6-K

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

FORM 6-K

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

For the month of May, 2008

Commission File Number: 001-32929

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

1003 - 1177 West Hastings Street
Vancouver, B.C. Canada V6E 2K3
(Address of principal executive offices)

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

[ X ] Form 20-F   [] Form 40-F

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

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

Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes [] No [ X ]

If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82- _________

SUBMITTED HEREWITH

Exhibits

99.1	Annual Report for the Fiscal Year Ended January 31, 2008
99.1	Annual Report for the Fiscal Year Ended January 31, 2008 (PDF Version)
99.2	Notice of Annual and Special Meeting of Shareholders to be held June 17, 2008
99.3	Management Proxy Circular for the Annual and Special Meeting of Shareholders to be held June 17, 2008
99.4	Form of Proxy
99.5	Voting Instruction Form (VIF)

SIGNATURES

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

	PolyMet Mining Corp.
	(Registrant)
Date: May 19, 2008	By:	/s/ Joe Scipioni
		Joe Scipioni
	Title:	President

EX-99.1

 

		Corporate Profile PolyMet Mining Corp. is a publicly traded mine development company with operating headquarters in Hoyt Lakes, Minnesota. Its shares are traded on the American and Toronto stock exchanges. The company is ready to build a new copper–nickel–precious metals mine in northeastern Minnesota near the company’s existing Erie Plant, a large crushing and milling facility acquired in 2005. Environmental review by the State of Minnesota is nearing completion. Project construction is planned to start upon receipt of permits and is expected to require approximately one million man-hours of construction labor, leading to the creation of approximately 400 long-term jobs during commercial operations. Forward-Looking Statements This report contains certain forward-looking statements concerning anticipated developments in PolyMet’s operations in the future. Forward-looking statements are frequently, but not always, identified by words such as “expects,” ”anticipates,” “believes,” “intends,” “estimates,” “potential,” “possible,” and similar expressions, or statements that events, conditions or results “will,” “may,” “could,” or “should” occur or be achieved. These forward-looking statements may include statements regarding exploration results and budgets, mineral resource and mineral reserve estimates, work programs, capital expenditures, timelines including timelines for third-party studies and issuance of permit to operate by various government agencies, strategic plans, the market price of metals, costs, or other statements that are not a statement of fact. Forward-looking statements address future events and conditions and therefore involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated due to a variety of risks, uncertainties and other factors. PolyMet’s forward-looking statements are based on the beliefs, expectations and opinions of management on the date the statements are made, and PolyMet does not assume any obligation to update forward-looking statements if circumstances or management’s beliefs, expectations Cautionary note to U.S. investors: the terms “measured and indicated resource,” “mineral resource,” and “inferred mineral resource” used in this annual report are Canadian geological and mining terms as defined in accordance with National Instrument 43-101, Standards of Disclosure for Mineral Projects (“NI 43-101”) under the guidelines set out in the Canadian Institute of Mining, Metallurgy and Petroleum (the “CIM”) Standards on Mineral Resources and Mineral Reserves. We advise U.S. investors that while such terms are recognized and required under Canadian regulations, the Securities & Exchange Commission does not recognize these terms. Mineral resources do not have demonstrated economic viability. It cannot be assumed that all or any part of a mineral resource will ever be upgraded to reserves. Under Canadian rules, estimates of inferred mineral resources may not form the basis of or be included in feasibility or other studies. U.S. investors are cautioned not to assume that any part of an inferred mineral resource exists, or is economically or legally mineable. Specific reference is made to PolyMet’s most recent Form 20-F/Annual Information Form on file with the SEC and Canadian securities authorities for a discussion of some of the risk factors and other considerations underlying forward-looking statements.
Contents
Company Highlights	1
Report to Shareholders	2
The Duluth Complex	5
Prepared for Production	8
Management’s Discussion & Analysis	9
Consolidated Financial Statements	33
Cover Image
Towering eight stories, the shining “Iron Man” of Chisholm, Minnesota, stands as an enduring tribute to Minnesota’s hard rock miners. The free- standing brass and copper statue, the third-tallest in the nation, is titled The Emergence of Man through Steel.The sculpture was designed by artist Jack Anderson and dedicated in 1987. Other metals used in its 150-ton construction are bronze, iron and stainless steel.

2008 ANNUAL REPORT | 1

The global markets remain robust for metals,
including copper, nickel and platinum group
metals all found in PolyMet’s ore body.

2007-2008
Company Highlights

• Environmental review nearing completion

• Detailed Project Description and more than 90 technical studies submitted for environmental review

• Company operating headquarters relocated to Minnesota

• Board of Directors expanded with appointment of two Minnesota- based directors

• Mineral resources and reserves expanded by more than 50%

• Project labor agreement signed with the construction trade unions

• Long-term electric power supply secured

• US$41.25 million equity private placement completed

• Detailed planning well advanced for construction and operations

Project Labor Agreement Ceremony
Left to Right: Joe Scipioni, President & CEO of PolyMet Mining Corp., David Dill, Minnesota State Representative, John Grahek, President of The Iron Range BuildingTrades, William Murray, Executive Chairman of PolyMet Mining Corp., and James Oberstar, US Congressman.

PolyMet’s Erie Plant
Initially built to concentrate iron ore, the large crushing and milling complex is capable of processing 100,000 tons of ore per day.

2 | POLYMET MINING

Report to Shareholders

Dear Fellow Shareholder:
The global metals markets remain robust and we are well into a “super cycle” for metals, including copper, nickel and platinum group metals (PGMs) found in PolyMet’s ore body. Demand from developing economies such as China and India continues to grow, outpacing supply and supporting higher prices. We have commented in prior years that there is a fundamental shortage of advanced mining projects in the development pipeline. This shortage is being reflected in the pace of acquisitions, as mining companies seek to grow by purchasing assets as opposed to finding and developing their own new projects.

Strategic Importance to the United States PolyMet’s copper/nickel/PGM Project is located in Minnesota’s Duluth Complex, which hosts an estimated 4 billion tons of nonferrous mineralization. While there are other copper mines in the United States, currently there are no operating nickel mines and only a single mine producing PGMs. The United States imports 40% of its copper, 60% of its nickel (the balance coming from recycled scrap) and between 80% and 95% of its PGMs. Yet each of these metals is critical to modern societies. Copper is used extensively in electrical transmission and telecommunications and is in growing demand for applications such as hybrid cars. Nickel is used in specialty steels that are stronger and lighter than conventional steel, thus saving energy in many applications. PGMs are primarily used in autocatalysts, to remove poisonous emissions from car and truck exhaust gases. Environmental Review Nearing Completion After decades with no new mining projects to review in northeastern Minnesota, the regulatory agencies have in the past three years evaluated and permitted several new large projects. Most recently, a large iron mine and steel mill complex proposed for the western end of the Iron Range received its environmental permits last year. In Minnesota, the State prepares the Environmental Impact Statement (EIS), resulting in a review which is independent and comprehensive.The Minnesota Department of Natural Resources (MDNR) is the lead State agency responsible for drafting the EIS, and the Army Corp of Engineers is the lead federal agency, which coordinates with several other agencies, such as the U.S. Forest Service and Tribal Governments.

William Murray Executive Chairman & Director

2008 ANNUAL REPORT | 3

We have assembled a strong owner’s team
comprised of experts in project management,
construction management, scheduling and
cost control.

Although the environmental review process is taking longer than we or the State of Minnesota anticipated, we are encouraged that PolyMet’s Project is receiving top priority from the regulators. The next step is for the regulators to publish the Draft Environmental Impact Statement (draft EIS).

Review Process Requires Full Commitment
PolyMet has expended more than $14 million since February 2004 on environmental review and permitting. An Environmental Assessment Worksheet (EAW) was completed in November 2005, including a public comment period. Since then, PolyMet and its experts have completed a very extensive Detailed Project Description, an updated Supplemental Detailed Project Description, and more than 90 technical studies that provide the necessary information the regulators need to complete their work.

We have engaged some of the world’s leading environmental experts to measure and model all aspects of our Project. Throughout the process there has been continuous interaction between PolyMet and the MDNR to provide the information needed by the agencies. The MDNR has been engaged in a massive process of review and verification, which will lead to the completion and publication of the draft EIS.

Once the draft EIS is published, it will be available for public comment and scrutiny. The comments received through this process will be reviewed and incorporated, as appropriate, into the final EIS. The final EIS will go through a shorter public comment period, which is expected to lead to a declaration of EIS adequacy. Subsequently, the agencies that have been actively involved throughout the EIS process will be able to issue operating permits.

Moving Ahead on Other Fronts
While we have focused a lot of our attention on the environmental aspects of the Project, we have also been working to prepare for construction and commercial operations, which are set to go once we receive the permits.

We have assembled a strong owner’s team comprised of experts in project management, construction management, scheduling and cost control as well as other key areas, such as financial management and financing. Key agreements have been reached that show the commitment of vendors and construction labor to the Project.

We have also taken a proactive approach to keeping the community and other interested parties informed about our plans. During the past several months we have stepped up these activities aimed at informing all stakeholders about the enduring economic benefits of

4 | POLYMET MINING

our project to Minnesota – including job creation, new job skills and training – and our attention to environmental safeguards. These stakeholders include communities and businesses in northeastern Minnesota and throughout the state and upper Midwest, the state government and legislature, environmental groups, and, of course, our shareholders.

Ready to Build
The owner’s team has completed the front-end engineering design packages, working with process specialist Bateman Engineering, which prepared our Definitive Feasibility Study in September 2006. This design work has been transferred to Washington Group International, a division of URS, our engineering, procurement and construction management (EPCM) contractor in Denver, Colorado.

Similarly, detailed mine planning is well advanced in preparation for construction and operations. Work has been carefully scoped and quotes received for most key aspects of the Project, such as the predevelopment mining contract.

Mining projects in most locations in the world are struggling to find engineers to design, contractors to build, and people to operate their mines. PolyMet continues to find capacity in all three categories because of the location and timing of this Project. Since much of the plant equipment and infrastructure is already installed at the Erie site, we are less affected than other mine developers by long delivery times and rapidly escalating costs for equipment.

An important Project Labor Agreement, negotiated by PolyMet, was signed in September 2007, which defines conditions for the Building Trade Unions and the Contractors during the construction phase of PolyMet. The buildout of this Project, upon receipt of permits, will be rapid.

Minnesota Focus
In January 2008, the Board of Directors decided to focus the Company’s efforts more solidly on Minnesota. This has meant that the operating headquarters of the Company has been relocated to the Project site in Hoyt Lakes, Minnesota, where we own a large office building acquired as part of the plant acquisition.

Joe Scipioni, our previous Chief Operating Officer, has been promoted to succeed me as President and Chief Executive Officer, and I welcome him to the Company’s Board of Directors. I will continue to serve PolyMet in my new role as Executive Chairman. The Company continues to be a Canadian company, and matters such as regulatory filings will continue to be handled from the Executive Chairman’s office in Vancouver.

I would also like to welcome Mr. Frank Sims to our board. Mr. Sims brings even more Minnesota-based depth of experience to PolyMet, having served in executive positions with Cargill, Inc. and as Chairman of the Federal Reserve Bank of Minneapolis.

The PolyMet team is excited by the steady, measurable progress we have achieved in the past year, and indeed during the past five years. Looking back, we have acquired the Erie Plant and associated infrastructure, we have completed the Definitive Feasibility Study, and we have completed extensive environmental test work and analysis, which we have submitted to the State of Minnesota for review and verification in the EIS process.

We have broadened our shareholder base to include many leading investors in the upper Midwest, and elsewhere in the United States and Europe. Looking forward, we have a team in place that has the experience and skills to build the Project once we receive the go-ahead from the environmental review process.

I invite you to attend the Annual General Meeting June 17, 2008, in Vancouver, B.C., to personally meet your management team.

2008 ANNUAL REPORT | 5

The Duluth Complex has the potential to
be a major supplier of domestic needs for
strategically important metals for many
decades.

The Duluth Complex

Strategically Important to the U.S.
The Duluth Complex in northeastern Minnesota is a well-known geological formation that hosts a large quantity of copper, nickel, cobalt, and platinum group metals. The complex is located immediately south of the eastern end of the historic Mesabi Iron Range, itself the major source of iron ore for the domestic U.S. steel industry for over 100 years.

While the copper-nickel mineralization of the Duluth Complex was discovered in the 1950s, it has taken technological advances to make the district economically viable. These advances in technology have been magnified by rising metal prices and increasing competition to secure supplies of strategically important raw materials.

What Is the Duluth Complex?
The Duluth Complex is considered the third-largest cache of sulfide nickel in the world. There is a 30-mile-long belt of copper-nickel deposits and 10 known deposits of significance. At the western end of the complex, where PolyMet’s NorthMet Project is located, the known deposits typically outcrop and are amenable to open pit mining. Moving east, the known mineralization tends to be deeper, but also somewhat higher grade, and thus could potentially be mined by underground mining methods.

6 | POLYMET MINING

 

How large is the resource?
The Minnesota Department of Natural Resources (MDNR) estimates that the Duluth Complex comprises approximately 4.4 billion tons of mineral resources grading 0.66% copper and 0.20% nickel. Modern exploration techniques have the potential to expand the resource.

PolyMet Leading the Way
PolyMet’s NorthMet deposit, in the western part of the copper-nickel belt, is the second-largest known deposit, representing nearly one-quarter of the known resources in the complex. Fortuitously, it is located only six miles from the Erie Plant, connected by road and railroad.

PolyMet is leading the commercial development of the Duluth Complex in bringing this new source of copper, nickel and platinum group metals to production.

Metals of Strategic Importance
There is much debate about U.S. dependence on imported oil, but the nation is also a major importer of other essential raw materials. The metals PolyMet will produce are all strategically important to the United States.

Copper is the material of choice for transmission of electricity and heat. Regardless of how electricity is generated – coal, natural gas, nuclear power, or renewable means – copper is needed to transmit the power from where it is generated to where it is consumed

Hybrid cars use copper wiring in the electric motors which reduce the demands on the gasoline engine. They also use copper wiring in the generators that recharge the batteries, and in the copper wiring connecting the generators, batteries and electric motor.

Hybrid Car Motor—As demand for gas-electric hybrid cars continues to grow, so does the need for copper as hybrids require considerably more copper to manufacture than conventional vehicles.

2008 ANNUAL REPORT | 7

  

Nickel is used in stainless and specialty steels as well as applications such as rechargeable batteries. By reducing or eliminating corrosion of steel, nickel alloys can make structures stronger and lighter and extend their safe operating life, thus reducing the long-term consumption of natural resources.

Jet Engine—Nickel-based alloys are widely used in high performance applications such as jet aircraft where engine components must retain strength and stable physical properties.

Precious metals found in PolyMet’s NorthMet ore body include platinum group metals (PGMs). Since the 1970s, a global market for PGMs has developed in removing noxious gasses from automobile exhaust.

Tougher standards on car exhaust emissions are spreading around the world including the developing economies – rapidly increasing demand for platinum and palladium for use in catalytic converters.

