Design  Source           Note 

Cleaners
Residence Time		mins	20	4
Cell Volume required		m 3	168	3
Cell size		m 3	21	2
Number of cells			8	3
Cell type			Conventional	2
Cleaner conc prod.	Average	% mill feed	~7.0	4
Re-cleaner
Residence Time		mins	16	4
Cell Volume required		m 3	118	3
Cell size		m	3.7 D x 12.2	3
Number of cells			1	3
Cell type			Column	2
Cleaner conc prod.	Average	% mill feed	2.57	1
Regrind mill - Scavenger conc/cleaner tail
Work Index			7.5	5
Type	Existing		Regrind ball
Size			12'2" x 24'
Motor		HP	1500
Ball size			1" steel
Feed size	f80	micron	81	5
Regrind size	p80	micron	31	5
Regrind mill - Feed to Pressure Oxidation
Work Index			7.5	5
Type	Existing		Regrind ball
Size			12'2" x 24'
Motor		HP	1500
Ball size			1" ceramic	4
Feed size	f80	micron	81	5
Regrind size	p80	micron	15	4,5
Concentrate production		t/d	703	3
Thickener unit area		m2/tpd	0.2	4
Thickener diameter		m	13.4	3
Concentrate storage
Residence Time		hrs	12	4
Tank size		m	8.0D x 9.0	3

PENGUINASI	DESIGN CRITERIA	April-04
NorthMet Project		Rev. C
Hoyt Lakes, Minnesota

Unit Design  Source           Note 

Pressure Oxidation
Autoclave feed tank
Residence Time			hrs	1	4
Tank size			m	3.0D x 3.5	3
Autoclaves
Slurry	solids		%	11.5	1
Number required				2	1
Flowrate	per autoclave		m 3/hr	96	1
Availability			%	90	1
Flowrate	per autoclave		m 3/hr	107	1
Residence time total			hr	2	1
Capacity	per autoclave		%	75	1
Factor	per autoclave			1.15	1
Volume required	per autoclave		m 3	327	3
Size	per autoclave	ID	m	4.1	1
		length	m	24.6	1
Volume installed	per autoclave		m 3	325	1
Compartments	per autoclave			5	1
Agitators	per autoclave			6	1
Power per agitator			kW	90	1
Operating conditions
Temperature			o C	225	1
Pressure			psi O	100	1
			2
Pressure			psig	~475	1
Pulp density			g/l	1050	1
H SO			g/l	50-60	1
2 4
Chloride			g/l	10	1
Cu			g/l	~20	1
Ni			g/l	~20	1
Slurry Cooling
Flash tanks
Solution loss to steam			%	19	1
Leach Residue Liquid-Solid Separation
Thickener
Feedrate			t/d	612	3
Thickener unit area			m2/tpd	0.4	4
Thickener diameter			m	17.7	3

PENGUINASI	DESIGN CRITERIA	April-04
NorthMet Project		Rev. C
Hoyt Lakes, Minnesota

Unit Design  Source           Note 

Filter
Feedrate	tph dry	25.9	3
Cake density		1.4	5
capacity	m3/hr	18.50	3
cycle time	mins	14.94	5
cycles per hour		4.02	3
Volume	litres	4607	3
scale up factor		1.25	2
Volume required	litres	5758	3
Filter type		Pressure
Model		VPA 2050	6
volume	l/chamber	205	5,6
chambers req		28.09	3
chambers installed		30
Leach Residue Flotation
Roughers
Residence Time	mins	20	4
Cell Volume	m 3	15	3
Cell size	m 3	3	3
Number of cells		5	3
Cell type		conventional	2
Cleaners
Residence Time	mins	10	4
Cell Volume	m 3	0.24	3
Cell size	m 3	0.08	3
Number of cells		3	3
Cell type		conventional	2
PGM Recovery
Reactors
Reactor type		pipe	4
number		2	4
residence time	secs	30	4
size		315mm x 55m	3
Clarifier
number		2	4
diameter	m	5	4	scaled
angle	degree	60	4
sidewall ht	m	2.0	4

PENGUINASI	DESIGN CRITERIA	April-04
NorthMet Project		Rev. C
Hoyt Lakes, Minnesota

Unit Design  Source           Note 

Neutralisation
pH required		2	4
Retention time	hr	3	4
Feedrate	t/d	612	3
Thickener unit area	m2/tpd	1.45	5
Thickener diameter	m	33.6	3
Gypsum Filter
Feedrate	tph dry	14.9	3
Cake density		0.704	5
capacity	m3/hr	21.16	3
cycle time	mins	12.28	5
cycles per hour		4.89	3
Volume	litres	4332	3
scale up factor		1.25	2
Volume	litres	5415	3
Filter type		Pressure	5,6
Model		VPA 2050	6
Volume	l/chamber	205	6
chambers req		26.41	3
chambers installed		30
Copper Solvent Extraction
Mixer tank
Residence time	mins	3	2	Typical
Size	m	3.5 D x 4.0	3
PLS surge tank
Residence time	hrs	4	4
Size	m	3.5 D x 4.0	3
PLS flow	m3/hr	225	3
scale factor		1.2	2
PLS flow	m3/hr	270	3
No of SX trains		1	2	Lakefield p/p
Extraction stages		3	2	2ex, 1w, 2 s
Wash stages		0	2
Strip stages		2	2
O/A ratio		1.5	2
Total flow	m3/hr	675	3
Settling Rate	m3/hr/m2	4.4	2
Organic depth	mm	300	2
Av aqueous depth	mm	450	2
Settler area	m2	153	3
Av sol velocity	cm/sec	3	2
Settler width	m	8.3	3
Settler length	m	18.4	3
Add for weirs	m	1	2
Add for distr. fence	m	2.5	2
Total length	m	21.9	3

Appendix 2- Drawings

POLYMET MINING CORPORATION
NORTHMET PROJECT
SCOPING STUDY
DRAWING LIST

DRAWING NO.	DESCRIPTION
METALLURGY
100-03-F00	SIMPLIFIED FLOWDIAGRAM
100-03-F01	CRUSHING AND SCREENING-FLOWSHEET # 1
100-03-F02	GRINDING CIRCUIT-FLOWSHEEET # 2
100-03-F03	FLOTATION AND REGRIND-FLOWSHEET # 3
100-03-F04	PRESSURE LEACHING-FLOWSHEET # 4
100-03-F05	SOLID/LIQUID SEPARATION-FLOWSHEET # 5
100-03-F06	PRECIOUS METAL RECOVERY-FLOWSHEET # 6
100-03-F07	Cu SOLVENT EXTRACTION-EXTRACTION CIRCUIT-FLOWSHEET # 7
100-03-F08	Cu SOLVENT EXTRACTION-STRIPPING CIRCUIT-FLOWSHEET # 8
100-03-F09	COPPER ORGANIC SYSTEM-FLOWSHEET # 9
100-03-F10	Cu ELECTROLYTE CLEANING AND RECIRCULATION-FLOWSHEET # 10
100-03-F11	Cu ELECTROWINNING AND CATHODE HANDLING-FLOWSHEET # 11
100-03-F12	Fe & HYDROXIDE PRECIPITATION-FLOWSHEET # 12
100-03-F13	LIMESTONE HANDLING-FLOWSHEET # 13
GENERAL LAYOUT
100-10-001	OVERALL PLANT SITE-PLAN
100-10-002	CONCENTRATOR-GA-PLAN
100-10-F03	CONCENTRATOR-GA-SECTION
100-10-F04	REGRIND MILLS-GA-PLAN
100-10-F05	HYDROMET PLANT-GA-PLAN
100-10-F06	FLOTATION CIRCUIT-GA-PLAN AND SECTIONS
100-10-F07	PRESSURE LEACHING-GA-PLAN AND SECTION
100-10-F08	SETTLING TANKS-GA-PLAN AND SECTION
100-10-F09	Cu ELECTROWINNING CIRCUIT-GA-PLAN AND SECTIONS
100-10-F10	RECOVERY & PRECIPITATION-GA-PLAN AND SECTIONS

The drawings and illustrations discussed above have been excluded from this filing due to file size issues.