Catalytic Converter—While palladium is used in a variety of applications, its greatest demand is in the automotive sector as the catalyst in catalytic converters to keep the air clean.

8 | POLYMET MINING

The Minnesota Department of Natural Resources
has estimated 4.4 billion tons of resources for the
district at 0.66% Cu and 0.20% Ni.

Prepared for Production

We completed a Definitive Feasibility Study in September 2006. We have undertaken extensive environmental review and planning to minimize emissions and provide multiple layers of protection of the environment.

State and federal agencies responsible for preparing the Environmental Impact Statement are working to complete a thorough assessment of PolyMet’s Project to confirm compliance with tough Minnesota and federal environmental standards.

With ownership of the Erie Plant and associated infrastructure, our location in an established mining district, the fact that our ore body comes nearly to surface, and careful planning of the construction and operational start-up, we expect to be in production within a year of receiving permits.

Rail Links to Global Connections
Minnesota’s extensive rail network interconnects the Erie Plant, providing access to North American and worldwide markets.

Powered for the Future
A high-voltage transmission line directly interconnects the Erie Plant with the regional power grid, providing reliable, competitively- priced electric power.

2008 ANNUAL REPORT | 9

Management’s Discussion & AnalysisFor the year ended 31 January, 2008
US Funds

Annual MD&A
The following information, prepared as at 23 April 2008, should be read in conjunction with the audited consolidated financial statements of PolyMet Mining Corp. (the “Company” or “PolyMet”) for the period ended 31 January 2008 and related notes attached thereto, which are prepared in accordance with Canadian generally accepted accounting principles (“GAAP”). All amounts are expressed in United States dollars unless otherwise indicated.

The Audit Committee of the Board of Directors of the Company, consisting of three independent directors, has reviewed this document pursuant to its mandate and charter.

Forward Looking Statements
This Management Discussion and Analysis contains certain forward-looking statements concerning anticipated developments in PolyMet’s operations in the future. Forward-looking statements are frequently, but not always, identified by words such as “expects,” “anticipates,” “believes,” “intends,” “estimates,” “potential,” “possible,” and similar expressions, or statements that events, conditions or results “will,” “may,” “could,” or “should” occur or be achieved. These forward-looking statements may include statements regarding exploration results and budgets, mineral resource and mineral reserve estimates, work programs, capital expenditures, timelines including timelines for third-party studies and issuance of permit to operate by various government agencies, strategic plans, the market price of metals, costs, or other statements that are not a statement of fact. Forward-looking statements address future events and conditions and therefore involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated in such statements due to a variety of risks, uncertainties and other factors. PolyMet’s forward-looking statements are based on the beliefs, expectations and opinions of management on the date the statements are made, and PolyMet does not assume any obligation to update forward-looking statements if circumstances or management’s beliefs, expectations and opinions should change.

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

Specific reference is made to PolyMet’s most recent Form 20-F/Annual Information Form on file with the SEC and Canadian securities authorities for a discussion of some of the factors underlying forward-looking statements.

Description of Business and Summary of Recent Events
PolyMet is a Toronto Stock Exchange and American Stock Exchange listed Issuer engaged in the exploration and development, when warranted, of natural resource properties. The Company’s primary mineral property and principal focus is the commercial development of its NorthMet Project, a polymetallic project in northeastern Minnesota, USA which hosts copper, nickel, cobalt and platinum group metal mineralization.

Asset Acquisitions
On 15 November 2005 the Company, through its Minnesota subsidiary (Poly Met Mining, Inc.), completed the early exercise of PolyMet’s option with Cleveland Cliffs, Inc. (NYSE:CLF) (“Cliffs”) to acquire the Erie Plant, which is located 10 kilometers west of the NorthMet deposit. The plant was operated by Cliffs for many years and was acquired by Cliffs in early 2001 from LTV Steel Mining Company after that

10 | POLYMET MINING

company’s bankruptcy when the plant was placed on care-and-maintenance with a view to a potential restart. With minor modification, the crushing and milling circuits can be used for the NorthMet ore. The plant assets now owned by PolyMet include crushing and milling capacity, comprehensive spare parts, plant site buildings, real estate, tailings impoundments and mine workshops, as well as access to extensive mining infrastructure including roads, rail, water, and power. A new hydrometallurgical plant is planned to be installed adjacent to the existing mill on surplus land.

PolyMet plans to refurbish and reactivate the crushing, concentrating and tailings facilities at the Erie Plant to produce concentrates containing copper, nickel, cobalt and precious metals. The concentrates may be sold prior to completion of construction and commissioning of the new hydrometallurgical metal recovery processing facilities. Once completed, the new hydrometallurgical plant will produce copper metal, nickel-cobalt hydroxide and a precious metals precipitate.

On 20 December 2006 the Company acquired from Cliffs, property and associated rights sufficient to provide it with a railroad connection linking the mine development site and the Erie Plant. This transaction also included 120 railcars, locomotive fuelling and maintenance facilities, water rights and pipelines, large administrative offices on site and an additional 6,000 acres to the east and west of and contiguous to its existing tailing facilities.

PolyMet has indemnified Cliffs for ongoing reclamation and remediation associated with the property under both transactions.

Feasibility Study, Mineral Resources and Mineral Reserves
On 25 September 2006 PolyMet announced that the Definitive Feasibility Study (“DFS”) prepared by Bateman Engineering (Pty) Ltd. (“Bateman”) confirmed the economic and technical viability of the NorthMet Project. The executive summary of the DFS was summarized in a Technical Report that conforms to National Instrument 43-101 (“NI 43-101”) and has been filed on PolyMet’s website (www.polymetmining. com) and on SEDAR.

The DFS described measured and indicated mineral resources of 422.1 million tons grading 0.28% copper, 0.08% nickel and 0.01 ounces per ton (“opt”) of precious metals (palladium, platinum and gold). In addition, the DFS reported inferred mineral resources of 120.6 million tons grading 0.25% copper, 0.07% nickel, and 0.01 opt of precious metals. Mineral resources are not reserves and do not have demonstrated economic viability.

The DFS also established proven and probable mineral reserves. This material, contained within the measured and indicated mineral resources, totals 181.7 million tons grading 0.31% copper, 0.09% nickel, and 0.01 opt of precious metals. These mineral reserves and mineral resources are based on copper at $1.25 per pound, nickel at $5.60 per pound, and precious metal prices of $210, $800, and $400 per ounce respectively for palladium, platinum and gold.

The DFS is based on processing of 32,000 tons of ore per day, which is the size of operation under environmental review for which operating permits are being sought.

The DFS estimated initial direct capital costs, including contingency, of approximately $312 million. Indirect costs including engineering and construction management, project insurance, the anticipated cost of environmental insurance related to reclamation and closure guarantees, and other owner’s costs were estimated at $68 million, for a total capital cost of approximately $380 million. Sustaining capital was projected at a total of $72 million for the first 20 years.

During the year ended 31 January, 2008, and up to the date of this Management Discussion and Analysis, the Company continued to advance its NorthMet Project including the activities noted below.

The Company completed its scheduled drilling program and on 9 August 2007 reported that measured and indicated mineral resources at the NorthMet Project increased by 51% to 638 million short tons from the 422 million short tons reported in the DFS. The revised mineral resource estimates are based on the same cut-off grades used in the DFS – namely a Net Metal Value (“NMV”) of US$7.42 per ton, reflecting mine planning at a copper price of US$1.25 per pound and a nickel price of US$5.60 per pound – see notes to the following table.

2008 ANNUAL REPORT | 11

The increase in mineral resources reflects two changes:

• Data from the winter drill program which confirmed the continuity of the main mineralized zone and the size of an upper level part of the ore body called the Magenta Zone, which extends down dip and to the west. These changes contributed 149 million short tons to the increase in measured and indicated mineral resources.

• Extension of the overall mineral envelope to approximately 1,600 feet below surface, compared with the prior cutoff at approximately 1,100 feet below surface. This change contributed 67 million short tons to the increase in measured and indicated mineral resources.

As a result, measured and indicated mineral resources have increased by 216 million short tons to 638 million short tons and inferred mineral resources have been expanded to 252 million short tons from 121 million short tons – all on the DFS cut-off grade. Details of the mineral resources are set out in the following table.

UPDATED MINERAL RESOURCES COMPARED WITH DFS

	ShortTons	Copper	Nickel	Cobalt	Precious Metals
	(million)	(%)	(%)	(%)	(oz/st)	(g/mt)
Updated Mineral Resource Estimate
Measured	187.0	0.287	0.084	0.007	0.010	0.359
Indicated	451.1	0.256	0.075	0.007	0.009	0.325
Measured & Indicated	638.2	0.265	0.078	0.007	0.010	0.334
Inferred	251.6	0.275	0.079	0.006	0.011	0.385
DFS
Measured	133.7	0.298	0.087	0.008	0.011	0.371
Indicated	288.4	0.266	0.078	0.007	0.010	0.330
Measured & Indicated	422.1	0.276	0.081	0.007	0.010	0.343
Inferred	120.6	0.247	0.074	0.007	0.009	0.315
Change in M&I from DFS to Current
Infill drilling	149.3
Extension to 0' elevation from 500' elevation	66.7
Total change	216.1

1.	Mineral Resources have been calculated using the following metal prices: Copper - $1.25/lb, Nickel - $5.60 per pound, Cobalt - $15.25/ lb, Palladium - $210 per ounce, Platinum - $800 per ounce and Gold - $400 per ounce.
2.	The Net Metal Value (NMV) is calculated by summing the product of the grade of each metal, the metal price (in the same units) used in resource modeling, the expected metal recovery, and the expected payment terms as set out in the DFS.

12 | POLYMET MINING

The resource estimate update was completed by a team from the Toronto office of Wardrop Engineering working closely with PolyMet’s chief geologist Richard Patelke. A NI 43-101 compliant report describing this increase was issued in September 2007 and has been filed on PolyMet’s website (www.polymetmining. com) and on SEDAR. Pierre Desautels of Wardrop and Richard Patelke of PolyMet are the Qualified Persons for this report.

On 26 September 2007 PolyMet reported that proven and probable mineable reserves at the NorthMet Project have increased, on an interim basis, by 51% to 275 million short tons from the 182 million short tons reported in the DFS.

The interim reserves are constrained to mineable blocks associated with material contained in the measured, indicated, and inferred resource blocks in the DFS for which detailed mining cost estimates, infrastructure planning, and waste rock stockpile locations were prepared as part of a larger study supporting the DFS.

It should be noted that the inferred resources were not included in the DFS or in this interim reserve update.

In conjunction with this interim increase in reserves, the strip (waste:ore) ratio for the revised mine plan has declined to 1.46:1 from 1.66:1.

INTERIM UPDATED RESERVES COMPARED WITH DFS

	ShortTons	Copper	Nickel	Cobalt	PreciousMetals
	(millions)	(%)	(%)	(%)	(oz/st)	(g/mt)
Updated Reserve Estimate
Proven	118.1	0.30	0.09	0.008	0.011	0.368
Probable	156.5	0.27	0.08	0.008	0.010	0.327
Proven and Probable	274.7	0.28	0.08	0.008	0.010	0.337
Waste	401.2
Strip Ratio	1.46
DFS
Proven	80.4	0.32	0.09	0.008	0.012	0.406
Probable	101.3	0.30	0.08	0.007	0.011	0.385
Proven and Probable	181.7	0.31	0.08	0.008	0.012	0.395
Waste	302.3
Strip Ratio	1.66

1.	The terms Mineral Resources and Reserves as used herein conform to the definitions contained in National Instrument 43-101.
2.	Mineral Resources and Reserves have been calculated using the following metal prices: Copper - $1.25/lb, Nickel - $5.60 per pound, Cobalt - $15.25/lb, Palladium - $210 per ounce, Platinum - $800 per ounce and Gold - $400 per ounce.

2008 ANNUAL REPORT | 13

The reserve estimate update was completed by a team from the Toronto office of Wardrop Engineering working closely with PolyMet’s team of Don Hunter and Richard Patelke. Gordon Zurowski of Wardrop and Don Hunter of PolyMet are the Qualified Persons.

During the second calendar quarter of 2008, PolyMet anticipates completing a full update of operating and capital costs reflecting the planned use of a more efficient mining fleet than contemplated in the DFS, the results of an assessment of the marketability of copper-nickel concentrates during the construction and commissioning of the hydrometallurgical plant, and other operating parameters. The reserves, which reflect mine planning, will be constrained to approximately the same pit envelop as the plan under environmental impact review and permitting.

Environment and Schedule
In January 2007, the Company submitted a Detailed Project Description (“DPD”) to state and federal regulators. The DPD lays out the Company’s development plans and proposed environmental safeguards. Since then, the Company has submitted a supplemental DPD as well as more than 90 supporting research studies. Independent environmental contractors retained by the Minnesota Department of Natural Resources (“MDNR”) are preparing the Environmental Impact Statement (“EIS”) for the Project.

On 15 February, 2008, PolyMet announced that, in order to make the draft EIS as thorough and complete as possible, extra time is being taken by the MDNR to validate and verify sampling, monitoring, and modeling data. The MDNR anticipates the validation and drafting of the draft EIS will be completed before the end of the second quarter of 2008.

The draft EIS will be an assessment of potential environmental, social and economic effects of the proposed project. Once the draft EIS is published, non-government organizations, government agencies and the public will have an opportunity to comment. The final EIS will incorporate analysis and appropriate responses to comments, a process that can take several months. The issuance of a final EIS would allow the MDNR to issue environmental and operating permits. Prior to receipt of these permits, the Company intends to secure production debt financing that would be available upon receipt of key permits, with construction slated to start upon availability of construction finance.

Construction of NorthMet is expected to be made up of four major components:

1.	Implementation of environmental safeguards;
2.	Construction of the mine and reactivation of some existing mine infrastructure;
3.	Refurbishment of the existing Erie Plant facilities and construction of new flotation facilities, and
4.	Construction of a new hydrometallurgical plant.

Key Developments
During the year ended 31 January 2008 PolyMet appointed key operating and construction staff for the development of the NorthMet Project. In March, The Company announced the promotion of Joe Scipioni to Chief Operating Officer and the appointment of Phillip Brodie-Hall as Executive Vice-President, Project Development, and Andy Clark as Project Manager, Process Plant. In August the Company announced additional appointments of three senior members of its Minnesota management team. LaTisha Gietzen, Vice-President of Public, Government, and Environmental Affairs, is in charge of government and public relations. James Tieberg, Division Manager of Mining, is overseeing mine development, construction, and operations. David Draves, Site Controller, is responsible for financial controls and accounting at the NorthMet Project.

On 25 April 2007, the Company’s agreement with Minnesota Power, whereby Minnesota Power will provide all of PolyMet’s electric service needs at its NorthMet Project, was approved by the Minnesota Public Utilities Commission.

In addition to the aforementioned developments, PolyMet completed the following activities.