Appendix 3- Equipment List

PENGUINASI	MECHANICAL EQUIPMENT LIST	April-04
NorthMet Project
Hoyt Lakes, Minnesota

Equip. #	Qty.	Description	Size	Material  Specification	HP Each	HP Total	Remarks	New / Existing
CRUSHING AND SCREENING
	1	PRIMARY CRUSHER SURGE POCKET						EXISTING
	1	PRIMARY CRUSHER	60 x 89 GYRATORY		900	900		EXISTING
	1	CRUSHED ORE SURGE POCKET						NEW
	1	APRON FEEDER	1500 x 4800		115	115		EXISTING
	1	CONVEYOR 1A	60"		900	900		EXISTING
	1	CONVEYOR 2A	60"		900	900		EXISTING
	1	CONVEYOR 2A-TRIPPER	60"		15	15		EXISTING
	1	COARSE ORE SURGE BIN	2000T					EXISTING
	12	COARSE ORE RECLAIM FEEDERS	4'x 6' VIBRATING		4	48		EXISTING
	4	COARSE ORE RECLAIM CONVEYORS	48"		5	20		EXISTING
	2	RETRACTABLE CONVEYORS	48"		5	10		EXISTING
	2	SECONDARY CRUSHER (PRIME)	7' STD. CONE		350	700		EXISTING
	2	SECONDARY CRUSHER SURGE BIN						EXISTING
	4	CRUSHER RECLAIM FEEDER	4'x 5' VIBRATING		4	16		EXISTING
	4	SIZING SCREENS	6'x 10' VIBRATING		15	60		EXISTING
	4	TERTIARY CRUSHER	7' SH. HD. CONE		350	1400		EXISTING
	1	CONVEYOR 3A	60"		75	75		EXISTING
	1	CONVEYOR 4A	60"		750	750		EXISTING
	1	CONVEYOR 5S	60"		450	450		EXISTING
	1	CONVEYOR 5S-TRIPPER	60"		15	15		EXISTING
		SUMP PUMPS						EXISTING
GRINDING CIRCUIT
	1	FINE ORE SURGE BIN	650 T LIVE CAPACITY					EXISTING
	8	FINE ORE RECLAIM BELT FEEDERS			3	24		EXISTING
	8	FINE ORE RECLAIM CONVEYORS	24		3	24		EXISTING
	8	ROD MILL	10'x 14'		800	6400		EXISTING
	8	BALL MILL	10'x 14'		1250	10000		EXISTING
	8	CYCLOPAC 1 OP 1 STDBY	2 x 33" dia					NEW
	8	CYCLONE FEED PUMPBOX						NEW
	8	CYCLONE FEED PUMPS						NEW
	1	OVERHEAD CRANE	200T		100	100		EXISTING
		SUMP PUMPS						EXISTING
FLOTATION & REGRIND
	1	CONDITIONING TANK	7.5 m dia x 8 m					NEW
	1	CONDITIONING TANK AGITATOR						NEW
	4	ROUGHER CELLS	160m3		260	1040	Tank cell	NEW
	10	SCAVENGER CELLS WITH DISTRIBUTER	160m3		260	2600	Tank cell	NEW
	8	CLEANER CELLS WITH DISTRIBUTER	21m3		45	360	Conventional cell	NEW
	1	FLOTATION TAILS PUMPBOX				0		NEW
	1	FLOTATION TAILS PUMPS				0		NEW
	1	RECLEANER FEED PUMPBOX						NEW
	1	RECLEANER FEED PUMPS						NEW
	1	RE CLEANER COLUMN CELLS	3.7m x 12.2 m				Column	NEW
	1	RECLEANER TAILS PUMP						NEW
	1	RECLEANER BLOWER						NEW
		FLOTATION BLOWERS						NEW
	3	SAMPLERS						NEW
	1	ANALYSER						NEW
	1	FLOTATION AREA OVERHEAD CRANE						EXISTING
	1	SCAVENGER REGRIND CYCLONE FEED	PUMPBOX					NEW
	1	SCAVENGER REGRIND CYCLONE FEED	PUMPS					NEW
	1	SCAVENGER REGRIND CYCLOPAC						NEW
	1	SCAVENGER REGRIND MILL	12'-2" x 24'		1500	1500		EXISTING
	1	FINAL CONC. REGRIND CYCLONE FEED	PUMPBOX					NEW
	1	FINAL CONC. REGRIND CYCLONE FEED	PUMPS					NEW
	1	FINAL CONC. REGRIND CYCLOPAC						NEW
	1	FINAL CONC REGRIND MILL	12'-2" x 24'		1500	1500		EXISTING
	2	SUMP PUMPS						NEW

PENGUINASI	MECHANICAL EQUIPMENT LIST	April-04
NorthMet Project
Hoyt Lakes, Minnesota

Equip. #	Qty.	Description	Size	Material  Specification	HP Each	HP Total	Remarks	New / Existing
PRESSURE LEACHING
	1	CONCENTRATE THICKENER	13.4 m dia.					NEW
	1	THICKENER O/F PUMP						NEW
	1	THICKENER U/F PUMP						NEW
	1	CONCENTRATE STORAGE TANK	8 m dia. X 9 m					NEW
	1	CONCENTRATE STORAGE TANK AGITATOR						NEW
	2	CONCENTRATE FEED PUMPS						NEW
	2	AUTOCLAVE FEED TANK	3 m dia. X 3.5 m					NEW
	2	AOTOCLAVE FEED PUMPS						NEW
	2	AUTOCLAVES	4.1m x 24.6m					NEW
	2	FLASH TANKS						NEW
	2	SLURRY COOLER FEED PUMPS						NEW
	2	SLURRY COOLERS						NEW
	1	COOLING TOWER						NEW
	1	VENT GAS SCRUBBER						NEW
	1	VENT GAS SCRUBBER DISHARGE PUMP						NEW
	2	RAFFINATE INJECTION PUMPS						NEW
	1	BOILER PACKAGE						NEW
	2	BOILER BLOWOUT VESSELS						NEW
	1	HP AIR COMPRESSOR						NEW
	1	LP AIR COMPRESSOR						NEW
	1	SEAL WATER COOLER						NEW
	1	SEAL/RINSE WATER PACKAGE						NEW
	2	OXYGEN BLOWOUT VESSEL						NEW
	3	SEAL WATER PUMPS						NEW
	1	WATER TREATMENT PACKAGE						NEW
	3	SUMP PUMPS						NEW
	1	NaCL STORAGE SYLO						NEW
	1	NaCL FEED SCREW						NEW
	1	NaCL WEIGH BELT						NEW
	2	AUTOCLAVE AREA OVERHEAD CRANE						NEW
SOLID LIQUID SEPARATION
	1	LEACH THICKENER	17.7 m dia.					NEW
	1	LEACH THICKENER U/F PUMP						NEW
	1	FILTER FEED TANK	3 m dia. X 3.5 m					NEW
	1	FILTER FEED TANK AGITATOR						NEW
	1	FILTER FEED PUMP						NEW
	1	LEACH RESIDUE FILTER	2050 x 12 Plates				Plate & Frame	NEW
	1	TAILINGS REPULP TANK	3 m dia. X 3.5 m					NEW
	1	TAILINGS REPULP TANK AGITATOR						NEW
	1	TAILINGS REPULP PUMP						NEW
	1	THICKENER O/F SURGE TANK	5 m dia. X 5.5 m					NEW
	2	POLISH FILTER	3.5 m dia.					NEW
	2	POLISH FILTER BLOWER						NEW
	5	ROUGHER/SCAVENGER FLOTATION CELL	2.8m3					NEW
	3	CLEANER FLOTATION CELLS	0.08m3					NEW
	1	ROUGHER/SCAV FLOT CELLS RETURN PUMP						NEW
	1	CONCENTRATE STORAGE TANK FEED PUMP						NEW
	1	LEACH RESIDUE TAILINGS PUMPBOX						NEW
	2	LEACH RESIDUE TAILINGS PUMP						NEW
	2	SUMP PUMPS						NEW

PENGUINASI	MECHANICAL EQUIPMENT LIST	April-04
NorthMet Project
Hoyt Lakes, Minnesota

Equip. #	Qty.	Description	Size	Material  Specification	HP Each	HP Total	Remarks	New / Existing
PGM RECOVERY
	1	SULPHUR MELT PIT						NEW
	1	SULPHUR FEED PUMP						NEW
	1	SULPHUR FILTER						NEW
	1	SULPHUR BURNER PACKAGE						NEW
	1	SULPHUR BURNER BLOWER						NEW
	1	IN LINE MIXER						NEW
	1	Fe REDUCTION TANK	6.5 m dia x 7 m					NEW
	1	Fe REDUCTION TANK AGITATOR						NEW
	2	PIPE REACTOR FEED PUMP						NEW
	2	PIPE REACTOR	315mm D x 55m					NEW
	2	CLARIFIER						NEW
	3	PGM FILTER						NEW
	2	CLARIFIER O/F STANDPIPE						NEW
	1	POLISH FILTER FEED PUMP						NEW
	2	CLARIFIER U/F DIAPHRAM PUMP						NEW
	1	REPULP TANK	1m dia x 1.2m					NEW
	1	REPULP PUMP						NEW
	1	AUTOCLAVE HOLDING TANK	2m dia x 2.5m					NEW
	1	AUTOCLAVE CHARGE PUMP						NEW
	1	BATCH LEACH AUTOCLAVE	1m dia x 1.5m					NEW
	1	FILTER FEED TANK	2m dia x 2.5m					NEW
	1	FILTER FEED TANK AGITATOR						NEW
	1	FILTER FEED PUMP						NEW
	1	TRAY DRYER						NEW
	1	SUMP PUMP
	1	PGM PRODUCT BIN						NEW
NEUTRALIZATION
	1	NEUTRALLIZATION SURGE TANK	8m dia x 8.5m					NEW
	1	NEUTRALIZATION SURGE TANK AGITATOR						NEW
	1	NEUTRALIZATION FEED PUMP						NEW
	3	NEUTRALISATION TANKS	6.5m dia x 7m					NEW
	3	NEUTRALIZATION TANK AGITATORS						NEW
	1	THICKENER FEED PUMPBOX						NEW
	3	THICKENER FEED PUMP						NEW
	1	NEUTRALISATION THICKENER	33.6m dia					NEW
	2	NEUTRALISATION THICKENER O/F PUMP						NEW
	2	NEUTRALISATION THICKENER U/F PUMP						NEW
	1	FILTER FEED TANK	2.5m dia x 3m					NEW
	1	FILTER FEED PUMP						NEW
	1	GYPSUM FILTER	2050mm x 8 chamber					NEW
	1	GYPSUM STOCKPILE CONVEYOR						NEW
	2	SUMP PUMPS						NEW

PENGUINASI	MECHANICAL EQUIPMENT LIST	April-04
NorthMet Project
Hoyt Lakes, Minnesota

Equip. #	Qty.	Description	Size	Material  Specification	HP Each	HP Total	Remarks	New / Existing
SOLVENT EXTRACTION AND STRIPPING
	1	SX FEED TANK						NEW
	1	SX FEED PUMP						NEW
	1	SX FEED FILTER WATER PUMP						NEW
	1	Cu SX FEED FILTERS						NEW
	1	SX BLOWER						NEW
	5	MIXER TANKS						NEW
	10	MIXER TANK AGITATORS						NEW
	1	LOADED ORGANIC ADVANCE PUMP						NEW
	1	RICH ELECTROLYTE PUMP						NEW
	1	ORGANIC BLEED PUMP						NEW
	1	LOADED ORGAINIC TANK						NEW
	2	LOADED ORGANIC PUMP						NEW
	1	AQUEOUS REMOVAL PUMP						NEW
	1	RAFFINATE TANK						NEW
	1	RAFFINATE FEED PUMP						NEW
	1	EXTRACTANT ISOTAINER PACKAGE						NEW
	1	GUNK REMOVAL FRAME						NEW
	1	GUNK REMOVAL PUMP						NEW
	1	GUNK TANK						NEW
	1	GUNK TANK AGITATOR						NEW
	1	GUNK TANK PUMP						NEW
	1	RECOVERED SOLUTION TANK						NEW
	1	CLAY FILTER PRESS FEED PUMP						NEW
	1	CLAY TREATMENT FILTER PRESS						NEW
	1	RECOVERED SOLUTION PUMP						NEW
	1	DILUENT STORAGE TANK						NEW
	1	DILUENT TRANSFER PUMP						NEW
ELECTROLYTE CLEANING
	1	ELECTROLYTE COLUMN CELL						NEW
	1	FILTER FEED TANK						NEW
	1	FILTER FEED PUMP						NEW
	1	FILTER BACKWASH PUMP						NEW
	2	ELECTROLYTE FILTERS						NEW
	1	ELECTROLYTE FILTER BLOWER						NEW
	2	ELECTROLYTE HEAT EXCHANGER						NEW
	1	ELECTROLYTE RECIRCULATION TANK						NEW
	1	LEAN ELECTROLYTE PUMP						NEW
	2	ELECTROWINNING FEED PUMPS						NEW
	1	SUMP PUMP						NEW
ELECTROWINNING
	1	WASH WATER HEAT EXCHANGER						NEW
	1	LOADING CONVEYOR						NEW
	1	DEMISTER						NEW
	1	DEMISTER EVACUATION FAN						NEW
	1	DEMISTER WASH CHAMBER						NEW
	1	DEMISTER RECIRCULATION PUMPS						NEW
	1	FLEXING STATION						NEW
	1	STRIPPING STATION						NEW
	1	BUFFING STATION						NEW
	1	CORRUGATING PRESS						NEW
	1	DISCHARGE CONVEYOR						NEW
	1	WEIGH SCALE						NEW
	1	STAND ALONE BUFFING UNIT						NEW
	1	REJECT MOTHERBLANK RACK						NEW
	1	EDGE STRIP INSTALLATION AND REPAIR STATION						NEW
	1	ANODE STORAGE RACKS						NEW
	1	CATHODE STORAGE RACKS						NEW
	130	ELECTROWINNING CELLS	54 CATHODES					NEW
	1	ELECTROWINNING AREA O/H CRANE						NEW
	1	TANKHOUSE CRANES						NEW
	2	SUMP PUMPS						NEW
		CATHODE MOTHER BLANKS						NEW

PENGUINASI	MECHANICAL EQUIPMENT LIST	April-04
NorthMet Project
Hoyt Lakes, Minnesota

Equip. #	Qty.	Description	Size	Material  Specification	HP Each	HP Total	Remarks	New / Existing
Fe & HYDROXIDE PRECIPITATION
	1	Fe THICKENER	6.35 M DIA.					NEW
	1	Fe THICKENER U/F PUMP						NEW
	1	Fe FILTER FEED TANK	3.5 x 4					NEW
	1	Fe FILTER FEED TANK AGITATOR						NEW
	1	Fe FILTER FEED PUMP						NEW
	1	Fe FILTER						NEW
	1	Fe FILTER FILTRATE TANK	2m x 2.5					NEW
	1	Fe FILTRATION PUMP						NEW
	1	Fe FILTER REPULP TANK	2m x 2.5					NEW
	1	Fe FILTER REPULP TANK AGITATOR						NEW
	1	Fe SLUDGE TAILINGS PUMP						NEW
	2	1st STAGE HYDROXIDE PRECIPITATION T	4 x 4.5					NEW
	2	1st STAGE HYDROXIDE PRECIP TANK AGITATOR						NEW
	1	HYDROXIDE THICKENER	9m					NEW
	1	HYDROXIDE O/F PUMP						NEW
	2	2nd STAGE HYDROXIDE PRECIPITATION T	4 x 4.5					NEW
	2	2nd STAGE HYDROXIDE PRECIP TANK AGITATOR						NEW
	1	TAILINGS THICKENER	9m					NEW
	1	TAILINGS THICKENER U/F PUMP						NEW
	1	HYDROXIDE PRECIPITATION U/F PUMP						NEW
	1	FILTER FEED TANK	2 x 2.5					NEW
	1	FILTER FEED TANK AGITATOR						NEW
	1	FILTER FEED PUMP						NEW
	1	HYDROXIDE FILTER						NEW
	1	FILTRATE TANK						NEW
	1	FILTRATION PUMP						NEW
	1	TRAY DRYER						NEW
	6	Fe PRECIPITATE TANKS	4m x 4.5					NEW
	6	Fe PRECIPITATE TANKS AGITATORS						NEW
	1	Fe THICKENER FEED PUMPBOX						NEW
	1	Fe THICKENER FEED PUMP						NEW
	1	Fe PRECIPITATION BLOWER						NEW

Appendix 4- Operating Costs

PENGUINASI		PLANT REAGENTS AND CONSUMABLES COST	April-04
NorthMet Project			Rev. A
Hoyt Lakes, Minnesota
	Tonnes ore milled per annum	9,125,000

AREA	SUPPLY	Unit/tonne Source	UNIT	UNITS/TONNE MILLED	UNITS PER      ANNUM	UNIT COST	Unit price Source	TOTAL COST	ESCALATION FACTOR	TOTAL COST 2004	COST PER TONNE ORE
Crush/Grind Flotation  POX  S/L Separation  PGM Recovery  Neutralization	Primary Crusher Liners Secondary Crusher Liners Tertiary Crusher Liners Rod Mill Liners Ball Mill Liners Regrind Mill Liners Rods Ball Mill Balls (2" & 3") Regrind Mill Balls (1") steel Regrind Mill Balls (1") ceramic 6.5% Tax on liners and media Conveyor Belting (allowance) Flex 31 PAX MIBC WW1752 Flocculant (Percol 155) NaCl Water Treatment (allowance) Oxygen (over the fence) Flocculent (Percol 355) Filter Aid (allowance) Limestone (to leach residue tails) Sulfur for SO2 NaHS Flocculant Filter Aid (allowance) H2SO1 (allowance) Oxygen (incl in POX) Limestone Flocculant Filter Aid (allowance)	AMEC Penguin Penguin Penguin Penguin Penguin Penguin AMEC AMEC Penguin calc Penguin AMEC AMEC AMEC AMEC Polymet Mass Balance Mass Balance AMEC Mass Balance Mass Balance Mass Balance AMEC Mass Balance AMEC	kg kg kg kg kg kg kg kg kg kg kg kg kg kg kg kg mt kg mt kg kg kg mt kg	0.0073 0.0045 0.0045 0.0386 0.0291 0.0082 0.4545 0.3636 0.2273 0.1136 0.0182 0.0455 0.0409 0.0909 0.0004 0.4776 0.016 0.0005 0.006 0.1240 0.0474 0.0002 0.009 0.0005	66,364 41,477 41,477 352,557 265,455 74,659 4,147,727 3,318,182 2,073,864 1,036,932 165,909 414,773 373,295 829,545 3,733 4,358,338 148,107 4,148 56,285 1,131,160 432,502 1,659 82,854 4,563	$2.82 $4.46 $4.46 $4.80 $4.80 $3.54 $0.44 $0.44 $0.61 $1.80 $2.75 $1.54 $1.43 $2.20 $3.85 $0.04 $19.72 $3.85 $10.00 $0.06 $0.64 $3.85 $10.00 $3.85	AMEC AMEC Penguin AMEC Penguin AMEC Penguin AMEC AMEC Penguin AMEC AMEC AMEC AMEC Polymet Polymet Polymet AMEC Polymet Polymet Polymet Polymet Polymet Polymet Polymet Polymet Polymet Polymet	$186,880 $185,146 $185,146 $1,691,638 $1,273,704 $263,950 $1,825,000 $1,460,000 $1,254,688 $1,866,477 $662,521 $400,000 $456,250 $638,750 $533,813 $1,825,000 $14,372 $153,414 $41,500 $2,920,670 $15,969 $100,000 $562,852 $64,702 $278,791 $6,388 $46,500 $18,600 $828,542 $17,566 $93,000	1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0	$186,880 $185,146 $185,146 $1,691,638 $1,273,704 $263,950 $1,825,000 $1,460,000 $1,254,688 $1,866,477 $662,521 $400,000 $456,250 $638,750 $533,813 $1,825,000 $14,372 $153,414 $41,500 $2,920,670 $15,969 $100,000 $562,852 $64,702 $278,791 $6,388 $46,500 $18,600 $828,542 $17,566 $93,000	0.020 0.020 0.020 0.185 0.140 0.029 0.200 0.160 0.138 0.205 0.073 0.044 0.050 0.070 0.059 0.200 0.002 0.017 0.005 0.320 0.002 0.011 0.062 0.007 0.031 0.001 0.005 0.002 0.091 0.002 0.010