14 | POLYMET MINING

In February 2007, PolyMet graduated from the TSX Venture Exchange to the Toronto Stock Exchange (“TSX”) and commenced trading on the TSX under the symbol POM.

In March 2007, BNP Paribas (“BNPP”), acting in its construction financing advisor capacity, retained Micon International Limited (“Micon”) as Independent Engineer in connection with construction finance for the NorthMet Project.

On 8 March 2007, the Company announced that William D. Corneliuson joined its Board of Directors.

On 17 April 2007, PolyMet announced that it had closed a private placement financing of 15 million units, at US$2.75 per unit with each unit comprising one common share and one-half of one warrant. Each, whole warrant is exercisable into a common share at a price of US$4.00 at any time until 13 October 2008 subject to an early trigger if the 20-day volume weighted average price of the common shares is US$6.00 or more. After paying cash finders’ fees totaling US$1.43 million, the financing raised $39.82 million.

In May 2007, Warren Hudelson retired from his position as Executive Vice President and Director of the US subsidiary, Poly Met Mining, Inc. but he continues as an advisor to the Company in connection with permitting of the NorthMet Property.

On 4 September 2007, the Company announced that it had signed a comprehensive Project Labour Agreement (“PLA”) governing the planned construction of the NorthMet Project. The PLA secures a supply of construction labour for NorthMet and defines the ground rules for working conditions, schedules, overtime and safety. The agreement also includes “no strike” provisions.

On 5 February 2008, PolyMet announced that it has re-allocated responsibilities amongst its senior management team and was relocating its headquarters to Hoyt Lakes, Minnesota. William Murray, formerly President and CEO, was appointed Executive Chairman, and Joe Scipioni assumed Mr. Murray’s former role as President and CEO. Ian Forrest, the former Chairman, continues to serve as an independent director and as Chairman of the Audit Committee.

On 19 February 2008, PolyMet announced that Frank Sims and Joe Scipioni had joined its board of directors.

2008 ANNUAL REPORT | 15

SELECTED ANNUAL FINANCIAL INFORMATION

	Year Ended 31 January
	(thousands of U.S. dollars including notes)
	2008		2007		2006
	$		$		$
Revenue	-		-		-
Loss for the Year	3,690	(1)	17,893	(2)	15,929	(3)
U.S. GAAP Loss for the Year	4,124		18,126		15,976
Loss per Share	(0 03	)	(0.16	)	(0.22	)
U.S. GAAP Loss per Share	(0 03	)	(0.16	)	(0.22	)
Total Assets	89,199	(4)	48,731	(5)	26,034
U.S. GAAP Total Assets	88,485	(4)	48,451	(5)	25,987
Long Term Debt (6)	10,834		11,853		1,420
Total Shareholders’ Equity	69,151		29,938		19,387
U.S. GAAP Total Shareholders’ Equity	68,437		29,658		19,340

(1)	Includes stock based compensation of $635.
(2)	Includes stock based compensation of $4,723, $1,289 for bonus shares expensed as consulting fees and office costs and corporate wages and pre-feasibility costs of $8,844.
(3)	Includes stock based compensation of $3,523 and pre-feasibility costs of $11,120.
(4)	Increase compared to 31 January 2007 primarily due to cash proceeds from private financing and increases in mineral property, plant and equipment as a result of amounts capitalized in the year.
(5)	Increase compared to 31 January 2006 primarily a result of cash proceeds from warrant exercise and increases in mineral property, plant and equipment as a result of the acquisition of additional buildings and property from Cliffs and amounts capitalized after the completion of the Definitive Feasibility Study offset by Loss for the Year.
(6)	Debt represents the unpaid cash portion of the consideration for the Cliffs transactions in the years ended 31 January 2007 and 2006.
	This financial information has been reported in accordance with Canadian GAAP and denominated in United States dollars, the Company’s reporting currency. The only material differences between Canadian and United States GAAP for the Company relates to the fact that accretion on asset retirement obligations which is capitalized under the Canadian basis must be expensed under the U.S. basis.

16 | POLYMET MINING

Results of Operations

Comparison of the years ending 31 January 2008 and 31 January 2007

a)	Loss for the Year:
	During the year ended 31 January 2008, the Company incurred a loss of $3.690 million ($0.03 loss per share) compared to a loss of $17.893 million ($0.16 loss per share) in 2007. The decrease in the net loss for the period was primarily attributable to:

•	Upon completion of the DFS in late September 2006, the Company commenced capitalizing those costs directly related to the NorthMet Project (prior to this those costs had been expensed in line with the Company’s accounting policy in this area);
•	During fiscal 2008 stock-based compensation expense was $635,000 compared to $4.723 million in the prior year due to the fact that $2.422 million of stock option costs were capitalized to mineral property, plant and equipment in 2008 (prior year period - $nil) and the timing of accounting as most of the options issued in fiscal 2008 have vesting periods while almost all of those issued in fiscal 2007 vested on issuance;
•	During fiscal 2007, the Company issued $1.289 million of bonus shares for the successful completion of Milestone 3 (completion of a DFS which indicates that commercial production from the NorthMet Project is viable), and
•	Interest income in the year ended 31 January 2008 was $1.168 million compared to $428,000 in the prior year period due primarily to higher cash balances as a result of the completion of a private placement late in April 2007.
	The above was partially offset by the recording of an “other than temporary impairment” loss of $1.050 million on an investment made by the Company during the current year.
	General and Administrative expense in the year ended 31 January 2008, excluding non-cash stock based compensation related to incentive stock options, was $3.764 million compared with $4.251 million for the prior year. The decrease was due to the impact of the bonus shares in the prior year being greater than the increased corporate activities and higher office and corporate wage expenses in the current period as a result of additional personnel and cash bonuses. Foreign exchange translation gains were $566,000 for the year ended 31 January 2008 (prior year – loss of $536,000) due to the increasing strength of the Canadian dollar compared to the U.S. dollar.

b)	Cash Flows:
	Cash used in operating activities in the year ended 31 January 2008 was $2.690 million compared to cash used in the prior year of $12.228 million. The variance in cash related to operating activities is due to the decrease in cash related operating expenditures described above, partially offset by an increase in prepaids in the current year period.
	Cash provided by financing activities for the year ended 31 January 2008 was $37.533 million compared with $13.625 million in the prior year. The current year activity was primarily due to the private placement which closed in April and $2.000 million of scheduled repayment of debt (prior year period - $1.250 million) and deferred financing costs of $293,000 relating to BNPP (prior year period - $200,000). In the year ended 31 January 2007 option and warrant exercises provided cash of $15.075 million (current year - $303,000).
	Cash used in investing activities for the year ended 31 January 2008 was $23.656 million compared with $4.171 million in the preceding

2008 ANNUAL REPORT | 17

	year, with the increase being the result of capitalization of site related costs for the full year, compared to only four months in the prior year, and the purchase of $2.495 million of common shares of a publicly traded Canadian mining company whose primary business is the operation of a recently recommissioned base metal mine.
	Total cash for the year ended 31 January 2008 increased by $11.187 million for a balance of $20.084 million compared to the year ended 31 January 2007 where cash decreased by $2.774 million to a balance of $8.897 million.
c)	Capital Expenditures:
	During the year ended 31 January 2008 the Company capitalized $26.853 million (2007 - $23.919 million) of costs primarily directly related to site activity, the draft EIS and permitting after the completion of the DFS and the purchase of equipment including a used drill. The prior year balance includes costs capitalized in the Cliffs II transaction. The Company also capitalized $293,000 (2007 - $1.397 million) of costs related to the agreement with BNPP to assist PolyMet in all aspects of preparation for construction finance.

Comparison of the years ending 31 January 2007 and 31 January 2006

a)	Loss for the Year:
	During the year the Company incurred a loss of $17.893 million ($0.16 loss per share) compared to a loss of $15.929 million ($0.22 loss per share) in 2006. The increase in the net loss for the year was primarily attributable to:

•	the increased level of work, and
•	an increase in general and administrative costs including non-cash stock compensation expense of $4.723 million (2006 - $3.523 million) and non-cash consulting fees expense of $1.289 million (2006 - $Nil).
This was partially offset by lower pre-feasibility costs as the DFS was completed effective 1 October 2006 and site costs from that date were capitalized. General and Administrative expense for the year ended 31 January 2007 excluding non-cash stock based compensation expenses was $4.251 million compared with $1.655 million for the year ended 31 January 2006. The Company reported an increase in expenditures for:

• Consulting fees were $1.458 million (2006 - $366,000) as a result of increased activity at both the corporate and project level and the issuance of bonus shares for successful completion of Milestone 3 (completion of the DFS that confirmed the technical and economic viability of the NorthMet Project);

• Professional fees totaled $790,000 (2006 - $151,000) owing to increased legal, audit and other advisory fees as a result of increased corporate activity, and

• Transfer agent and filing fees were $272,000 (2006 - $65,000) as a result of listing on the Toronto Stock Exchange and the American Stock Exchange during the period.

	Net interest income during the year ended 31 January 2007 was $428,000 compared with $148,000 in the year ended 31 January 2006 as a result of higher cash balances on deposit and higher interest rates. Foreign exchange translation losses were $536,000 for the year ended 31 January 2007 (2006 – gain of $221,000) due to changes in exposure and fluctuations in foreign exchange rates.
b)	Cash Flows:
	Cash used in operating activities in the year ended 31 January 2007 was $12.228 million compared to cash used in the year ended 31 January 2006 of $10.846 million. The increase in cash used is a consequence of the expenditures described above and changes in working capital.

18 | POLYMET MINING

	Cash used in investing activities for the year ended 31 January 2007 was $4.171 million compared with $203,000 in the year ended 31 January 2006, with the increase being the result of capitalization of site related costs subsequent to the completion of the DFS late in September 2006 and the cashing of a term deposit in the prior year.
	Cash from financing activities for the year ended 31 January 2007 was $13.625 million compared with $22.209 million in the year ended 31 January 2006. This comprised $15.075 million (2006 - $22.209 million) from the exercise of options and share purchase warrants, share subscriptions received and proceeds of a private placement; less $1.250 million (2006 - $Nil) scheduled repayment of the notes to Cliffs and $200,000 (2006 - $Nil) of financing costs relating to BNPP.
	Total cash for the year ended 31 January 2007 decreased by $2.774 million for a balance of $8.897 million compared to the year ended 31 January 2006 where cash increased $11.160 million to a balance of $11.671 million.
c)	Capital Expenditures:
	During the year ended 31 January 2007 the Company capitalized $23.919 million (2006 - $13.502 million) of costs directly related to the Cliffs II acquisition (2006 represented the November 2005 Cliffs acquisition) and site activity after the completion of the DFS and $1.397 million of costs (2006 - $Nil) related to the agreement with BNPP to assist PolyMet in all aspects of preparation for construction finance.

SUMMARY OF QUARTERLY RESULTS

(All figures in Thousands of U.S. dollars except Loss per share)
Three Months Ended	Jan. 31		Oct. 31		July 31		Apr. 30		Jan. 31		Oct. 31		July 31		Apr. 30
	2008		2007		2007		2007		2007		2006		2006		2006
	$		$		$		$		$		$		$		$
Total Revenues	-		-		-		-		-		-		-		-
Pre-feasibility costs	-		-		-		-		-		(1,708	)	(3,441	)	(3,695	)
General and Administrative	(1,111	)	(985	)	(1,008	)	(1,295	)	(1,120	)	(2,451	)	(1,098	)	(4,305	)
Other Income (Expenses)	(798	)	611		498		398		(466	)	295		(26	)	122
Net Loss	(1,909	)	(374	)	(510	)	(897	)	(1,586	)	(3,864	)	(4,565	)	(7,878	)
Loss per share	(0.01	)	(0.00	)	(0.00	)	(0.01	)	(0.01	)	(0.03	)	(0.04	)	(0.07	)

Significant items to report for the quarterly results are as follows:

The quarter ended 31 January 2008 had an investment loss of $1,050,000. There were no investment losses in the other quarters.

The net loss included stock based compensation expense for the quarters ended:

1.	31 January 2008 - $39,000
2.	31 October 2007 - $80,000
3.	31 July 2007 - $125,000
4.	30 April 2007 - $391,000

5.	31 January 2007 - $61,000
6.	31 October 2006 - $524,000
7.	31 July 2006 - $349,000
8.	30 April 2006 - $3,789,000

2008 ANNUAL REPORT | 19

Financing Activities

During the year ended 31 January 2008 the Company issued 15 million units at US$2.75 per unit, with each unit comprising one common share and one-half of one warrant (for accounting purposes, the value of the units was bifurcated between the common shares and the warrants). Each whole warrant is exercisable into a common share at a price of US$4.00 at any time until 13 October 2008, subject to an early trigger if the 20-day volume weighted average price of the common shares is US$6.00 or more. In connection with the private placement, the Company paid finders’ fees totaling US$1.43 million in cash, 150,000 shares and 520,000 broker warrants having the same terms as the warrants described above. During the period the Company also issued 462,199 shares upon exercise of options for proceeds of $303,000.

During the year ended 31 January 2007 the Company issued:

(i)	14,662,703 shares upon the exercise of warrants for proceeds of $14.310 million;
(ii)	2,193,000 shares upon the exercise of options for proceeds of $765,000, and
(iii)	2,350,000 shares under the Company’s Bonus Share Plan for deemed proceeds of $1,289,000.

Liquidity And Capital Resources
As at 31 January 2008 the Company had working capital of $16.558 million compared with $5.240 million at 31 January 2007 consisting primarily of cash of $20.084 million (31 January 2007 - $8.897 million), prepaids of $793,000 (31 January 2007 - $210,000) investments of $1.445 million (31 January 2007 - $nil) accounts payable and accrued liabilities of $4.266 million (31 January 2007 - $1.518 million) and the current portion of the notes to Cliffs of $1.401 million (31 January 2007 - $2.000 million). The Company expects to pay the remaining balance of $10.834 million (31 January 2007 - $11.853 million) long term notes to Cliffs from working capital, additional financing and funds from operations once commercial production has commenced. The Company’s cash is primarily held in deposits and bearer deposits of a major Canadian bank and does not include any exposure to asset-backed commercial paper.

The following table lists as of 31 January 2008 information with respect to the Company’s known contractual obligations:

		Payments due by period
Contractual Obligations				Less than						More than
		Total		1 year		1 – 3 years		3 – 5 years		5 years
Accounts payable and
accrued liabilities	$	4,266,000	$	4,266,000	$	-	$	-	$	-
Long-term accounts payable		108,000		-		108,000
Long-term debt obligations		15,782,000		1,843,000		7,837,000		2,914,000		3,188,000
Asset retirement obligation		23,582,000		279,000		1,813,000		521,000		20,969,000
Total	$	43,838,000	$	6,488,000	$	9,758,000	$	3,435,000	$	24,157,000

20 | POLYMET MINING

Long-term debt obligations (including the current portion) are set out in this table on an undiscounted basis and include anticipated interest. Asset retirement obligation represents the undiscounted obligation at 31 January 2008.