PENGUINASI		PLANT REAGENTS AND CONSUMABLES COST	April-04
NorthMet Project			Rev. A
Hoyt Lakes, Minnesota
	Tonnes ore milled per annum	9,125,000

AREA	SUPPLY	Unit/tonne Source	UNIT	UNITS/TONNE MILLED	UNITS PER      ANNUM	UNIT COST	Unit price Source	TOTAL COST	ESCALATION FACTOR	TOTAL COST 2004	COST PER TONNE ORE
Cu SX/EW Fe Precipitation Hydroxide ppt'n TOTAL	Extractant (M5640) Diluent (SX 11) H2 SO Cobalt Sulphate Clay (allowance) Cathodes (10yrlife) Anodes (7 yr life) Cathode Bundling Supplies FC1100 (allowance) Guar (allowance) Limestone Sulfur for SO2 Flocculant Filter Aid (allowance) Oxygen (ind in POX) MgO CaO Hydroxide Bundling Supplies Flocculent	AMEC AMEC AMEC AMEC Calc Calc Mass Balance Mass Balance AMEC Mass Balance Mass Balance AMEC	litres litres mt kg plate plate mt kg kg kg kg kg	0.0061 0.0140 0.0011 0.0006 0.002 0.0335 0.0002 0.5868 0.0914 0.0002	55,267 127,805 10,038 5,392 675 965 19,286 305,296 1,659 5,354,716 833,693 1,659	$9.12 $0.71 $60.00 $5.50 $250.00 $165.00 $10.00 $0.06 $3.85 $0.10 $0.06 $3.85	Polymet Polymet Penguin Polymet Polymet Polymet Polymet Polymet Polymet Polymet Polymet Polymet Polymet Polymet Polymet Polymet Polymet Polymet	$503,992 $91,159 $602,250 $29,656 $30,000 $30,000 $30,000 $30,000 $40,000 $20,000 $192,863 $17,463 $6,388 $58,000 $535,472 $53,190 $8,400 $6,388	1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0	$503,992 $91,159 $602,250 $29,656 $30,000 $30,000 $30,000 $30,000 $40,000 $20,000 $192,863 $17,463 $6,388 $58,000 $535,472 $53,190 $8,400 $6,388 $22,142,258	0.055 0.010 0.066 0.003 0.003 0.003 0.003 0.003 0.004 0.002 0.021 0.002 0.001 0.006 0.059 0.006 0.001 0.001 $2.43

Appendix 5- Capital Costs

PENGUINASI	CAPITAL COST ESTIMATE	April-04
NorthMet Project	SUMMARY	Rev. C
Hoyt Lakes, Minnesota

Item	Item Description	Total		Labor		Material		Subcontract		Total
	SUMMARY - OVERALL	Mhrs						Costs		Costs
100	CRUSHING	15,842	$	1,075,130	$	2,007,038		$ -	$	3,082,168
210	GRINDING	15,640	$	1,049,723	$	3,174,011	$	58,501	$	4,282,235
220	FLOTATION & REGRIND	65,827	$	4,476,264	$	13,004,243	$	65,900	$	17,546,408
300	PRESSURE LEACHING	118,638	$	8,067,369	$	22,981,576	$	3,000	$	31,051,945
410	SOLID / LIQUID SEPARATION	26,903	$	1,830,793	$	4,822,330	$	13,381	$	6,666,504
420	PGM RECOVERY	19,927	$	1,356,385	$	3,712,286	$	13,381	$	5,082,053
510	NEUTRALIZATION	38,661	$	2,633,222	$	6,220,210	$	13,381	$	8,866,813
520	SOLVENT EXTRACTION	35,242.9	$	2,397,018	$	4,011,187	$	30,767	$	6,438,971
530	ELECTROWINNING	55,855	$	3,800,408	$	14,930,476	$	18,678	$	18,749,562
540	Fe & HYDROXIDE PRECIPITATION	30,868	$	2,100,460	$	3,889,689	$	13,381	$	6,003,530
600	INFRASTRUCTURE & AUXILIARY SERVICES	46,404	$	3,168,312	$	8,912,206	$	506,193	$	12,586,710
700	TAILINGS	2,740	$	186,320	$	385,000	$	3,977,524	$	4,548,844
800	MINING	6,185	$	439,810	$	411,700	$	4,908,239	$	5,759,749
	TOTAL DIRECT COSTS	478,732	$	32,581,212	$	88,461,953	$	9,622,327	$	130,665,492

PENGUINASI	CAPITAL COST ESTIMATE	April-04
NorthMet Project	SUMMARY	Rev. C
Hoyt Lakes, Minnesota

Item	Item Description	Total	Labor	Material		Subcontract		Total
	SUMMARY - OVERALL	Mhrs				Costs		Costs
920	EPCM	15%	On Direct Costs		$	19,599,824	$	19,599,824
930	CONSTRUCTION INDIRECTS	$6	On Manhours for Construction Equipment		$	2,872,394	$	2,872,394
			Site Costs and Contractor O/H and Profit included in labour rate
941	CAPITAL SPARES	5%	On Process Materials Excluding Crushing		$	4,322,746	$	4,322,746
942	FIRST FILLS	LS	3 Months Consumables		$	4,000,000	$	4,000,000
950	VENDOR REPRESENTATIVES	LS			$	1,319,508	$	1,319,508
960	FREIGHT	3%	On Materials		$	2,498,427	$	2,498,427
970	START UP AND COMMISSIONING	LS			$	910,460	$	910,460
	CONTINGENCY	20%	On Direct and Indirect Costs				$	33,237,770
			Excluding Owners Costs
	PROJECT TOTAL						$	199,426,621

PENGUINASI	CRUSHING AND SCREENING	April-04
NorthMet Project		Rev. C
Hoyt Lakes, Minnesota