As at 31 January 2008 the Company, in addition to its obligation to Cliffs as described herein, has obligations to issue shares under the Company’s Bonus Share Plan. The Company has received shareholder approval for the Bonus Shares of Milestones 1 – 4 and regulatory approval for Milestones 1, 2 and 3. Milestone 4 is subject to regulatory approval, which will be sought when the Company is closer to completing this Milestone. To date 3,940,000 shares have been issued for the achievement of Milestones 1 and 3. The bonus shares allocated for Milestones 1 thru 4 are valued using the Company’s closing trading price on 28 May 2004 of CDN$0.75 per share, the date of the approval of the bonus plan by the disinterested shareholders. The Company also has outstanding firm commitments of $500,000.

The Company is funded to meet its current obligations through to permitting and to service and repay its debt to Cliffs due in the next year.

Should the Company wish to continue to advance the NorthMet Project to commercial production PolyMet will require additional funds. As the Company has no operating revenues, the only source of liquidity consists primarily of cash from proceeds of project debt, other debt and equity financing.

There can be no assurance that the Company will be able to continue to raise funds, in which case it may be unable to continue to advance the NorthMet Project. Should PolyMet be unable to realize on its assets and discharge its liabilities in the normal course of business, the realizable value of its assets may be materially less than the amounts recorded on the balance sheets.

Shareholder Rights Plan
Effective 25 May 2007, the Company adopted an updated Shareholder Rights Plan (“Rights Plan”), which was approved by the Company’s shareholders’ on 27 June 2007. 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 subsequently issued by the Company during the term of the Rights Plan will have one right represented for each common share held by the shareholder 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.

Off Balance-Sheet Arrangements
The Company does not utilize off-balance sheet arrangements.

2008 ANNUAL REPORT | 21

Related Party Transactions
The Company has conducted transactions with officers, directors and persons or companies related to directors and paid or accrued amounts as follows:

		2008		2007		2006
Consulting fees paid to Directors of the Company
and rent and offices charges paid to a company
of the which the president is a director	$	143,000	$	184,000	$	103,000

The amounts charged to the Company for the services provided have been determined by negotiation among the parties and, in certain cases, are covered by signed agreements. These transactions were in the normal course of operations and were measured at the exchange value, which is the amount of consideration established and agreed to by the related parties.

During the year ended 31 January 2008, the Company paid $63,000 (2007 - $62,000 and 2006 - $37,000) to Dr. Dreisinger for consulting fees primarily in connection with activities related to the processing / technical side of the NorthMet Project and related expenses (the latter were supported by invoices and receipts). The consulting fees in 2008 were based on a monthly fee of Canadian $5,500 plus general sales tax.

During the year ended 31 January 2008, the Company paid $55,000 (2007 - $59,600 and 2006 - $41,000) to Mr. Swearingen for consulting fees primarily in connection with activities related to our agreements with Cliffs Erie L.L.C. and land tenure and related expenses (the latter were supported by invoices and receipts). The consulting fees in 2007 were based on a monthly fee of $5,000.

Proposed Transactions
There are no transactions that will materially affect the performance of the Company.

Subsequent Events
There have been no material subsequent events since 31 January 2008.

22 | POLYMET MINING

Changes in Accounting Policies Including Initial Adoption
The Company has adopted the following CICA guidelines effective for the Company commencing 1 February 2007:

a)	Section 3855 – Financial Instruments – Recognition and Measurement. Section 3855 requires that all financial assets, except those classified as held to maturity, and derivative financial instruments, must be measured at fair value. All financial liabilities must be measured at fair value when they are classified as held for trading, otherwise, they are measured at cost. Investments classified as available for sale are reported at fair market value based on quoted market prices with unrealized gains or losses excluded from earnings and reported as other comprehensive income or loss. All financial assets and liabilities have been classified as either held-to-maturity, available-for-sale, held for trading or loans and receivables effective 1 February 2007. Investments subject to significant influence are reported at cost and not adjusted to fair market value.
b)	Section 1530 – Comprehensive Income - Comprehensive income or loss is the change in the Company’s net assets that results from transactions, events and circumstances from sources other than the Company’s shareholders and includes items that would not normally be included in net earnings such as unrealized gains or losses on available-for-sale investments. Other comprehensive income would include the holding gains and losses from available for sale securities which are not included in net loss until realized.
c)	Section 3865 – Hedges. This new standard specifies the criteria under which hedge accounting can be applied and how hedge accounting can be executed for each of the permitted hedging strategies: fair value hedges, cash flow hedges and hedges of foreign currency exposure of a net investment in self sustaining operations. The Company has not designated any instruments as hedges.

d) The adoption of Sections 1530, 3855 and 3865 did not have any impact on the opening equity and deficit of the Company.

2008 ANNUAL REPORT | 23

Other MD&A Requirements

Outstanding Share Data
Authorized Capital:
Unlimited common shares without par value.

Issued and outstanding:
As at 23 April 2008,137,011,375 common shares were issued and outstanding.

Outstanding options, warrants and convertible securities as at 23 April 2008:

		Exercise Price
Type of Security	Number	(US$)	Expiry Date
Common share warrants	8,020,000	4.00	13 October 2008
Stock options	225,000	0.40	09 March 2009
Stock options	150,000	0.75	28 April 2009
Stock options	850,000	0.66	05 July 2009
Stock options	50,000	0.79	18 October 2009
Stock options	247,500	0.65	30 March 2010
Stock options	350,000	0.85	1 May 2010
Stock options	40,000	0.94	15 June 2010
Stock options	1,690,000	1.36	19 September 2010
Stock options	280,000	1.20	24 October 2010
Common share warrants	1,100,000	4.00	30 October 2010
Stock options	225,000	1.15	5 December 2010
Stock options	3,200,000	2.77	20 March 2011
Stock options	325,000	2.98	19 June 2011
Stock options	325,000	3.83	1 September 2011
Stock options	75,000	3.52	22 September 2011
Stock options	575,000	3.31	5 January 2012
Stock options	1,250,000	2.99	12 February 2012
Stock options	400,000	2.88	8 March 2012
Stock options	250,000	2.92	12 March 2012
Stock options	50,000	2.89	23 March 2012
Stock options	360,000	3.00	4 September 2012
Stock options	205,000	3.05	12 December 2012
Stock options	70,000	3.03	11 January 2013
Stock options	100,000	2.87	31 January 2013
Stock options	500,000	2.72	15 February 2014

24 | POLYMET MINING

Effective 25 May 2007, the Company adopted a new Omnibus Share Compensation Plan (“Stock Option Plan”), which was approved by the Company’s shareholders’ on 27 June 2007. The Stock Option Plan covers the Company’s employees, directors, officers and consultants. The options are granted for varying terms ranging from two to five years. The maximum number of common shares under the stock option plan shall not exceed (i) 10% of the outstanding common shares of the Company at the time of granting of the options and (ii) 18,592,888 common shares of the Company, of which 5,940,000 common shares are reserved for issuance as awards other than options.

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

Risks Relating to Our Business
Our metals exploration and development efforts are highly speculative in nature and may be unsuccessful.

As a development stage company, our work is speculative and involves unique and greater risks than are generally associated with other businesses.

The development of mineral deposits involves uncertainties, which careful evaluation, experience, and knowledge cannot eliminate. Although the discovery of an ore body may result in substantial rewards, few properties explored are ultimately developed into producing mines. It is impossible to ensure that the current development program we have planned will result in a profitable commercial mining operation. Significant capital investment is required to achieve commercial production from successful exploration efforts.

We are subject to all of the risks inherent in the mining industry, including, without limitation, the following:

• Success in discovering and developing commercially viable quantities of minerals is the result of a number of factors, including the quality of management, the interpretation of geological data, the level of geological and technical expertise and the quality of land available for exploration;

• Exploration for minerals is highly speculative and involves substantial risks, even when conducted on properties known to contain significant quantities of mineralization, and most exploration projects do not result in the discovery of commercially mineable deposits of ore;

• Operations are subject to a variety of existing laws and regulations relating to exploration and development, permitting procedures, safety precautions, property reclamation, employee health and safety, air and water quality standards, pollution and other environmental protection controls, all of which are subject to change and are becoming more stringent and costly to comply with;

• A large number of factors beyond our control, including fluctuations in metal prices and production costs, inflation, the proximity and liquidity of precious metals and energy fuels markets and processing equipment, government regulations, including regulations relating to prices, taxes, royalties, land tenure, land use, importing and exporting of minerals and environmental protection, and other economic conditions, will affect the economic feasibility of mining;

• Substantial expenditures are required to construct mining and processing facilities;

• Title to mining properties may be subject to other claims, and

2008 ANNUAL REPORT | 25

• In the development stage of a mining operation, our mining activities could be subject to substantial operating risks and hazards, including metal bullion losses, environmental hazards, industrial accidents, labor disputes, encountering unusual or unexpected geologic formations or other geological or grade problems, encountering unanticipated ground or water conditions, cave-ins, pit-wall failures, flooding, rock falls, periodic interruptions due to inclement weather conditions or other unfavorable operating conditions and other acts of God. Some of these risks and hazards are not insurable or may be subject to exclusion or limitation in any coverage which we obtain or may not be insured due to economic considerations.

We have had no production history and we do not know if we will generate revenues in the future.

While we were incorporated in 1981, we have no history of producing minerals. We have not developed or operated any mines, and we have no operating history upon which an evaluation of our future success or failure can be made. We currently have no mining operations of any kind. Our ability to achieve and maintain profitable mining operations is dependent upon a number of factors, including our ability to either attract a partner to operate, or to successfully build and operate mines, processing plants and related infrastructure ourselves.

We are subject to all the risks associated with establishing new mining. We may not successfully establish mining operations or profitably produce metals at any of our properties. As such, we do not know if we will ever generate revenues.

We have a history of losses which we expect to continue into the future.

As a development stage company with no holdings in any producing mines, we continue to incur losses and expect to incur losses in the future. As of 31 January 2008, we had an accumulated deficit of $56,289,000. We may not be able to achieve or sustain profitability in the future. If we do not begin to generate revenues or find alternate sources of capital, we may either have to suspend or cease operations.

We may not be able to raise the funds necessary to develop our mineral properties.

We will need to seek additional financing to complete our development and construction of the NorthMet Project. Sources of such external financing include future equity offerings, advance payments by potential customers to secure long-term supply concentrate or metal supply contracts, grants and low-cost debt from certain state financial institutions, and commercial debt secured by the NorthMet Project. The failure to obtain such additional financing could have a material adverse effect on our results of operations and financial condition. We may not be able to secure the financing necessary to sustain exploration and development activities in the future. If we cannot raise the money necessary to continue to explore and develop our property, we will have to suspend or cease operations.

Our actual mineral reserves and mineral resources may not conform to our established estimates.

The figures for mineral reserves and mineral resources stated in this MD&A are estimates and no assurances can be given that the anticipated tonnages and grades will be achieved or that the indicated level of recovery will be realized. Market fluctuations and the prices of metals may render reserves and mineral resources uneconomic. Moreover, short-term operating factors relating to the mineral deposits, such as the need for the orderly development of the deposits or the processing of new or different grades of ore, may cause a mining operation to be unprofitable in any particular accounting period.

There is no assurance that any of our mineral resources will ever be classified as mineral reserves under the disclosure standards of the SEC.

This MD&A discusses our mineral resources in accordance with Canadian National Instrument 43-101. Resources are classified as “measured resources”, “indicated resources” and “inferred resources” under NI 43-101. However, U.S. investors are cautioned that the SEC does not recognize these resource classifications. There is no assurance that any of our mineral resources will be converted into mineral reserves under the disclosure standards of the United States Securities and Exchange Commission.

26 | POLYMET MINING

Our future activities could be subject to environmental laws and regulations which may have a materially adverse effect on our future operations.

We, like other development stage companies doing business in the United States and Canada, are subject to a variety of federal, provincial, state and local statutes, rules and regulations designed to, among other things:

• protect the environment, including the quality of the air and water in the vicinity of exploration, development, and mining operations;

• remediate the environmental impacts of those exploration, development, and mining operations;

• protect and preserve wetlands and endangered species, and

• mitigate negative impacts on certain archeological and cultural sites.

We are required to obtain various governmental permits to conduct exploration, development, construction and mining activities at our properties. Obtaining the necessary governmental permits is often a complex and time-consuming process involving numerous U.S. or Canadian federal, provincial, state, and local agencies. The duration and success of each permitting effort is contingent upon many variables not within our control. In the context of obtaining permits or approvals, we must comply with known standards, existing laws, and regulations that may entail greater or lesser costs and delays depending on the nature of the activity to be permitted and the interpretation of the laws and regulations implemented by the permitting authority. The failure to obtain certain permits or the adoption of more stringent permitting requirements could have a material adverse effect on our business, operations, and properties and we may be unable to proceed with our exploration and development programs.

Federal legislation and implementing regulations adopted and administered by the U.S. Environmental Protection Agency, Forest Service, Bureau of Land Management, Fish and Wildlife Service, Mine Safety and Health Administration, and other federal agencies, and legislation such as the Federal Clean Water Act, Clean Air Act, National Environmental Policy Act, Endangered Species Act, and Comprehensive Environmental Response, Compensation, and Liability Act, have a direct bearing on U.S. exploration, development and mining operations. Due to the uncertainties inherent in the permitting process, we cannot be certain that we will be able to obtain required approvals for proposed activities at any of our properties in a timely manner, or that our proposed activities will be allowed at all.

The process of obtaining federal and local regulatory approvals is increasingly cumbersome, time-consuming, and expensive, and the cost and uncertainty associated with the permitting process could have a material adverse effect on exploring, developing or mining our properties. Moreover, compliance with statutory environmental quality requirements described above may require significant capital outlays, significantly affect our earning power, or cause material changes in our intended activities. Environmental standards imposed by federal, state, or local governments may be changed or become more stringent in the future, which could materially and adversely affect our proposed activities.

Because the price of metals fluctuate, if the prices of metals in our ore body decrease below a specified level, it may no longer be profitable to develop our NorthMet Project.

Prices of metals are determined by some of the following factors:

• expectations for inflation;

• the strength of the United States dollar;

• global and regional supply and demand, and

2008 ANNUAL REPORT | 27

• political and economic conditions and production costs in major metals producing regions of the world.

The aggregate effect of these factors on metals prices is impossible for us to predict. In addition, the prices of metals are sometimes subject to rapid short-term and/or prolonged changes because of speculative activities. The current demand for and supply of various metals affect the prices of copper, nickel, cobalt, platinum, palladium and gold, but not necessarily in the same manner as current supply and demand affect the prices of other commodities. The supply of these metals primarily consists of new production from mining. If the prices of copper, nickel, cobalt, platinum, palladium and gold are, for a substantial period, below our foreseeable costs of production, we could cease operations.

We may not have adequate, if any, insurance coverage for some business risks that could lead to economically harmful consequences to us.

Our businesses are generally subject to a number of risks and hazards, including:

• industrial accidents;

• railroad accidents;

• labor disputes;

• environmental hazards;

• electricity stoppages;

• equipment failure, and

• severe weather and other natural phenomena.