Area 100	Item Description CRUSHING AND SCREENING			Qty	Unit	Unit Mhrs	Total Mhrs	MH Rate	Labor	Unit Matl	Material	Subcontract Specl Costs	Total Costs
	Existing equipment refurbishment costs include an allowance for labour and an allowance for materials based on 10% of new equipment cost for liners, idlers etc.
110	PRIMARY CRUSHING
		REMOVE EXISTING 36'' GYRATORY Removed at no cost for salvage		1	EA	-	-	$ 68	$        -	$         -	$         -		$ -
		CRUSHER SURGE POCKET DEMOLITION		1	LS	500	500	$ 68	$34,000	$         -	$         -		$34,000
		CRUSHER SURGE POCKET MODIFICATIONS		20	TN	30	600	$ 68	$40,800	$ 3,000	$60,000		$100,800
	EXISTING	PRIMARY CRUSHER Discharge Skirt Repairs	60x89 GYR, 900 HP	1	EA	300	300	$ 68	$20,400	$250,000	$250,000
		and New Lube Uni t											$270,400
	EXISTING	APRON FEEDER	1500 x 4800, 115HP	1	EA	299	299	$ 68	$20,323	$29,887	$29,887		$50,210
	EXISTING	CONVEYOR 1A Change Troughing Idler Sets at	60", 900 HP	1	EA	250	250	$ 68	$17,000	$25,000	$25,000
		Feed End											$42,000
	EXISTING	BELT WEIGHSCALE		1	EA	12	12	$ 68	$     816	$ 2,000	$ 2,000		$2,816
	EXISTING	CONVEYOR 2A Change Troughing Idlers at	60", 900 HP	1	EA	250	250	$ 68	$17,000	$25,000	$25,000
		Feed En d											$42,000
	EXISTING	CONVEYOR 2A-TRIPPER Modify Tripper Drive	60", 15 HP	1	EA	700	700	$ 68	$47,600	$70,000	$70,000
													$117,600
	EXISTING	CONV. 2A TRIPPER SUPPORT REPAIR		20	TN	60	1,224	$ 69	$84,456	$ 3,000	$61,200		$145,656
	NEW	RE & RE PRIMARY CRUSHER CHUTEWORK LINERS		15	TN	30	450	$ 68	$30,600	$ 3,500	$52,500		$83,100
	EXISTING	PRIMARY CRUSHER PIPING 20% of new for inspection/repair		1	LS	158	158	$ 68	$10,744	$15,800	$15,800		$26,544
	EXISTING	PRIMARY CRUSHER ELECTRICAL/LIGHTING 10% of new for repair		1	LS	274	274	$ 68	$18,627	$27,393	$27,393		$46,020
	EXISTING	PRIMARY CRUSHER INSTRUMENTATION 20% of new for repair		1	LS	40	40	$ 68	$ 2,720	$10,400	$10,400		$13,120
	EXISTING	PRIMARY CRUSHER HVAC/SERVICES Allowance		1	LS	80	80	$ 68	$ 5,440	$ 5,000	$ 5,000		$10,440
	EXISTING	PRIMARY CRUSHER FIRE PROTECTION Allowance		1	LS	80	80	$ 68	$ 5,440	$ 5,000	$ 5,000		$10,440
	EXISTING	PRIMARY CRUSHER BUILDING Allowance for Repairs/Modifications		1	LS	250	250	$ 68	$17,000	$25,000	$25,000		$42,000
120	SECONDARY AND TERTIARY CRUSHING AND SCREENING
	EXISTING	RE & RE COARSE ORE SURGE BIN LINERS	2000 T BIN	24	TN	100	2,400	$ 68	$163,200	$350	$ 8,400
		Liners in Stock											$171,600
	EXISTING	COARSE ORE RECLAIM FEEDERS	4'x 6' VIB, 4 HP	12	EA	177	2,119	$ 68	$144,109	$14,717	$176,604		$320,713
	EXISTING	COARSE ORE RECLAIM CONVEYORS	48", 5 HP	4	EA	39	156	$ 68	$10,608	$325	$ 1,300
		Recently Replace d											$11,908
	EXISTING	RETRACTABLE CONVEYORS	48", 5 HP	2	EA	39	78	$ 68	$5,304	$3,250	$ 6,500		$11,804
	EXISTING	SECONDARY CRUSHER Replace Lube Unit	7' STD. CONE, 350 HP	2	EA	150	300	$ 68	$20,400	$150,000	$300,000		$320,400
	EXISTING	CRUSHER RECLAIM FEEDER	4'x 5' VIB, 4 HP	4	EA	175	700	$ 68	$47,600	$14,717	$58,868		$106,468
	EXISTING	SIZING SCREENS Spare Parts in Stock	6'x 10' VIB, 15 HP	4	EA	50	200	$ 68	$13,600	$17,000	$68,000		$81,600
	EXISTING	TERTIARY CRUSHER Replace Lube Unit	7' CONE, 350 HP	4	EA	150	600	$ 68	$40,800	$100,000	$400,000		$440,800
	EXISTING	RELACE BOTTOM SECTION OF DISCHARGE		10	TN	30	300	$ 68	$20,400	$3,000	$30,000
		CHUTES											$50,400
	EXISTING	CONVEYOR 3A Change Troughing Idlers at	60", 75 HP	1	EA	250	250	$ 68	$17,000	$25,000	$25,000
		Feed En d											$42,000
	EXISTING	CONVEYOR 4A Change Troughing Idlers at	60", 750 HP	1	EA	250	250	$ 68	$17,000	$25,000	$25,000
		Feed En d											$42,000
	EXISTING	CONVEYOR 5S Change Troughing Idlers at	60", 450 HP	1	EA	250	250	$ 68	$17,000	$25,000	$25,000
		Feed En d											$42,000
	EXISTING	CONVEYOR 5S-TRIPPER	60", 15 HP	1	EA	200	200	$ 68	$13,600	$20,000	$20,000		$33,600
	EXISTING	SUMP PUMPS		2	EA	100	200	$ 68	$13,600	$1,500	$ 3,000		$16,600
	NEW	RE & RE SEC AND TER CHUTEWORK LINERS		4	TN	50	200	$ 68	$13,600	$3,500	$14,000		$27,600
	NEW	REPLACE DUST COLLECTION COLLECTOR DUCTING Material on Site		1	sum	400	400	$ 60	$23,856	$4,000	$ 4,000		$27,856

PENGUINASI	CRUSHING AND SCREENING	April-04
NorthMet Project		Rev. C
Hoyt Lakes, Minnesota

Area 100	Item Description CRUSHING AND SCREENING		Qty	Unit	Unit Mhrs	Total Mhrs	MH Rate	Labor	Unit Matl	Material	Subcontract Specl Costs	Total Costs
	EXISTING	SECONDARY CRUSHER PIPING	1	LS	316	316	$ 68	$21,488	$31,600	$31,600		$53,088
	EXISTING	SECONDARY CRUSHER ELEC/LIGHTING	1	LS	548	548	$ 68	$37,254	$54,786	$54,786		$92,040
	EXISTING	SECONDARY CRUSHER INSTRUMENTATION	1	LS	208	208	$ 68	$14,144	$20,800	$20,800		$34,944
	EXISTING	SECONDARY CRUSHER HVAC	1	LS	100	100	$ 68	$6,800	$10,000	$10,000		$16,800
	EXISTING	SECONDARY CRUSHER FIRE PROTECTION	1	LS	100	100	$ 68	$6,800	$10,000	$10,000		$16,800
	EXISTING	SECONDARY CRUSHER BUILDING Allowance for Repairs/Modifications	1	LS	500	500	$ 68	$34,000	$50,000	$50,000		$84,000
110		SUB TOTAL CRUSHING AND SCREENING				15,842		$1,075,130		$2,007,038		$3,082,168

PENGUINASI	200 - GRINDING	April-04
NorthMet Project		Rev. C
Hoyt Lakes, Minnesota

Area 210	Item Description GRINDING			Qty	Unit	Unit Mhrs	Total Mhrs	Labor	Unit Matl	Material	Subcontract Specl Costs	Total Costs
		Existing equipment refurbishment costs include an allowance for labour and an allowance for materials based on 10% of new equipment cost for liners, idlers etc.
		EQUIPMENT AND STEEL DEMOLITION Removed at no cost for salvage		1	LS	-	-	$           -	$           -	$           -	$           -	$           -
		GRINDING CIRCUIT DEMOLITION		1	LS	500	500	$34,000	$3,500	$3,500	$2,000	$39,500
		BACKFILL		1	LS	200	200	$13,600	$2,000	$2,000	$1,500	$17,100
		NEW CONCRETE FOOTINGS AND PIERS		1	LS	400	400	$27,200	$300	$300	$           -	$27,500
		NEW STRUCTURAL STEEL AND PLATFORMS		8	TN	30	240	$16,320	$3,200	$25,600	$           -	$41,920
		FINE ORE SURGE BIN BULKHEADS Not Required		0	TN	30	-	$            -	$3,200	$         -	$           -	$           -
	EXISTING	RE & RE FINE ORE SURGE BIN LINERS	650 T LIVE CAPACITY	16	TN	25	400	$27,200	$3,500	$56,000	$           -	$83,200
	EXISTING	FINE ORE RECLAIM CONVEYORS	24', 3 HP	8	ea	147	1,176	$79,968	$14,717	$117,736	$           -	$197,704
	EXISTING	ROD MILL	10'x 14', 800 HP	8	ea	300	2,400	$163,200	$100,000	$800,000	$           -	$963,200
	EXISTING	BALL MILL	10'x 14', 1250 HP	8	ea	300	2,400	$163,200	$100,000	$800,000	$           -	$963,200
	NEW	CYCLOPAC 1 OP 1 STDBY	2 x 33" dia	8	ea	100	800	$54,400	$40,000	$320,000	$           -	$374,400
	NEW	CYCLONE FEED PUMPBOX		8	ea	80	640	$43,52	$10,000	$80,000	$           -	$123,520
	NEW	CYCLONE FEED PUMPS		8	ea	100	800	$54,40	$50,000	$400,000	$           -	$454,400
	EXISTING	REPLACE 42" PROCESS WATER HEADER		1	EA	210	210	$         -	$21,000	$21,000	$          1	$21,001
	EXISTING	OVERHEAD CRANE		1	ea	40	40	$2,720	$25,000	$25,000	$5,000	$32,720
	EXISTING	SUMP PUMPS	6"	2	ea	100	200	$13,600	$750	$1,500	$           -	$15,100
		RE & RE GRINDING CHUTEWORK / LINERS		20	TN	30	600	$40,800	$3,500	$70,000	$           -	$110,800
		GRINDING PIPING		1	LS	1,695	1,695	$115,260	$169,500	$169,500	$           -	$284,760
		GRINDING ELECTRICAL/LIGHTING		1	LS	1,271	1,271	$86,445	$127,125	$127,125	$           -	$213,570
		GRINDING INSTRUMENTATION		1	LS	848	848	$57,630	$84,750	$84,750	$           -	$142,380
		GRINDING HVAC/SERVICES Allowance		1	LS	160	160	$10,880	$10,000	$10,000	$           -	$20,880
		GRINDING FIRE PROTECTION Allowance		1	LS	160	160	$10,880	$10,000	$10,000	$           -	$20,880
		GRINDING BUILDING Allowance for Repairs/Modifications		1	LS	500	500	$34,500	$50,000	$50,000	$           -	$84,500
		SEPARATION WALL ALLOWANCE		1	LS						$50,000	$50,000
210		SUB TOTAL GRINDING					15,640	$1,049,723		$3,174,011	$58,501	$4,282,235

PENGUINASI	FLOTATION AND REGRIND	April-04
NorthMet Project		Rev. C
Hoyt Lakes, Minnesota

Area 220	Item Description FLOTATION & REGRIND			Qty	Unit	Unit Mhrs	Total Mhrs	Labor	Unit Matl	Material	Subcontract Specl  Costs	Total Costs
		EQUIPMENT AND STEEL DEMOLITION Removed at no cost for salvage		1	LS	0	0	$        -	$       -	$ -	$-	$ -
		GRINDING CIRCUIT DEMOLITION		1,100	CY	1	1100	$$74,800	$       -	$ -	$8,800	$83,600
		BACKFILL		700	CY	0.1	70	$4,760	$      8	5,600	$2,100	$12,460
		NEW CONCRETE FOOTINGS/PIERS/SLABS		400	CY	8	3200	$217,600	$300	120,000		$337,600
		STRUCTURAL STEEL AND PLATFORMS		70	TN	22	1540	$104,720	$2,800	196,000		$300,720
		GENERAL BUILDING MODIFICATIONS		1	LS	500	500	$34,000	$50,000	50,000		$84,000
	EXISTING	FLOTATION AREA CRANE	25T/5T 20/5 HP	1	EA	40	40	$2,720	$8,000	8,000	$5,000	$15,720
	NEW	CONDITIONING TANK	7.5 m dia x 8 m	31,700	LB	0.03	951	$64,668	$      1	31,700		$96,368
	NEW	CONDITIONING TANK AGITATOR		1	EA	100	100	$6,800	$48,000	48,000		$54,800
	NEW	ROUGHER CELLS Quoted	160 m3 TANK CELL	4	EA	60	240	$16,320	$307,500	1,230,00 0		$1,246,320
	NEW	SCAVENGER CELLS Quoted	160 m3 TANK CELL	10	EA	60	600	$40,800	$338,250	3,382,50 0		$3,423,300
	NEW	CLEANER CELLS WITH DISTRIBUTOR Quoted	21 m3 CONV. CELL	8	EA	120	960	$65,280	$99,000	792,00 0		$857,280
	NEW	FLOTATION TAILS PUMPBOX		1	EA	250	250	$17,000	$15,000	15,000		$32,000
	NEW	FLOTATION TAILS PUMPS		2	EA	400	800	$54,400	$200,000	400,000		$454,400
	NEW	RECLEANER FEED PUMPBOX		1	EA	40	40	$2,720	$10,000	10,000		$12,720
	NEW	RECLEANER FEED PUMPS		2	EA	60	120	$8,160	$30,000	60,000		$68,160
	NEW	RE CLEANER COLUMN CELLS	3.7mx12.2 m COL CELL	1	EA	120	120	$8,160	$99,000	99,000		$107,160
	NEW	RECLEANER TAILS PUMP		2	EA	60	120	$8,160	$30,000	60,000		$68,160
	NEW	RECLEANER BLOWER		1	EA	60	60	$4,080	$15,000	15,000		$19,080
	NEW	FLOTATION BLOWERS		2	EA	61	122	$8,296	$15,001	30,002		$38,298
	NEW	SAMPLERS		3	EA	50	150	$10,200	$10,000	30,000		$40,200
	NEW	ANALYSER		1	EA	900	900	$61,200	$500,000	500,000		$561,200
	NEW	SUMP PUMPS		4	EA	60	240	$16,320	$15,000	60,000		$76,320
	NEW	SCAVENGER REGRIND CYCLONE FEED PUMPBOX		1	EA	100	100	$6,800	$10,000	10,000		$16,800
	NEW	SCAVENGER REGRIND CYCLONE FEED PUMPS		2	EA	125	250	$17,000	$50,000	100,000		$117,000
	NEW	SCAVENGER REGRIND CYCLOPAC		1	EA	80	80	$5,440	$50,000	50,000		$55,440
	EXISTING	SCAVENGER REGRIND MILL	12'-2" x 24', 1500 HP	1	EA	250	250	$17,000	$150,000	150,000		$167,000
	NEW	FINAL CONC. REGRIND CYCLONE FEED PUMPBOX		1	EA	100	100	$6,800	$10,000	10,000		$16,800
	NEW	FINAL CONC. REGRIND CYCLONE FEED PUMPS		2	EA	60	120	$8,160	$50,000	100,000		$108,160
	NEW	FINAL CONC. REGRIND CYCLOPAC		1	EA	80	80	$5,440	$50,000	50,000		$55,440
	EXISTING	FINAL CONC REGRIND MILL	12'-2" x 24', 1500 HP	1	EA	250	250	$17,000	$150,000	150,000		$167,000
		FLOTATION PIPING		1	LS	14,766	14,766	$1,004,115	$1,476,640	1,476,640		$2,480,756
		OUTSIDE LINES To Pressure Leaching and Reagent Supply		1	LS	18,478	18,478	$1,256,504	$1,847,801	1,847,801		$3,104,305
		FLOTATION ELECTRICAL		1	LS	11,087	11,087	$753,903	$1,108,680	1,108,680		$1,862,583
		FLOTATION INSTRUMENTATION		1	LS	7,383	7,383	$502,058	$738,320	738,320		$1,240,378
		FLOTATION HVAC		1	LS	80	80	$5,440	$10,000	10,000		$15,440
		FLOTATION FIRE PROTECTION		1	LS	80	80	$5,440	$10,000	10,000		$15,440
		FLOTATION BUILDING Allowance for Repairs / Modifications		1	LS	500	500	$34,000	$50,000	50,000		$84,000
		SEPARATION WALL ALLOWANCE		1	LS						$50,000	$50,000
220		SUB TOTAL FLOTATION & REGRIND					65,827	$4,476,264		$13,004,243	$65,900	$17,546,408

PENGUINASI	PRESSURE LEACHING	April-04
NorthMet Project		Rev. C
Hoyt Lakes, Minnesota

Area 300	Item Description PRESSURE LEACHING			Qty	Uni	Unit Mhrs	Total Mhrs	Labor	Unit Matl	Material	Subcontract Specl Costs	Total Costs
		SITE PREPARATION AND CIVIL		1	LS	500	500	$34,000	$10,000	$10,000	$3,000	$47,000
		PRE ENGINEERED BUILDING Including Concrete and Architectural		24,000	SF	0.70	16,800	$1,142,400	$70	$1,680,000		$2,822,400
		BUILDING HVAC		24,000	SF	0.05	1,200	$81,600	$8	$192,000		$273,600
		BUILDING FIRE PROTECTION		24,000	SF	0.02	480	$32,640	$4	$96,000		$128,640
		BUILDING ELECTRICAL lighting/convenience electrical		24,000	SF	0.05	1,200	$81,600	$6	$144,000		$225,600
		CONCRETE EQUIP FOUNDATIONS AND PIERS		350	YD	6	2,100	$142,800	$300	$105,000		$247,800
		EQUIPMENT SUPPORT STRUCTURAL STEEL		35	TN	30	1,050	$71,400	$3,200	$112,000		$183,400
		AUTOCLAVE AREA OVERHEAD CRANE	5t/1t	2	EA	240	480	$32,640	$80,000	$160,000		$192,640
	NEW	CONCENTRATE THICKENER Budget Quotation	44 ft. dia	1	EA	1,500	1,500	$102,000	$301,125	$301,125		$403,125
	NEW	THICKENER O/F PUMP		2	EA	40	80	$5,440	$15,000	$30,000		$35,440
	NEW	THICKENER U/F PUMP		2	EA	40	80	$5,440	$8,000	$16,000		$21,440
	NEW	CONCENTRATE STORAGE TANK	26 ft dia. X 29 ft	45,000	LBS	0.03	1,350	$91,800	$1	$45,000		$136,800
	NEW	CONCENTRATE STORAGE TANK AGITATOR	29.52	1	EA	100	100	$6,800	$50,000	$50,000		$56,800
	NEW	CONCENTRATE FEED PUMPS		2	EA	40	80	$5,440	$12,000	$24,000		$29,440
	NEW	AUTOCLAVE FEED TANK	3 m dia. X 3.5 m	8,000	LBS	0.03	240	$16,320	$1	$8,000		$24,320
	NEW	AUTOCLAVE FEED TANK AGITATOR		2	EA	40	80	$5,440	$10,000	$20,000		$25,440
	NEW	AUTOCLAVE FEED PUMPS		2	EA	80	160	$10,880	$75,000	$150,000		$160,880
	NEW	NaCL ADDITION SYSTEM		1	EA	400	400	$27,200	$150,000	$150,000		$177,200
	NEW	AUTOCLAVES Adjusted to 65% of AMEC study	4.1m x 24.6m	2	EA	4,000	8,000	$544,000	$3,475,046	$6,950,092		$7,494,092
	NEW	AUTOCLAVE AGITATORS		12	EA	150	1,800	$122,400	$200,000	$2,400,000		$2,522,400
	NEW	FLASH TANKS Adjusted to 65% of AMEC study		2	EA	1,000	2,000	$136,000	$656,398	$1,312,795		$1,448,795
	NEW	SLURRY COOLER FEED PUMPS		2	EA	60	120	$8,160	$35,000	$70,000		$78,160
	NEW	SLURRY COOLERS		2	EA	80	160	$10,880	$50,000	$100,000		$110,880
	NEW	COOLING TOWER		1	EA	1,200	1,200	$81,600	$200,000	$200,000		$281,600
	NEW	VENT GAS SCRUBBER		1	EA	60	60	$4,080	$260,000	$260,000		$264,080
	NEW	VENT GAS SCRUBBER DISCHARGE PUMP		2	EA	40	80	$5,440	$5,000	$10,000		$15,440
	NEW	RAFFINATE INJECTION PUMPS		2	EA	80	160	$10,880	$75,000	$150,000		$160,880
	NEW	BOILER PACKAGE Adjusted to 65% of AMEC study		1	EA	4,000	4,000	$272,000	$617,786	$617,786		$889,786
	NEW	BOILER BLOWOUT VESSELS		2	EA	40	80	$5,440	$8,000	$16,000		$21,440
	NEW	HP AIR COMPRESSOR		1	EA	40	40	$2,720	$60,000	$60,000		$62,720
	NEW	LP AIR COMPRESSOR		1	EA	40	40	$2,720	$40,000	$40,000		$42,720
	NEW	SEAL WATER COOLER		1	EA	80	80	$5,440	$50,000	$50,000		$55,440
	NEW	SEAL/RINSE WATER TREATMENT PACKAGE		1	EA	100	100	$6,800	$50,000	$50,000		$56,800
	NEW	OXYGEN BLOWOUT VESSEL		2	EA	40	80	$5,440	$8,000	$16,000		$21,440
	NEW	SEAL WATER PUMPS		3	EA	40	120	$8,160	$8,000	$24,000		$32,160
	NEW	WATER TREATMENT PACKAGE		1	EA	200	200	$13,600	$100,000	$100,000		$113,600
	NEW	SUMP PUMPS		3	EA	60	180	$12,240	$12,000	$36,000		$48,240
		PRESSURE LEACHING PIPING Adjusted to 65% of AMEC study		1	LS	33,808	33,808	$2,298,967	$3,380,833	$3,380,833		$5,679,800
		OUTSIDE LINES TO SOLID LIQUID SEPARATION Allowance		1	LS	16,904	16,90 4	$1,149,483	$1,690,417	$1,690,417		$2,839,900
		PRESSURE LEACHING ELECTRICAL/LIGHTING Adjusted to 65% AMEC		1	LS	12,680	12,680	$862,244	$1,268,006	$1,268,006		$2,130,249
		PRESSURE LEACHING INSTRUMENTATION Adjusted to 65% AMEC		1	LS	8,865	8,86 5	$602,835	$886,523	$886,523		$1,489,358
300		SUB TOTAL PRESSURE LEACHING					118,638	$8,067,369		$22,981,576	$3,000	$31,051,945