These occurrences could result in damage to, or destruction of, mineral properties, production facilities, transportation facilities, or equipment. They could also result in personal injury or death, environmental damage, waste of resources or intermediate products, delays or interruption in mining, production or transportation activities, monetary losses and possible legal liability. The insurance we maintain against risks that are typical in our business may not provide adequate coverage. Insurance against some risks (including liabilities for environmental pollution or certain hazards or interruption of certain business activities) may not be available at a reasonable cost or at all. As a result, accidents or other negative developments involving our mining, production or transportation facilities could have a material adverse effect on our operations.

The mining industry is an intensely competitive industry.

We face intense competition from other mining and producing companies. In recent years, the mining industry has experienced significant consolidation among some of our competitors, as a result these companies may be more diversified than us. We cannot assure you that the result of current or further consolidation in the industry will not adversely affect us.

In addition, because mines have limited lives we must periodically seek to replace and expand our reserves by acquiring new properties. Significant competition exists to acquire properties producing or capable of producing copper, nickel and other metals.

We are dependent on our key personnel.

Our success depends on key members of management. The loss of the services of one or more of such key management personnel could have a material adverse effect on the Company. Our ability to manage exploration and development activities, and hence our success, will depend in large part on the efforts of these individuals. We face intense competition for qualified personnel, and we cannot be certain that we will be able to attract and retain such personnel.

We may experience delays, higher than expected costs, difficulties in obtaining environmental permits and other obstacles when implementing our capital expenditure projects.

We are investing heavily in various facets of our NorthMet Project. Our project is subject to a number of risks that may make it less successful than anticipated, including:

28 | POLYMET MINING

• we may encounter delays or higher than expected costs in obtaining the necessary equipment or services to build and operate our project,

• adverse mining conditions may delay and hamper our ability to produce the expected quantities of minerals.

If we are unable to successfully manage these risks, our growth prospects and profitability may suffer.

Risks Related to the Ownership of our Stock
We may experience volatility in our stock price.

Our common shares are listed for trading on the Toronto Stock Exchange and on the American Stock Exchange. Our shareholders 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 our common shares may be affected significantly by factors such as changes in our operating results, the availability of funds, fluctuations in the price of metals, the interest of investors, traders and others in development stage public companies such as us 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 development companies similar to us, have experienced wide fluctuations, which have not necessarily been related to the operating performances, underlying asset values, or the future prospects of such companies. There can be no assurance that future fluctuations in the price of our shares will not occur.

A large number of shares will be eligible for future sale and may depress our stock price.

Our shares that are eligible for future sale may have an adverse effect on the price of our stock. As of 31 January 2008 there were 136,991,075 of our common shares outstanding. The average trading volume for the three months prior to 31 January 2008 was approximately 85,000 shares per day on the Toronto Stock Exchange and 212,000 shares per day on the American Stock Exchange. Sales of substantial amounts of our common shares, or a perception that such sales could occur, and the existence of options or warrants to purchase common shares at prices that may be below the then current market price of our common shares, could adversely affect the market price of our common shares and could impair our ability to raise capital through the sale of our equity securities.

Your ownership interest, voting power and the market price of our common stock may decrease because we have issued, and may continue to issue, a substantial number of securities convertible or exercisable into our common stock.

We have issued common shares and options, and warrants to purchase our common shares to satisfy our obligations and fund our operations. In the future, because we currently do not have a source of revenue, we will likely issue additional common shares, options, warrants, preferred stock or other securities exercisable for or convertible into our common shares to raise money for our continued operations or as non-cash incentives to our own and our subsidiaries’ directors, officers, insiders, and key employees. If additional sales of equity occur, your ownership interest and voting power in us will be diluted and the market price of our common shares may decrease.

Under our 2007 Omnibus Share Compensation Plan (the “Plan”) which was adopted on 25 May 2007, approved by our shareholders on 27 June 2007, options may be granted equal in number the greater of (i) 10% of the Company’s issued and outstanding common shares and (ii)18,592,888 common shares, representing 13.62% of the company’s outstanding common shares at the time of the approval of the Plan, of which 5,940,000 common shares are reserved for issuance as awards other than options. As of 31 January 2008 we could issue options to purchase up to 13,655,887 shares. Under our bonus share incentive plan (the “Bonus Plan”) for our directors and key employees approved by the disinterested shareholders at the Company’s shareholders’ meeting held on 28 May 2004 we may issue an additional 4,940,000 shares upon achieving certain milestones.

2008 ANNUAL REPORT | 29

Upon any issuances or exercise of options issued, the ownership interests and voting power of existing shareholders may be further diluted.

We have a Shareholders Rights Plan Agreement and certain employment and management contracts that contain provisions designed to discourage a change of control.

An updated Shareholders Rights Plan between us and shareholders effective as of 27 June 2007 and certain employment and management agreements contain provisions that could discourage an acquisition or change of control without our board of directors’ approval. Under the Shareholders Rights Plan, if a shareholder individually or in concert with other shareholders acquires 20% or more of our common shares outstanding without complying with the Shareholder Rights Plan or without the approval of our Board of Directors, all holders of record will have a right to one common share for each share owned. Each right entitles the holder to a certain number of shares, as calculated under the Rights Plan. We have also entered into agreements with certain key employees and officers that contain severance provisions in the event of a take-over bid. The Rights Plan and the preceding agreements may make it more difficult for a third party to acquire control of us, even if such a change of control is more beneficial to shareholders.

Because we believe that we will be classified as a passive foreign investment company (a PFIC), U.S. holders of our common stock may be subject to United States federal income tax consequences that are worse than those that would apply if we were not a PFIC.

Because we believe that we will be classified as a passive foreign investment company (a PFIC), U.S. holders of our common stock may be subject to United States federal income tax consequences that are worse than those that would apply if we were not a PFIC, such as ordinary income treatment plus a charge in lieu of interest upon a sale or disposition of shares of our common stock even if the shares were held as a capital asset. See “Certain United States Federal Income Tax Consequences” in our Form 20-F / Annual Information Form on file with the SEC and Canadian securities authorities.

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.

Increased Costs and Compliance Risks as a Result of Being a Public Company

Legal, accounting and other expenses associated with public company reporting requirements have increased significantly in the past few years. The Company anticipates that general and administrative costs associated with regulatory compliance will continue to increase with recently adopted governance requirements, including requirements under the Sarbanes-Oxley Act of 2002, as well as new rules implemented by the United States

30 | POLYMET MINING

Securities and Exchange Commission, Canadian Securities Administrators, the AMEX and the TSX. The Company expects these rules and regulations to significantly increase its legal and financial compliance costs and to make some activities more time consuming and costly. There can be no assurance that the Company will continue to effectively meet all of the requirements of these new regulations, including Sarbanes-Oxley Section 404 and Canadian Multilateral Instrument 52-109. Any failure to effectively implement new or improved internal controls, or to resolve difficulties encountered in their implementation, could harm the Company’s operating results, cause the Company to fail to meet reporting obligations or result in management being required to give a qualified assessment of the Company’s internal controls over financial reporting or the Company’s independent auditors providing an adverse opinion regarding management’s assessment. Any such result could cause investors to lose confidence in the Company’s reported financial information, which could have a material adverse effect on the Company’s stock price. The Company also expects these new rules and regulations may make it more difficult and more expensive for it to obtain director and officer liability insurance, and it may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for the Company to attract and retain qualified individuals to serve on its board of directors or as executive officers. If the Company fails to maintain the adequacy of its internal controls, the Company’s ability to provide accurate financial statements and comply with the requirements of the Sarbanes-Oxley Act of 2002 and/ or Multilateral Instrument 52-109 could be impaired, which could cause the Company’s stock price to decrease.

Critical Accounting Policies
The consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in Canada that require management to make assumptions and estimates that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as at the date of the financial statements. Significant estimates used in the preparation of these consolidated financial statements include, amongst other things, expected economic lives of plant and equipment, anticipated costs of asset retirement obligations including the reclamation of mine site, valuation of options and share purchase warrants, and the assessment of impairment in value of long lived assets.

Mineral Property, Plant and Equipment

Mineral property costs, aside from mineral property acquisition costs, incurred prior to determination of the DFS are expensed as incurred and expenditures incurred subsequent to the DFS and mineral property acquisition costs are deferred or capitalized until the property is placed into production, sold, allowed to lapse or abandoned. Acquisition costs include cash and fair market value of common shares.

As a result of the DFS on the NorthMet Project, the Project entered the development stage effective 1 October 2006. The Company has deferred mineral property development expenditures related to the NorthMet Project from that date.

Plant and equipment are recorded at cost and depreciated over the estimated life of the related assets calculated on a unit of production or straight-line basis, as appropriate. Mineral property, plant and equipment related to the NorthMet Project will begin to be amortized at the time the project commences operations.

The Company performs impairment tests on its mineral property, plant and equipment when events or changes in circumstances indicated that the carrying values of assets may not be recoverable. These tests require the comparison of the undiscounted future cash flows derived from these assets with the carrying value of the assets. If a shortfall exists, the assets are written down to fair value, determined primarily using discounted cash flow models.

2008 ANNUAL REPORT | 31

Stock Based Compensation and Share Purchase Warrants

All stock-based awards made to employees and non-employees are measured and recognized using a fair value based method. For employees, the fair value of the options is measured at the date of the grant. For non-employees, the fair value of the options is measured on the earlier of the date at which the counterparty performance is complete or the date the performance commitment is reached or the date at which the equity instruments are granted if they are fully vested and non-forfeitable. For employees and non-employees, the fair value of the options is accrued and charged either to operations or mineral property plant and equipment, with the offsetting credit to contributed surplus, on a graded method over the vesting period. If and when the stock options are ultimately exercised, the applicable amounts of contributed surplus are transferred to share capital.

The Company issues share purchase warrants in connection with certain equity transactions. The fair value of the warrants, as determined using the Black-Scholes option pricing model, is credited to contributed surplus. The recorded value of share purchase warrants is transferred to share capital upon exercise.

Asset Retirement Obligations

The Company follows CICA Handbook Section 3110, Asset Retirement Obligations (“CICA 3110”) which requires the recognition of a legal liability for obligations relating to the retirement of property, plant and equipment and obligations arising from the acquisition, construction, development, or normal operation of those assets. Such asset retirement costs must be recognized at fair value, when a reasonable estimate of fair value can be estimated, in the year in which the liability is incurred. A corresponding increase to the carrying amount of the related asset, where one is identifiable, is recorded and amortized over the life of the asset. Where a related asset is not easily identifiable with a liability, the change in fair value over the course of the year is expensed. The amount of the liability is subject to re-measurement at each reporting year-end. The estimates are based principally on legal and regulatory requirements. It is possible that the Company’s estimates of its ultimate reclamation and closure liabilities could change as a result of changes in regulations, changes in the extent of environmental remediation required, changes in the means of reclamation or changes in cost estimates.

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 may vary greatly and are not predictable.

Financial Instruments

Section 3855 of the CICA Handbook requires that all financial assets, except those classified as held to maturity, and derivative financial instruments, must be measured at fair value. All financial liabilities must be measured at fair value when they are classified as held for trading, otherwise, they are measured at cost. Investments classified as available for sale are reported at fair market value based on quoted market prices with unrealized gains or losses excluded from earnings and reported as other comprehensive income or loss. All financial assets and liabilities have been classified as either held-to-maturity, available-for-sale, held for trading or loans and receivables effective 1 February 2007. Investments subject to significant influence are reported at cost and not adjusted to fair market value.

Disclosure Controls and Procedures
Management of the Company conducted an evaluation of the disclosure controls and procedures as required by Multilateral Instrument 52-109 issued by the Canadian Securities Administrators. They concluded that at 31 January 2008 the Company’s disclosure controls and procedures were effective in providing reasonable assurance that material information regarding this annual report and other disclosures was made known to them on a timely basis. In reaching this conclusion, the Company recognizes two factors that must be and are present:

a) the Company is dependent upon its advisors and consultants (primarily legal counsel) to assist in recognizing, interpreting and understanding and complying with the various securities regulations disclosure requirements, and

32 | POLYMET MINING

b) an active Board of Directors and Management with open lines of communication.

It should be noted that while the Company’s Management believe that the Company’s disclosure controls and procedures provide a reasonable level of assurance that they are effective, they do not expect that the disclosure controls and procedures will prevent all errors and fraud. A control system, no matter how well conceived or operated, can provide only reasonable, not absolute, assurance that the objects of the control system are met.

Internal Controls over Financial Reporting
Management of the Company are responsible for designing internal controls over financial reporting or causing them to be designed under their supervision in order to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with Canadian GAAP.

Management of the Company have assessed the effectiveness of the Company’s internal controls over financial reporting as at 31 January 2008 in accordance with Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, the Management determined that the Company’s internal control over financial reporting was effective as of 31 January 2008.

There have been no changes in the Company’s internal control over financial reporting during the year ended 31 January 2008 that have materially affected, or are reasonably likely to material affect, its internal control over financial reporting.

Management’s Responsibility for Financial Statements
The information provided in this report including the financial statements, is the responsibility of management. In the preparation of these statements, estimates are sometimes necessary to make a determination of future values for certain assets or liabilities. Management believes such estimates have been based on careful judgments and have been properly reflected in the accompanying financial statements.

Management maintains a system of internal controls to provide reasonable assurances that the Company’s assets are safeguarded and to facilitate the preparation of relevant and timely information.

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

2008 ANNUAL REPORT | 33

Management Report

Management’s Responsibility for Consolidated Financial Statements

The accompanying Consolidated Financial Statements of PolyMet Mining Corp. (the “Company”) are the responsibility of management. The Consolidated Financial Statements have been prepared by management in accordance with Canadian generally accepted accounting principles and include certain estimates that reflect management’s best judgments.

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

Management’s Report on Internal Control over Financial Reporting

Management is also responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Consolidated Financial Statements for external reporting purposes in accordance with GAAP.

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

Management has assessed the effectiveness of the Company’s internal control over financial reporting as at 31 January 2008. In making its assessment, management has used the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) framework in Integral Control-Integrated Framework to evaluate the Company’s internal control over financial reporting. Based on our evaluation, management has concluded that the Company’s internal control over financial reporting was effective as at that date.

The effectiveness of the Company’s internal control over financial reporting as at 31 January 2008 has been audited by PricewaterhouseCoopers LLP, our independent auditors, as stated in their report which appears herein.

Joseph Scipioni	Douglas Newby
President and Chief Executive Officer	Chief Financial Officer

34 | POLYMET MINING

Independent Auditors’ Report

To the Shareholders of PolyMet Mining Corp.
We have completed an integrated audit of PolyMet Mining Corp.’s 2008 consolidated financial statements and of its internal control over financial reporting as at January 31, 2008 and an audit of its 2007 consolidated financial statements. Our opinions, based on our audits, are presented below.

Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of PolyMet Mining Corp. (the “Company”) as at January 31, 2008 and 2007, and the related consolidated statements of operations, comprehensive loss, changes in shareholders’ equity and cash flows for each of the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audit of the Company’s financial statements as at January 31, 2008 and for the year then ended in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). We conducted our audit of the Company’s financial statements as at January 31, 2007 and for the year then ended in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.

An audit of financial statements includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. A financial statement audit also includes assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as at January 31, 2008 and 2007 and the results of its operations and its cash flows for each of the years then ended in accordance with Canadian generally accepted accounting principles.

The consolidated financial statements as at January 31, 2006 and for the year then ended were audited by other auditors who expressed an opinion without reservation on those financial statements in their report dated 4 April 2006.

Internal Control over Financial Reporting
We have also audited PolyMet Mining Corp.’s internal control over financial reporting as at January 31, 2008, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. An audit of internal control over financial reporting includes obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control, based on the assessed risk, and performing such other procedures as we consider necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

2008 ANNUAL REPORT | 35

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as at January 31, 2008 based on criteria established in Internal Control — Integrated Framework issued by the COSO.

CHARTERED ACCOUNTANTS

Vancouver, BC, Canada
April 25, 2008

36 | POLYMET MINING

Staley Okada Report

To the Shareholders of PolyMet Mining Corp.:

We have audited the consolidated statements of shareholders’ equity, loss and cash flows of PolyMet Mining Corp. (the “Company”) for the year ended 31 January 2006. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the Canadian generally accepted auditing standards and with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the results of the Company’s operations and its cash flows for the year ended 31 January 2006, after the restatement (as described in the May 2007 20-F filing of the Company), in accordance with Canadian generally accepted accounting principles.

“Staley, Okada & Partners”

STALEY, OKADA & PARTNERS
CHARTERED ACCOUNTANTS

Vancouver, BC, Canada
4 April 2006, except as to the restatement described in the May 2007 20-F filing, which is as of 28 April 2008

2008 ANNUAL REPORT | 37

Consolidated Balance Sheets

As at January 31
All figures in Thousands of U.S. Dollars

		2008			2007
ASSETS
Current
Cash and equivalents	$	20,084		$	8,897
Accounts receivable and advances		168			61
Investment (Note 12)		1,445			-
Prepaid expenses		793			210
		22,490			9,168
Deferred Financing Costs (Note 13d)		1,690			1,397
Mineral Property, Plant and Equipment (Notes 3 and 4)		65,019			38,166
	$	89,199		$	48,731
LIABILITIES
Current
Accounts payable and accrued liabilities	$	4,266		$	1,518
Current portion of long term debt (Note 5)		1,401			2,000
Current portion of asset retirement obligation (Note 6)		265			410
		5,932			3,928
Long term
Long term debt (Note 5)		10,834			11,853
Long term accounts payable		108			-
Asset retirement obligation (Note 6)		3,1743,174			3,012
		20,048			18,793
SHAREHOLDERS’ EQUITY
Share Capital - (Note 7)		104,615			72,923
Contributed Surplus – (Note 7d)		20,825			9,614
Deficit		(56,289	)		(52,599	)
		69,151			29,938
	$	89,199		$	48,731

Contingent Liabilities and Commitments (Notes 4 and 13)

ON BEHALF OF THE BOARD:

William Murray, Director	David Dreisinger, Director

See Accompanying Notes

38 | POLYMET MINING

Consolidated Statements of Loss,
Other Comprehensive Loss and Deficit

For the years ended 31 January
All figures in Thousands of U.S. Dollars, except per share amounts

		2008			2007			2006
Pre-feasibility Costs
See Schedule 1 (Note 1)	$	-		$	8,844		$	11,120
General and Administrative
Amortization		56			7			4
Consulting fees		73			1,458			366
Investor relations and financing		270			218			90
Office and corporate wages		1,681			899			578
Professional fees		652			790			151
Shareholders’ information		373			125			53
Stock-based compensation (Note 7c))		635			4,723			3,523
Transfer agent and filing fees		127			272			65
Travel		532			482			348
		4,399			8,974			5,178
Other Expenses (Income)
Interest income, net		(1,168	)		(428	)		(148	)
Loss (gain) on foreign exchange		(566	)		536			(221	)
Investment loss (Note 12)		1,050			-			-
Rental income		(25	)		(33	)		-
		(709	)		75			(369	)
Loss for the Year and Comprehensive Loss	$	3,690		$	17,893		$	15,929
Deficit Beginning of the Year		52,599			34,706			18,777
Deficit End of Year		56,289			52,599			34,706
Basic and Diluted Loss per Share	$	(0.03	)	$	(0.16	)	$	(0.22	)
Weighted Average Number of Shares		133,697,572			114,754,213			73,484,490

See Accompanying Notes

2008 ANNUAL REPORT | 39

Consolidated Statements of Changes
in Shareholders’ Equity

All figures in Thousands of U.S. Dollars, except for Shares

	Common Shares (Note 7)
							Share
	Authorized						Subscriptions			Contributed
	Shares	Shares		Amount			Received			Surplus			Deficit			Total
Balance – 31 January 2005 – Shares issued	Unlimited	55,313,653		18,128			763			1,006			(18,777	)		1,120
Shares allotted for exercise of warrants	-	224,925		26			-			-			-			26
Shares allotted for bonus	-	1,590,000		873			-			-			-			873
Balance – 31 January 2005 –
Shares issued & allotted
(issued in fiscal 2006)	Unlimited	57,128,578		19,027			763			1,006			(18,777	)		2,019
Loss for the year	-	-		-			-			-			(15,929	)		(15,929	)
Shares issued for cash:
Private placements	-	28,494,653		17,302			(763	)		3,653			-			20,192
Share issuance costs	-	-		(1,475	)		-			-			-			(1,475	)
Exercise of warrants	-	5,700,628		3,296			-			-			-			3,296
Exercise of options	-	1,795,852		197			-			-			-			197
Shares issued for finders’ fee	-	852,915		617			-			-			-			617
Non-cash share issuance costs	-	-		(617	)		-			-			-			(617	)
Shares issued for property	-	6,200,547		7,564			-			-			-			7,564
Stock-based compensation	-	-		-			-			3,523			-			3,523
Fair value of stock options exercised	-	-		98			-			(98	)		-			-
Balance – 31 January 2006	Unlimited	100,173,173		46,009			-			8,084			(34,706	)		19,387
Loss for the year	-	-		-			-			-			(17,893	)		(17,893	)
Issuance of shares for bonus (Note 13)	-	2,350,000		1,289			-			-			-			1,289
Shares issued for cash:
Exercise of warrants	-	14,662,703		17,963			-			(3,653	)		-			14,310
Exercise of options	-	2,193,000		765			-			-			-			765
Shares issued for property (Note 4)	-	2,000,000		6,160			-			-			-			6,160
Stock-based compensation	-	-		-			-			4,723			-			4,723
Warrants issued for deferred financing costs	-	-		-			-			1,197			-			1,197
Fair value of stock options exercised	-	-		737			-			(737	)		-			-
Balance – 31 January 2007	Unlimited	121,378,876	$	72,923		$	-		$	9,614		$	(52,599	)	$	29,938
Loss for the year	-	-		-			-			-			(3,690	)		(3,690	)
Shares and warrants issued:
Exercise of options	-	462,200		303			-			-			-			303
Fair value of stock options exercised	-	-		212			-			(212	)		-			-
Private placement, finders’ fees & issuance costs	-	15,149,999		31,177			-			8,346			-			39,523
Stock-based compensation	-	-		-			-			3,077			-			3,077
Balance – 31 January 2008	Unlimited	136,991,075	$	104,615		$	-		$	20,825		$	(56,289	)	$	69,151

See Accompanying Notes

40 | POLYMET MINING

Consolidated Statements of Cash Flows

For the Years Ended 31 January All figures in Thousands of U.S. Dollars

		2008			2007			2006
Operating Activities
Loss for the year	$	(3,690	)	$	(17,893	)	$	(15,929	)
Items not involving cash
Consulting fees and Office and Corporate wages (Note 13a))		-			1,289			-
Amortization		56			7			4
Stock-based compensation		635			4,723			3,523
Investment loss (Note 12)		1,050			-			-
Changes in non-cash working capital items
Accounts receivable and advances		(107	)		(20	)		4
Prepaid expenses		(583	)		(135	)		166
Accounts payable and accrued liabilities		(51	)		(199	)		1,386
Net cash used in operating activities		(2,690	)		(12,228	)		(10,846	)
Financing Activities
Share capital - for cash		39,826			15,075			22,209
Long-term debt repayment		(2,000	)		(1,250	)		-
Deferred financing costs		(293	)		(200	)		-
Net cash provided by financing activities		37,533			13,625			22,209
Investing Activities
Purchase of investment		(2,495	)		-			-
Term deposit		-			-			807
Mineral property, plant and equipment		(21,161	)		(4,171	)		(1,010	)
Net cash used in investing activities		(23,656	)		(4,171	)		(203	)
Net Increase (Decrease) in Cash and Cash Equivalents Position		11,187			(2,774	)		11,160
Cash and Cash Equivalents Position - Beginning of Year		8,897			11,671			511
Cash and Cash Equivalents Position - End of Year	$	20,084		$	8,897		$	11,671

See Accompanying Notes

2008 ANNUAL REPORT | 41

Consolidated Schedules of Pre-Feasibility Costs
	Schedule 1

For the Years Ended 31 January
All figures in Thousands of U.S. Dollars

		2008		2007		2006
Direct
Camp and general	$	-	$	187	$	101
Consulting fees		-		819		690
Drilling		-		94		3,075
Engineering		-		642		578
Environmental		-		3,303		2,421
Geological and geophysical		-		55		75
Land lease, taxes and licenses		-		127		187
Metallurgical		-		303		1,894
Mine planning		-		2,236		1,312
Permitting		-		2		137
Plant maintenance and repair		-		681		44
Sampling		-		395		606
Total Costs for the Year (Note 1)	$	-	$	8,844	$	11,120

See Accompanying Notes

42 | POLYMET MINING

Notes to Consolidated Financial Statements

For the years ended 31 January 2008, 2007 and 2006
Tabular amounts in Thousands of U.S. Dollars except for price per share, shares and options

1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

PolyMet Mining Corp. (the “Company”) was incorporated in British Columbia, Canada on 4 March 1981 under the name Fleck Resources Ltd. The Company changed its name from Fleck Resources to PolyMet Mining Corp. on 10 June 1998. The Company 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 realization of the Company’s investment in the NorthMet Project and other assets is dependant upon various factors, including the existence of economically recoverable mineral reserves, the ability to obtain the necessary financing to complete the exploration and development of the NorthMet Project, future profitable operations, or alternatively upon disposal of the investment on an advantageous basis.

On 25 September 2006, the Company received the results of a Definitive Feasibility Study (“DFS”) prepared by Bateman Engineering (Pty) Ltd. (“Bateman”) that confirms the economic and technical viability of the NorthMet Project and, as such, the Project has moved from the exploration stage to the development stage.

The consolidated financial statements of PolyMet Mining Corp. have been prepared in accordance with accounting principles generally accepted in Canada that require management to make assumptions and estimates that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as at the date of the financial statements.

Significant estimates used in the preparation of these consolidated financial statements include, amongst other things, expected economic lives of plant and equipment, anticipated costs of asset retirement obligations including the reclamation of mine site, valuation of options and share purchase warrants, and the assessment of impairment in value of long lived assets. Actual results could differ from these estimates. Significant differences from United States generally accepted accounting principles are disclosed in Note 14.

Basis of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Poly Met Mining, Inc. and Fleck Minerals Inc. Inter-company balances and transactions have been eliminated on consolidation.

Cash and Cash Equivalents
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.

Mineral Property, Plant and Equipment

Mineral property

Mineral property costs, aside from mineral property acquisition costs, incurred prior to determination of the DFS are expensed as incurred and expenditures incurred subsequent to the DFS and mineral property acquisition costs are deferred or capitalized until the property is placed into production, sold, allowed to lapse or abandoned. Acquisition costs include cash, debt and fair market value of common shares.

Upon commencement of commercial production, mineral properties and acquisition costs relating to mines are amortized over the estimated life of the proven and probable mineral reserves to which they relate, calculated on a unit of production basis.

As a result of the DFS on the NorthMet Project, the Project entered the development stage effective 1 October 2006. The Company has deferred mineral property development expenditures related to the NorthMet Project from that date.

2008 ANNUAL REPORT | 43

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.

Plant and equipment

Plant and equipment are recorded at cost and depreciated over the estimated life of the related assets calculated on a unit of production or straight-line basis, as appropriate.

Depreciation of plant and equipment is provided on a straight-line basis over the estimated economic life of the assets as follows:

Leasehold improvements – Straight-line over the term of the lease

Furniture and equipment – Straight-line over 10 years

Computers – Straight-line over 5 years

Mineral property, plant and equipment related to the NorthMet Project will begin to be amortized at the time the project commences operations.

Loss Per Share
Loss per share is computed by dividing the loss for the year by the weighted average number of common shares outstanding during the year. Basic and diluted losses per share are the same for the periods reported, as the effect of potential issuances of shares under warrant or share option agreements would be anti-dilutive.

Foreign Currency Translation
The United States (“U.S.”) dollar is the functional currency of the Company’s business. Accordingly, amounts in these consolidated financial statements are expressed in U.S. dollars unless otherwise stated. The Company’s non-U.S. operations are considered to be integrated with the U.S. operations and have been translated into U.S. dollars using the temporal method. Under this method, monetary assets and liabilities are translated at the rate of exchange in effect at the balance sheet dates and non-monetary assets and liabilities are translated at the exchange rate in effect at the times of the transactions. Revenue and expense items are translated at rates approximating the exchange rate in effect at the time of the transactions, except for amortization which is translated at historical rates. Translation gains and losses are reflected in the year.

Stock-Based Compensation and Share Purchase Warrants
All stock-based awards made to employees and non-employees are measured and recognized using a fair value based method. For employees, the fair value of the options is measured at the date of the grant. For non-employees, the fair value of the options is measured on the earlier of the date at which the counterparty performance is complete or the date the performance commitment is reached or the date at which the equity instruments are granted if they are fully vested and non-forfeitable. For employees and non-employees, the fair value of the options is accrued and charged either to operations or mineral property plant and equipment, with the offsetting credit to contributed surplus, on a graded method over the vesting period. If and when the stock options are ultimately exercised, the applicable amounts of contributed surplus are transferred to share capital.

The Company issues share purchase warrants in connection with certain equity transactions. The fair value of the warrants, as determined using the Black-Scholes option pricing model, is credited to contributed surplus. The recorded value of share purchase warrants is transferred to share capital upon exercise.