PENGUINASI	SOLID / LIQUID SEPARATION	April-04
NorthMet Project		Rev. C
Hoyt Lakes, Minnesota

Area 410	Item Description SOLID / LIQUID SEPARATION			Qty	Unit	Unit  Mhrs	Total Mhrs	Labor	Unit Matl	Material	Subcontract Specl Costs	Total Costs
		SITE PREPARATION		1	LS	500	500	$34,000	$5,000	$5,000	$3,000	$42,000
		DEMOLITION		1,185	YD	1	1,185	$80,593	$-	$-	$9,481	$90,074
		BACKFILL		1,200	CY	0.08	96	$6,528	$5	$6,000	$900	$13,428
		CONCRETE EQUIP FOUNDATIONS AND PIERS		120	YD	6	720	$48,960	$300	$36,000		$84,960
		TANK FARM CONCRETE		180	YD	7	1,260	$86,940	$301	$54,180		$141,120
		PLATFORMS		1,000	SF	0.15	150	$10,350	$12	$12,000		$22,350
		EQUIPMENT SUPPORT STRUCTURAL STEEL		20	TN	30	600	$40,800	$3,200	$64,000		$104,800
		BUILDING MODIFICATIONS		1	LS	500	500	$34,000	$100,000	$100,000		$134,000
		BUILDING ARCHITECTURAL Allowance		1,200	SF	1	1,200	$81,600	$75	$90,000		$171,600
		BUILDING HVAC		4,000	SF	0.05	200	$13,600	$8	$32,000		$45,600
		BUILDING FIRE PROTECTION		4,000	SF	0.02	80	$5,440	$5	$20,000		$25,440
		BUILDING ELECTRICAL Lighting/Convenience Electrical		4,000	SF	0.05	200	$13,600	$6	$24,000		$37,600
		CRANE		1	EA	400	400	$27,200	$50,000	$50,000		$77,200
	NEW	LEACH THICKENER Budget Quotation	17.7 m dia.	1	EA	3000	3,000	$204,000	$380,000	$380,000		$584,000
	NEW	LEACH THICKENER O/F PUMP		2	EA	60	120	$8,160	$15,000	$30,000		$38,160
	NEW	LEACH THICKENER U/F PUMP		2	EA	40	80	$5,440	$8,000	$16,000		$21,440
	NEW	FILTER FEED TANK	3 m dia. X 3.5 m	1	EA	200	200	$13,600	$30,000	$30,000		$43,600
	NEW	FILTER FEED TANK AGITATOR		1	EA	40	40	$2,720	$6,000	$6,000		$8,720
	NEW	FILTER FEED PUMP		2	EA	30	60	$4,080	$8,000	$16,000		$20,080
	NEW	LEACH RESIDUE FILTER - Budget Quote		1	EA	500	500	$34,000	$1,690,000	$1,690,000		$1,724,000
	NEW	TAILINGS REPULP TANK	3 m dia. X 3.5 m	1	EA	200	200	$13,600	$30,000	$30,000		$43,600
	NEW	TAILINGS REPULP TANK AGITATOR		1	EA	40	40	$2,720	$6,000	$6,000		$8,720
	NEW	TAILINGS REPULP PUMP		2	EA	40	80	$5,440	$8,000	$16,000		$$21,440
	NEW	THICKENER O/F SURGE TANK	5 m dia. X 5.5 m	1	EA	600	600	$40,800	$100,000	$100,000		140,800
	NEW	POLISH FILTER FEED PUMP		2	EA	40	80	$5,440	$6,000	$12,000		$17,440
	NEW	POLISH FILTER	3.5 m dia.	2	EA	120	240	$16,320	$175,000	$350,000		$366,320
	NEW	POLISH FILTER BLOWER		1	EA	60	60	$4,080	$15,000	$15,000		$19,080
	NEW	ROUGHER/SCAVENGER CELLS Budget Quote	2.8m3	5	EA	30	150	$10,200	$18,000	$90,000		$100,20 0
	NEW	CLEANER FLOTATION CELLS Budget Quote	0.08m3	3	EA	40	120	$8,160	$8,333	$25,000		$33,160
	NEW	ROUGHER/SCAV FLOT CELLS RETURN PUMP		1	EA	40	40	$2,720	$6,000	$6,000		$8,720
	NEW	CONCENTRATE STORAGE TANK FEED PUMP		1	EA	40	40	$2,720	$5,000	$5,000		$7,720
	NEW	LEACH RESIDUE TAILINGS PUMPBOX		1	EA	80	80	$5,440	$20,000	$20,000		$25,440
	NEW	LEACH RESIDUE TAILINGS PUMP		2	EA	80	160	$10,880	$45,000	$90,000		$100,880
	NEW	SUMP PUMPS		2	EA	40	80	$5,440	$6,000	$12,000		$17,440
		SOLID / LIQUID SEPARATION PIPING		1	LS	5,890	5,890	$400,520	$589,000	$589,000		$989,520
		SOLID LIQUID SEPARATION ELECTRICAL		1	LS	4,418	4,418	$300,390	$441,750	$441,750		$742,140
		SOLID LIQUID INSTRUMENTATION		1	LS	3,534	3,534	240,312	$353,400	$353,400		$593,712
410		SUB TOTAL SOLID / LIQUID SEPARATION					26,903	$1,830,793		$4,822,330	$13,381	$6,666,504

PENGUINASI	PGM RECOVERY	April-04
NorthMet Project		Rev. C
Hoyt Lakes, Minnesota

Area 420	Item Description PGM RECOVERY			Qty	Unit	Unit Mhrs	Total Mhrs	Labor	Unit Matl	Material	Subcontract Specl  Costs	Total Costs
		SITE PREPARATION		1	LS	500	500	$34,000	$5,000	$5,000	$3,000	$42,000
		DEMOLITION		1,185	YD	1	1,185	$80,593	$-	$-	$9,481	$90,074
		BACKFILL		1,200	CY	0.08	96	$6,528	$5	$6,000	$900	$13,428
		CONCRETE EQUIP FOUNDATIONS AND PIERS		120	YD	6	720	$48,960	$300	$36,000		$84,960
		TANK FARM CONCRETE		180	YD	7	1,260	$86,940	$301	$54,180		$141,120
		PLATFORMS		500	SF	0.15	75	$5,175	$12	$6,000		$11,175
		EQUIPMENT SUPPORT STRUCTURAL STEEL		20	TN	30	600	$40,800	$3,200	$64,000		$104,800
		BUILDING MODIFICATIONS		1	LS	500	500	$34,000	$100,000	$100,000		$134,000
		BUILDING ARCHITECTURAL Allowance		1,200	SF	1	1,200	$81,600	$75	$90,000		$171,600
		BUILDING HVAC		4,000	SF	0.05	200	$13,600	$8	$32,000		$45,600
		BUILDING FIRE PROTECTION		4,000	SF	0.02	80	$5,440	$5	$20,000		$25,440
		BUILDING ELECTRICAL Lighting/Convenience Electrical		4,000	SF	0.05	200	$13,600	$6	$24,000		$37,600
		CRANE		1	EA	400	400	$27,200	$50,000	$50,000		$77,200
	NEW	PLANT AIR COMPRESSOR		1	EA	60	60	$4,080	$40,000	$40,000		$44,080
	NEW	INSTRUMENT AIR COMPRESSOR		1	EA	60	60	$4,080	$40,000	$40,000		$44,080
	NEW	SULPHUR BURNER PACKAGE		1	EA	800	800	$54,400	$200,000	$200,000		$254,400
	NEW	SULPHUR BURNER BLOWER		1			-	-		-		-
	NEW	IN LINE MIXER		1	EA	40	40	$2,720	$10,000	$10,000		$12,720
	NEW	Fe REDUCTION TANK	6.5 m dia x 7 m	1	EA	800	800	$54,400	$120,000	$120,000		$174,400
	NEW	Fe REDUCTION TANK AGITATOR		1	EA	40	40	$2,720	$13,000	$13,000		$15,720
	NEW	PIPE REACTOR FEED PUMP		2	EA	40	80	$5,440	$17,000	$34,000		$39,440
	NEW	PIPE REACTOR	315mm D x 55m	2	EA	120	240	$16,320	$10,000	$20,000		$36,320
	NEW	CLARIFIER		2	EA	120	240	$16,320	$80,000	$160,000		$176,320
	NEW	PGM FILTER		2	EA	500	1,000	$68,000	$690,002	$1,380,005		$1,448,005
	NEW	CLARIFIER O/F STANDPIPE		2	EA	40	80	$5,440	$8,000	$16,000		$21,440
	NEW	POLISH FILTER FEED PUMP		2	EA	80	160	$10,880	$30,000	$60,000		$70,880
	NEW	CLARIFIER U/F DIAPHRAM PUMP		4	EA	40	160	$10,880	$8,000	$32,000		$42,880
	NEW	REPULP TANK	1m dia x 1.2m	1	EA	20	20	$1,360	$2,000	$2,000		$3,360
	NEW	REPULP TANK AGITATOR		1	EA	20	20	$1,360	$4,000	$4,000		$5,360
	NEW	REPULP PUMP		2	EA	30	60	$4,080	$4,000	$8,000		$12,080
	NEW	AUTOCLAVE HOLDING TANK	2m dia x 2.5m	1	EA	40	40	$2,720	$6,500	$6,500		$9,220
	NEW	AUTOCLAVE HOLDING TANK AGITATOR		1	EA	40	40	$2,720	$5,000	$5,000		$7,720
	NEW	AUTOCLAVE CHARGE PUMP		2	EA	40	80	$5,440	$5,000	$10,000		$15,440
	NEW	BATCH LEACH AUTOCLAVE	1m dia x 1.5m	1	EA	80	80	$5,440	$60,000	$60,000		$65,440
	NEW	BATCH LEACH AUTOCLAVE AGITATOR		1	EA	40	40	$2,720	$25,000	$25,000		$27,720
	NEW	FILTER FEED TANK	2m dia x 2.5m	1	EA	40	40	$2,720	$6,500	$6,500		$9,220
	NEW	FILTER FEED TANK AGITATOR		1	EA	40	40	$2,720	$5,000	$5,000		$7,720
	NEW	FILTER FEED PUMP		2	EA	40	80	$5,440	$8,000	$16,000		$21,440
	NEW	PGM FILTER		1	EA	50	50	$3,400	$50,000	$50,000		$53,400
	NEW	TRAY DRYER		1	EA	80	80	$5,440	$50,000	$50,000		$55,440
	NEW	PGM PRODUCT BIN		1	EA	10	10	$680	$5,000	$5,000		$5,680
		PGM RECOVERY PIPING		1	LS	4756	4,756	$323,409	$475,600.97	$475,601		$799,010
		PRESSURE LEACHING ELECTRICAL/LIGHTING		1	LS	2253	2,253	$153,204	$225,300.36	$225,300		$378,505
		PRESSURE LEACHING INSTRUMENTATION		1	LS	1462	1,462	$99,416	$146,200.24	$146,200		$245,616
420		SUB TOTAL PGM RECOVERY					19,927	$1,356,385		$3,712,286	$13,381	$5,082,053

EX-7

Exhibit 7

Polymet Mining Corp.

CODE OF ETHICS

March 2004

Introduction

Polymet Mining Corp. is committed to maintaining high ethical and moral standards of behavior in conducting its business. We expect that all those who act on behalf of the Company, whether a director, officer, employee or contractor, will do so in a manner consistent with this Code. Reports of violations can be made, anonymously if desired, to any member of the Corporate Governance Committee (see “Reporting”). The Code will be reviewed and, if necessary, revised annually by the Board of Directors.

Compliance with Laws

We must comply with all laws, rules and governmental regulations applicable to the jurisdictions in which the Company operates. Each one of us is responsible for understanding the rules or laws that govern our work. If there is any doubt with respect to compliance, check with the Corporate Secretary who will make the necessary inquiries.

Human Rights

Every person associated with the Company, whether a director, officer, employee or contractor, is entitled to be treated fairly, respectfully, courteously and professionally. Harassment and discrimination will not be tolerated at any level.

The Company is committed to providing a safe and healthy work environment by developing and maintaining safe and productive work practices and by complying with all applicable occupational health and safety laws and regulations.

Confidentiality

The Company’s records, reports, papers, plans and procedures are proprietary and confidential. The disclosure of such information to any outside entity (other than approved lawyers, auditors and banks) must be authorized by the Chairman or President of the Company. Disclosing such information without proper authorization is prohibited.

Insider Information

Trading, or encouraging others to trade, in securities of the Company while in possession of material information which has not been disclosed to the public is strictly prohibited. Information which could be considered material and confidential would include, but is not limited to, matters regarding significant assays, mineral discoveries, financial results, stock split, a major merger, acquisition or disposition, or take-over bid.

The Company will impose trading black-out periods when deemed necessary by the Chairman and/or President & C.E.O. However, even if a trading ban has not been imposed, each individual is responsible for ensuring that they do not violate insider trading rules.

Timely Disclosure

The Company is committed to timely, full, plain and accurate disclosure in its news releases, reports and documents. Disclosure of such information to the public shall be authorized by the Chairman or President and made in accordance with the rules set by the securities commissions and other regulatory bodies.

Conflicts of Interest

Situations should be avoided where the best interests of the Company or the ability to objectively make decisions are compromised. The Company recognizes that directors, officers and employees have the right to participate in outside interests but such activities should not affect his or her ability to act solely in the best interest of the Company or to carry out duties properly. Where a potential conflict of interest may occur, it must be disclosed.

Financial Books & Records

Accounting and financial books and records must accurately reflect the Company’s affairs and comply with all applicable accounting principles and legal requirements. Dishonest reporting is strictly prohibited. Directors, officers and employees have a responsibility to ensure that false or misleading information is not entered in the records and that full, accurate and timely disclosure is made in all periodic reports required to be filed with securities and other regulatory authorities. Any concerns regarding questionable accounting or auditing matters, should be addressed, confidentially and/or anonymously, to the Chairman of the Audit Committee.

Environment

The Company is committed to protecting the environment and being a responsible member of the communities in which we operate. It is our responsibility to understand how our activities may impact the environment and minimize the risks thereto.

Reporting

Compliance with this Code of Ethics protects all of us individually as well as the Company’s assets and reputation. Everyone associated with the Company is expected to comply with this Code. Concerns or violations should be reported, anonymously and/or confidentially, to the Company’s Chairman or President. Financial or accounting concerns should be addressed to the Chairman of the Audit Committee. Reprisals or intimidation of those who report such violations will not be tolerated.

Any change or waiver to this Code of Ethics may be made only by the Board of Directors and will be promptly disclosed as required by law or regulation.

EX-12.1

SECTION 302 CERTIFICATION

I, William Murray, Chief Executive Officer, certify that:

1.	I have reviewed this annual report on Form 20-F of Polymet Mining Corp;
2.	Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
3.	Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
4.	The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
	(a)	designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
	(b)	evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and
	(c)	presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5.	The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
	(a)	all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
	(b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6.	The registrant's other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: July 28, 2004

/s/ William Murray 

William Murray 

President, 

and Chief Executive Officer 

(Principal Executive Officer) 

EX-12.2

SECTION 302 CERTIFICATION

I, Terese J. Gieselman, Chief Financial Officer, certify that:

1.	I have reviewed this annual report on Form 20-F of Polymet Mining Corp;
2.	Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
3.	Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
4.	The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
	(a)	designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
	(b)	evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and
	(c)	presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5.	The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
	(a)	all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
	(b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6.	The registrant's other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: July 28, 2004

/s/ Terese J. Gieselman

Terese J. Gieselman

Chief Financial Officer
(Principal Financial Officer)

EX-13.1

Exhibit 13.1

SECTION 906 CERTIFICATION
CERTIFICATION PURSUANT TO 18 U.S.C. ss.1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Polymet Mining Corp. (the "Company") on Form 20-F for the period ended January 31, 2004 as filed with the Securities and Exchange Commission on the date hereof, I, William Murray, President, Chairman and Chief Executive Officer of the Company, certify pursuant to 18 U.S.C. ss.1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: July 28, 2004 /s/ William Murray
William Murray
President, and Chief Executive
Officer (Principal Executive Officer)

EX-13.2

Exhibit 13.2

SECTION 906 CERTIFICATION
CERTIFICATION PURSUANT TO 18 U.S.C. ss.1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Polymet Mining Corp. (the "Company") on Form 20-F for the period ended January 31, 2004 as filed with the Securities and Exchange Commission on the date hereof, I, Terese J. Gieselman Chief Financial Officer of the Company, certify pursuant to 18 U.S.C. ss.1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: July 28, 2004 /s/ Terese j. Gieselman
Terese J. Gieselman
Chief Financial Officer
(Principal Financial Officer)