Asset Retirement Obligations
The Company follows CICA Handbook Section 3110, Asset Retirement Obligations (“CICA 3110”) which requires the recognition of a legal liability for obligations relating to the retirement of property, plant and equipment and obligations arising from the acquisition, construction, development, or normal operation of those assets. Such asset retirement costs must be recognized at fair value, when a reasonable estimate of fair value can be estimated, in the year in which the liability is incurred. A corresponding

44 | POLYMET MINING

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Tabular amounts in Thousands of U.S. Dollars except for price per share, shares and options

increase to the carrying amount of the related asset, where one is identifiable, is recorded and amortized over the life of the asset. Where a related asset is not easily identifiable with a liability, the change in fair value over the course of the year is expensed. The estimates are based principally on legal and regulatory requirements. It is possible that the Company’s estimates of its ultimate reclamation and closure liabilities could change as a result of changes in regulations, changes in the extent of environmental remediation required, changes in the means of reclamation or changes in cost estimates.

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 may vary greatly and are not predictable.

Impairment of Long-Lived Assets
The Company performs impairment tests on its mineral property, plant and equipment when events or changes in circumstances indicate that the carrying values of assets may not be recoverable. These tests require the comparison of the undiscounted future cash flows derived from these assets with the carrying value of the assets. If a shortfall exists, the assets are written down to fair value, determined primarily using discounted cash flow models.

Recent Accounting Pronouncements
The Company has adopted the following CICA standards effective for the Company commencing 1 February 2007:

a) Section 3855 – Financial Instruments – Recognition and Measurement. Section 3855 requires that all financial assets, except those classified as held to maturity, and derivative financial instruments, must be measured at fair value. All financial liabilities must be measured at fair value when they are classified as held for trading, otherwise, they are measured at cost. Investments classified as available for sale are reported at fair market value based on quoted market prices with unrealized gains or losses excluded from earnings and reported as other comprehensive income or loss. All financial assets and liabilities have been classified as either held-to-maturity, available-for-sale, held for trading or loans and receivables effective 1 February 2007. Investments subject to significant influence are reported at cost and not adjusted to fair market value.

	All derivative instruments, including certain embedded derivatives that are required to be separated from their host contracts, are recorded on the balance sheet at fair value and mark to market adjustments on these instruments are included in net income. Under the transitional provisions for the standard only embedded derivatives acquired or substantively modified on or after 1 January 2003 are required to be considered for recognition and measurement. Transaction costs incurred to acquire or issue financial instruments are included in the initial carrying amount of the relevant financial instrument. Where a financial asset classified as held-to-maturity or available-for-sale has a loss in value which is considered to be other than temporary, the loss is recognized by a charge to earnings.
b)	Section 1530 – Comprehensive Income. Comprehensive income or loss is the change in the Company’s net assets that results from transactions, events and circumstances from sources other than the Company’s shareholders and includes items that would not normally be included in net earnings such as unrealized gains or losses on available-for-sale investments. Other comprehensive income would include the holding gains and losses from available for sale securities which are not included in net loss until realized.
c)	Section 3865 – Hedges. This new standard specifies the criteria under which hedge accounting can be applied and how hedge accounting can be executed for each of the permitted hedging strategies: fair value hedges, cash flow hedges and hedges of foreign currency exposure of a net investment in self sustaining foreign operations. The Company has not designated any instruments as hedges.

2008 ANNUAL REPORT | 45

d) The adoption of Sections 1530, 3855 and 3865 did not have any impact on the opening equity and deficit of the Company.

The CICA has issued three new standards, which may affect the financial disclosures and results of operations of the Company for interim and annual periods beginning 1 February 2008. The Company will adopt the requirements commencing in the interim period ended 30 April 2008 or after and is considering the impact this will have on the Company’s financial statements.

a)	Section 1535 – Capital Disclosures. This section establishes standards for disclosing information about a company’s capital and how it is managed. Under this standard the Company will be required to disclose the following, based on the information provided internally to the Company’s key management personnel:
	a.	Qualitative information about its objectives, policies and processes for managing capital;
	b.	Summary quantitative data about what it manages as capital;
	c.	Whether during the period it complied with externally imposed capital requirements to which it is subject, and
	d.	When the Company has not complied with such externally imposed capital requirements, the consequences of such non-compliance.
b)	Section 1530 – Inventories. This section prescribes the accounting treatment for inventories and provides guidance on the determination of costs and its subsequent recognition as an expense, including any write- down to net realizable value. It also provides guidance on the cost formulas that are used to assign costs to inventories.

c)	Sections 3862 & 3863 – Financial Instruments – Disclosures and Presentation. These new standards replace Section 3861, Financial Instruments – Disclosure and Presentation, revising and enhancing disclosure requirements and carrying forward unchanged the presentation requirements. Section 3862 requires entities to provide disclosure of quantitative and qualitative information in their financial statements that enable users to evaluate (a) the significance of financial instruments for the entity’s financial position and performance; and (b) the nature and extent of risks arising from financial instruments to which the entity is exposed during the period and at the balance sheet date, and management’s objectives, policies and procedures for managing such risks. Entities will be required to disclose the measurement basis or bases used, and the criteria used to determine classification for different types of instruments.
	The Section requires specific disclosures to be made, including the criteria for:
	(i)	Designating financial assets and liabilities as held for trading;
	(ii)	Designating financial assets as available for sale, and
	(iii)	Designating when impairment is recorded against the related financial asset or when an allowance account is used.
d)	Section 3064 – Goodwill and Intangible. The objectives of CICA 3064 are to reinforce the principle-based approach to the recognition of assets only in accordance with the definition of an asset and the criteria for asset recognition; and clarify the application of the concept of matching revenues and expenses such that the current practice of recognizing assets that do not meet the definition and recognition criteria is eliminated. The standard will also provide guidance for the recognition of internally developed intangible assets (including research and development activities), ensuring consistent treatment of all intangible assets, whether separately acquired or internally developed.

46 | POLYMET MINING

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Tabular amounts in Thousands of U.S. Dollars except for price per share, shares and options

International Financial Reporting Standards (“IFRS”)
In 2006, the Canadian Accounting Standards Board (“AcSB”) published a new strategic plan that will significantly affect financial reporting requirements for Canadian companies. The AcSB strategic plan outlines the convergence of Canadian GAAP with IFRS over an expected five year transitional period. In February 2008 the AcSB announced that 2011 is the changeover date for publicly-listed companies to use IFRS, replacing Canada’s own GAAP. The date is for interim and annual financial statements relating to fiscal years beginning on or after 1 January 2011. The transition date of 1 January 2011 will require the restatement for comparative purposes of amounts reported by the Company for the year ended 31 January 2012. The financial reporting impact of the transition to IFRS cannot be reasonably estimated at this time.

Comparative Figures
Certain of the comparative figures have been reclassified to conform with the current year’s presentation.

2. FINANCIAL INSTRUMENTS

a)	Fair value
	The carrying value of cash, accounts receivable, accounts payable and long-term debt approximates the fair value of these financial instruments due to their short-term maturity, discounted nature or capacity of prompt liquidation.
b)	Interest rate risk
	The Company is exposed to interest rate risk due to the longer-term maturity of some of its monetary assets and liabilities.

3. RESOURCE PROPERTY AGREEMENTS

NorthMet, Minnesota, U.S.A. - Lease
By an agreement dated 4 January 1989 and a subsequent amendment and assignment, the Company leases certain lands in St. Louis County, Minnesota from RGGS Land & Minerals Ltd., L.P. During the year ended 31 January 2005, United States Steel Corporation assigned the lease to RGGS Land & Minerals Ltd., L.P. The current term of the renewable lease is 20 years and calls for total lease payments of $1,475,000. All lease payments have been paid or accrued to 31 January 2008. The agreement requires future annual lease payments of $150,000 to 2009.

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 indefinitely extend the 20-year term by continuing to make $150,000 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.

2008 ANNUAL REPORT | 47

4. MINERAL PROPERTY, PLANT AND EQUIPMENT

Details are as follows:

				Accumulated		Net Book
31 January 2008		Cost		Amortization		Value
NorthMet Project	$	64,766	$	-	$	64,766
Leasehold improvements	$	48	$	12	$	36
Computers	$	135	$	23	$	112
Furniture and equipment	$	136	$	31	$	105
	$	65,085	$	66	$	65,019

				Accumulated		Net Book
31 January 2007		Cost		Amortization		Value
NorthMet Project	$	38,056	$	-	$	38,056
Leasehold improvements	$	41	$	-	$	41
Computers	$	17	$	5	$	12
Furniture and equipment	$	63	$	6	$	57
	$	38,177	$	11	$	38,166

Erie Plant, Minnesota, U.S.A.
By a Memorandum of Understanding dated 5 December 2003 and an option agreement dated 14 February 2004, the Company obtained an option (“Cliffs Option”) to acquire certain property, plant and equipment (“Cliffs Assets”) from Cleveland Cliffs of Cleveland, Ohio (“Cliffs”) located near the Company’s NorthMet Project.

As consideration for the exclusive Cliffs Option, the Company paid $500,000 prior to 31 January 2004 as required and issued to Cliffs 1,000,000 common shares on 30 March 2004, valued at $229,320 to maintain the rights until 30 June 2006.

On 14 September 2005 the Company reached an agreement in principle with Cliffs on the terms for the early exercise of the Cliffs option and the scope of the plant and equipment to be acquired. On 15 November 2005, the Company exercised this expanded option and acquired 100% ownership of large portions of the former LTV Steel Mining Company ore processing plant in northeastern Minnesota under the Asset Purchase Agreement.

The consideration for the Asset Purchase Agreement was $1 million in cash, $2.4 million in notes payable and the issuance of 6,200,547 common shares (at fair market value of $7,564,444) in the capital stock of the Company. The remaining balance of $400,000 will be paid in quarterly instalments of US$250,000 plus interest (Note 5).

On 20 December 2006, the Company closed a transaction (the “Asset Purchase Agreement II”) in which it acquired, from Cliffs, property and associated rights sufficient to provide it with a railroad connection linking the mine development site and the Erie Plant. The transaction also included a 120-railcar fleet, locomotive fuelling and maintenance facilities, water rights and pipelines, large administrative offices on site and an additional 6,000 acres to the east and west of and contiguous to its existing tailing facilities.

48 | POLYMET MINING

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Tabular amounts in Thousands of U.S. Dollars except for price per share, shares and options

The purchase price totalling 2 million shares and $15 million in cash and debt was in four tranches:

• 2 million shares of PolyMet, paid at closing;

• $1 million in cash, paid at closing;

• $7 million in cash, payable in quarterly instalments of $250,000 commencing 31 December 2006 with the balance payable upon receipt of production financing. Interest will be payable quarterly from 31 December 2006 at the Wall Street Journal Prime Rate, and

• $7 million in cash, payable in quarterly instalments of $250,000 commencing on 31 December 2009. No interest will be payable until 31 December 2009 after which it will be payable quarterly at the Wall Street Journal Prime Rate, accordingly this portion of the debt has been fair valued, for balance sheet purposes, by discounting it at 8.25%.

The Company has assumed certain ongoing site-related environmental and reclamation obligations as a result of the above purchases. These environmental and reclamation obligations are presently contracted under the terms of the purchase agreements with Cliffs. Once the Company obtains its permit to mine and Cliffs is released from its obligations by the State agencies, the environmental and reclamation obligations will be direct with the governing bodies. The present value of the asset retirement obligation in the amount of $3,439,000 (Note 6) has been recorded as an increase in the carrying amount of the NorthMet Project assets and will be amortized over the life of the asset.

Under the terms of the agreement Cliffs has the right to participate on a pro-rata basis in future cash equity financings. The Company has a 20 business day first right to acquire or place any shares of PolyMet that Cliffs may chose to sell from time-to-time.

Interest and loan accretion to 31 January 2008 in the amount of $1,227,000 (2007 - $189,000) has been capitalized as part of the cost of the NorthMet Project assets.

As the above assets are not in use no amortization of these assets has been recorded to 31 January 2008.

5. LONG TERM DEBT

Pursuant to the Asset Purchase Agreements (Note 4) the Company’s wholly owned subsidiary Poly Met Mining, Inc. signed three notes payable to Cliffs in the amounts of $2,400,000, $7,000,000 and $7,000,000, respectively. The first note is interest bearing at the annual simple rate of four percent (4%) and shall be paid in quarterly instalments equal to $250,000, commencing in March 2006 for total repayment of $2,400,000. The second note is interest bearing at the Wall Street Journal Prime Rate and is being paid in quarterly instalments equal to $250,000 commencing 31 December 2006, with the balance repayable upon receipt of commercial financing, for total repayment of $7,000,000. The third note is interest bearing at the Wall Street Journal Prime Rate and shall be paid in quarterly instalments equal to $250,000 commencing on 31 December 2009 for total repayment of $7,000,000. No interest will be payable on the third note until 31 December 2009, accordingly it has been fair valued, for balance sheet purposes, by discounting it at 8.25% . As at 31 January 2008 the outstanding long term debt was as follows:

		31 January			31 January
		2008			2007
Notes Payable	$	12,204		$	13,768
Accrued interest		31			85
Total debt		12,235			13,853
Less current portion		(1,401	)		(2,000	)
Long term debt	$	10,834		$	11,853

2008 ANNUAL REPORT | 49

6. ASSET RETIREMENT OBLIGATION

As part of the consideration for the Cliffs Purchase Agreements (Note 4), the Company indemnified Cliffs for the liability for final reclamation and closure of the acquired property.

Federal, state and local laws and regulations concerning environmental protection affect the Company’s operations. Under current regulations, the Company is contracted to indemnify Cliff’s requirement to meet performance standards to minimize environmental impact from operations and to perform site restoration and other closure activities. The Company’s provisions for future site closure and reclamation costs are based on known requirements. It is not currently possible to estimate the impact on operating results, if any, of future legislative or regulatory developments. The Company’s estimate of the present value of the obligation to reclaim the NorthMet Project is based upon existing reclamation standards at 31 January 2008 and Canadian GAAP. Once the Company obtains its permit to mine the environmental and reclamation obligations will be direct with the governing bodies.

The Company’s estimate of the fair value of the asset retirement obligation at 31 January 2008 was $3,439,000 (2007 - $3,422,000). These were based upon a 31 January 2008 undiscounted future cost of $21.4 million for the first Cliffs transaction and $2.1 million for Cliffs II, an annual inflation rate of 2.00%, and a credit-adjusted interest rate of 12.00% and a mine life of 20 years, commencing in late-2009 and a reclamation period of 5 years. During the year ended 31 January 2008, the Company decreased the inflation rate from 3% to 2% to reflect the Company’s expectations of inflation rates. Accretion of the liability to 31 January 2008 of $714,000 (2007 - $280,000) until the commencement of commercial production will be capitalized to the NorthMet Project assets.

7. SHARE CAPITAL

a)	Share Issuances for Cash
	During the year ended 31 January 2008 the Company issued the following shares for cash:
	i)	On 17 April 2007, the Company closed a non- brokered private placement financing of 15 million units at US$2.75 per unit, with each unit comprising one common share and one- half of one warrant (for accounting purposes, the value of the units was bifurcated between the common shares and the warrants). Each whole warrant is exercisable into a common share at a price of US$4.00 at any time until 13 October 2008, subject to an early trigger if the 20-day volume weighted average price of the common shares is US$6.00 or more. In connection with the private placement, the Company has paid finders’ fees totalling US$1.43 million in cash, 150,000 shares and 520,000 broker warrants having the same terms as the warrants described above, and
	ii)	462,200 shares pursuant to the exercise of stock options for total proceeds of $303,000 (Note 7b)).
	During the year ended 31 January 2007 the Company issued the following shares for cash:
	i)	14,662,703 shares pursuant to the exercise of warrants at prices between Cdn$0.20 and Cdn$2.00 (US$0.09 and US$1.77) for total proceeds of $14,310,000 (Note 7e)), and
	ii)	2,193,000 shares pursuant to the exercise of stock options for total proceeds of $765,000 (Note 7b)).
	During the year ended 31 January 2006 the Company issued the following shares for cash:
	i)	224,925 shares pursuant to the exercise of warrants allotted at 31 January 2005 (note 7e));

50 | POLYMET MINING

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Tabular amounts in Thousands of U.S. Dollars except for price per share, shares and options

ii)	Four private placements for a total of 28,494,653 shares at prices of CDN$0.55 – CDN$1.40 (US$0.48 - US$1.22) for net proceeds of $20,389,000 ($763,000 was received prior to 31 January 2005). Each of the private placements included share purchase warrants (Note 7e)). Cash share issue costs in the amount of $909,000 were included in respect of these private placements;
iii)	5,700,628 shares pursuant to the exercise of 5,700,628 share purchase warrants for total proceeds of $3,296,000 (Note 7e)), and
iv)	1,795,852 shares pursuant to the exercise of stock options for total proceeds of $197,000 (Note 7b)).

b) Stock Options

			Weighted			Weighted				Weighted
	31		Average	31		Average		31		Average
	January		Exccercise	January		Excercise		January		Excercise
	2008		Price	2007		Price		2006		Price
	Options		(CDN$)	Options		(CDN$)		Options		(CDN$)
Outstanding - Beginning of year	9,090,000		1.95	6,783,700		0.80		4,999,552		0.32
Granted	2,685,000		2.98	4,500,000		2.93		3,580,000		1.13
Cancelled	-		-	(700	)	(0.10	)	-		-
Exercised	(462,200	)	0.69	(2,193,000	)	(0.39	)	(1,795,852	)	0.13
Outstanding - End of year	11,312,800		2.24	9,090,000		1.95		6,783,700		0.80

2008 ANNUAL REPORT | 51

As at 31 January 2008, the following director, officer, consultant and employee stock options were outstanding:

	Exercise	Exercise	Number of
	Price	Price	options
Expiry Date	(US$)	(CDN$)	outstanding
9 March 2009	0.40	0.40	225,000
28 April 2009	0.75	0.75	150,000
5 July 2009	0.66	0.66	850,000
18 October 2009	0.79	0.79	50,000
30 March 2010	0.65	0.65	267,800
1 May 2010	0.85	0.85	350,000
15 June 2010	0.94	0.94	40,000
19 September 2010	1.36	1.36	1,690,000
24 October 2010	1.20	1.20	280,000
5 December 2010	1.15	1.15	225,000
20 March 2011	2.77	2.76	3,200,000
19 June 2011	2.98	2.97	325,000
1 September 2011	3.83	3.82	325,000
22 September 2011	3.52	3.51	75,000
5 January 2012	3.31	3.30	575,000
13 February 2012	2.99	2.98	1,250,000
8 March 2012	2.88	2.87	400,000
12 March 2012	2.92	2.91	250,000
23 March 2012	2.89	2.88	50,000
4 September 2012	3.00	2.99	360,000
12 December 2012	3.05	3.04	205,000
11 January 2013	3.03	3.02	70,000
31 January 2013	2.87	2.86	100,000
	2.25	2.24	11,312,800

As at 31 January 2008 all options had vested and were exercisable, with the exception of 235,000 which vest incrementally until September 2009 and 1,635,000 which vest under completion of specific targets.

c)

Stock-Based Compensation i)During the year ended 31 January 2008, the Company granted 2,685,000 options to directors, officers, consultants and employees with an average exercise price of US$2.97 per option. The fair value of stock-based compensation in the amount of $3,077,000 has been recorded in the accounts of the Company as an expense of $635,000 and a debit to mineral property, plant and equipment of $2,442,000 with the offsetting credit going to contributed surplus. These values were estimated at the date of grant using the Black-Scholes Option Pricing Model with the following weighted average assumptions:

52 | POLYMET MINING

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Tabular amounts in Thousands of U.S. Dollars except for price per share, shares and options

Risk-free interest rate	3.23% to 4.35%
Expected dividend yield	Nil
Expected stock price volatility	62.47% to 65.02%
Expected option life in years	2.33

	The weighted fair value of options granted was US$1.29 (Cdn$1.36).
	Option pricing models require the input of highly subjective assumptions including the estimate of the share price volatility. Changes in the subjective input assumptions can materially affect the fair value estimate, and therefore, the existing models do not necessarily provide a reliable single measure of the fair value of the Company’s stock options.
ii)	During the year ended 31 January 2007, the Company granted 4,500,000 options to directors, officers, consultants and employees with exercise prices ranging from CDN$2.76 - CDN$3.82 (US$2.33 – US$3.23) per option. The fair value of stock-based compensation in the amount of $4,723,000 has been recorded in the accounts of the Company as an expense with the offsetting entry to contributed surplus. This value is estimated at the date of grant using the Black-Scholes Option Pricing Model with the following weighted average assumptions:

Risk-free interest rate	3.89% to 4.09%
Expected dividend yield	Nil
Expected stock price volatility	59.91% to 83.01%
Expected option life in years	2.33

iii) During the year ended 31 January 2006, the Company granted 3,580,000 options to directors, officers, consultants and employees with exercise prices ranging from CDN$0.65 - CDN$1.36 per option. The fair value of stock-based compensation in the amount of $3,523,000 has been recorded in the accounts of the Company as an expense with the offsetting entry to contributed surplus. This value is estimated at the date of grant using the Black- Scholes Option Pricing Model with the following weighted average assumptions:

Risk-free interest rate	3.66%
Expected dividend yield	Nil
Expected stock price volatility	131%
Expected option life in years	5.00

d)	Contributed Surplus
	Contributed surplus represents accumulated stock-based compensation expense and warrants issued, reduced by the fair value of the stock options and warrants exercised. Details are as follows:

		31 January			31 January
		2008			2007
Balance – Beginning of year	$	9,614		$	8,084
Current year fair value of stock-based compensation		3,077			4,723
Fair value of warrants issued as finder’s fees		695			-
Fair value of warrants issued in unit financing		7,651			-
Fair value of warrants exercised during the year		-			(3,653	)
Fair value of warrants issued for financing services		-			1,197
Fair value of stock options exercised during the year		(212	)		(737	)
Balance – End of year	$	20,825		$	9,614

2008 ANNUAL REPORT | 53

e)	Share Purchase Warrants
	The Company’s share purchase warrants as at 31 January 2008 and 2007 and the changes during the years then ended are as follows:

	2008		2007
		Weighted			Weighted
		Average			Average
		Excercise			Excercise
		Price			Price
	Warrants	(US$)	Warrants		(CDN$)
Warrants outstanding - beginning of year	1,100,000	4.00	14,662,703		1.07
Issued	8,020,000	4.00	1,100,000		4.53
Exercised	-	-	(14,662,703	)	(1.07	)
Warrants outstanding – end of year	9,120,000	4.00	1,100,000		4.53

	On 17 April 2007, the Company issued 7,500,000 warrants in connection with a non-brokered private placement financing of 15 million units at US$2.75 per unit, with each unit comprising one common share and one-half of one warrant. Each whole warrant is exercisable into a common share at a price of US$4.00 at any time until 13 October 2008, subject to an early trigger if the 20-day volume weighted average price of the common shares is US$6.00 or more. In connection with the private placement, the Company has paid finders’ fees including an additional 520,000 broker warrants having the same terms as the warrants described above. On 31 October 2006, the Company issued 600,000 warrants to BNP Paribas Loan Services as partial consideration under the agreement described in Note 13d). These warrants have an exercise price of US$4.00 per share and expire on 30 October 2010. The fair value of these warrants was $1,197,000. Further, upon delivering a bona fide offer of project financing, warrants to purchase an additional 500,000 shares of the Company at a price of US$4.00 per share at any time prior to 30 October 2010 will vest. All of the warrants are exercisable as at 31 January 2008, except for 500,000 which vest upon delivery of a bona fide offer of project financing.
	During the year ended 31 January 2006 the Company completed the following financings (for accounting purposes, the value of the units was not originally bifurcated between share capital and warrants). The 31 January 2006 figures were restated in these financial statements to reflect this requirement.
(i)	A non-brokered private placement for 9,000,000 units at a price of CDN$0.55 per unit. Each unit consisted of one common share and one half of one share purchase warrant. One full Warrant entitles the holders, on exercise, to purchase one additional common share of the Company at a price of CDN$0.70 per Warrant Share at any time until the close of business on the day which is 24 months from the date of Closing, provided that if the closing price of the Issuer’s shares, as traded on the Exchange, trade at or exceed CDN$1.00 per share for 30 consecutive trading days, the Warrants will terminate 30 days thereafter.
(ii)	A non-brokered private placement for 6,672,219 units at a price of CDN$0.90 per unit. Each unit consisted of one common share and one half of

54 | POLYMET MINING

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Tabular amounts in Thousands of U.S. Dollars except for price per share, shares and options

	one share purchase warrant. One full Warrant entitles the holders, on exercise, to purchase one additional common share of the Company at a price of CDN$1.25 per Warrant Share at any time until the close of business on the day which is 30 months from the date of Closing, provided that if the closing price of the Issuer’s shares as traded on the Exchange is over CDN$2.50 per share for 20 consecutive trading days, the Warrants will terminate 30 days thereafter.
(iii)	A brokered private placement for 9,277,777 units at a price of CDN$0.90 per unit. Each unit consisted of one common share and one half of one share purchase warrant. One full Warrant entitles the holders, on exercise, to purchase one additional common share of the Company at a price of CDN$1.25 per Warrant Share at any time until the close of business on the day which is 30 months from the date of Closing, provided that if the closing price of the Issuer’s shares as traded on the Exchange is over CDN$2.50 per share for 20 consecutive trading days (Accelerated Expiry), the Warrants will terminate 30 days thereafter. In addition, 927,777 share purchase warrants were issued as finders fee at a price of CDN$1.25 for a period of two years from the date of Closing and include the Accelerated Expiry provision.
(iv)	A non-brokered private placement for 3,544,657 units at a price of CDN$1.40 per unit. Each unit consisted of one common share and one half of one share purchase warrant. One full Warrant entitles the holders, on exercise, to purchase one additional common share of the Company at a price of CDN$2.00 per Warrant Share at any time until the close of business on the day which is 18 months from the date of Closing, provided that if the closing price of the Issuer’s shares as traded on the Exchange is over CDN$2.50 per share for 20 consecutive trading days, the Warrants will terminate 30 days thereafter.

f)	Shareholder Rights Plan
	Effective 25 May 2007, the Company adopted an updated Shareholder Rights Plan (“Rights Plan”), which was approved by the Company’s shareholders’ on 27 June 2007. All common shares issued by the Company during the term of the Rights Plan will have one right represented for each common share held by the shareholder 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, upon certain events occurring (as defined in the Rights Plan), 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.

2008 ANNUAL REPORT | 55

8. SUPPLEMENTAL DISCLOSURE WITH RESPECT TO STATEMENTS OF CASH FLOWS

During the years ended 31 January 2008, 2007 and 2006, the Company entered into the following non-cash investing and financing activities:

		2008		2007		2006
Issued nil (2007 – 2,000,000; 2006 – 6,200,547)
shares to Cliffs pursuant to the Company’s
exercise of the Cliffs Option to purchase the Cliffs Assets	$	-	$	6,160	$	7,564
Issued promissory notes payable to Cliffs pursuant to the
Company’s exercise of the Cliffs Option to purchase the
Cliffs Assets	$	-	$	12,518	$	2,400
Recorded an Asset Retirement Obligation and a
corresponding increase in Cliffs Assets pursuant to the
Company’s exercise of the Cliffs Option to purchase the
Cliffs Assets	$	-	$	911	$	2,511
Transfer from contributed surplus to capital stock on
exercise of stock options	$	212	$	737	$	98
Transfer from share subscriptions to share capital on
issuance of the related shares	$	-	$	-	$	763
Capitalized accretion on the promissory note payable
to Cliffs	$	398	$	165	$	21
Issued 150,000 (2007 – nil; 2006 – 852,915) shares
and 520,000 broker warrants for finders’ fees on
private placements	$	1,108	$	-	$	617
Changes in accounts payable and accrued liabilities
related to Investing Activities	$	2,907	$	-	$	-

9. 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 and paid or accrued amounts as follows:

		2008		2007		2006
Consulting fees paid to Directors of the Company
and rent and office charges paid to a company of
which the president is a director	$	143	$	184	$	103

56 | POLYMET MINING

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Tabular amounts in Thousands of U.S. Dollars except for price per share, shares and options

The amounts charged to the Company for the services provided have been determined by negotiation among the parties and, in certain cases, are covered by signed agreements. These transactions were in the normal course of operations and were measured at the exchange value, which is the amount of consideration established and agreed to by the related parties.

During the year ended 31 January 2008, the Company paid $63,000 (2007 - $62,000 and 2006 - $37,000) to Dr. Dreisinger for consulting fees primarily in connection with activities related to the processing / technical side of the NorthMet Project and related expenses (the latter were supported by invoices and receipts). The consulting fees in 2008 were based on a monthly fee of Canadian $5,500 plus general sales tax.

During the year ended 31 January 2008, the Company paid $55,000 (2007 - $59,600 and 2006 - $41,000) to Mr. Swearingen for consulting fees primarily in connection with activities related to our agreements with Cliffs Erie L.L.C. and land tenure and related expenses (the latter were supported by invoices and receipts). The consulting fees in 2007 were based on a monthly fee of $5,000.

10. INCOME TAXES

The Company’s provision for income taxes differs from the amounts computed by applying the combined Canadian federal and provincial income tax rates to the net loss as a result of the following:

		2008			2007
Provision for recovery of taxes at statutory rates	$	(2,960	)	$	(6,105	)
Tax benefit not recognized on current year losses		1,770			2,156
Differences in foreign tax rates		19			(426	)
Non-deductible items and other		1,171			4,375
	$	-		$	-

Future income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The significant components of the Company’s future tax assets as at 31 January 2008 are as follows:

		2008			2007
Non-capital loss carry forwards	$	7,923		$	5,916
Unutilized exploration expenses		6,617			8,422
Capital assets		(10	)		(8	)
Total future income tax assets		14,530			14,330
Less: valuation allowance		(14,530	)		(14,330	)
Net future income tax assets	$	-		$	-

2008 ANNUAL REPORT | 57

The Company has income tax loss carry forwards of approximately $10.0 million in Canada, which may be used to reduce future income taxes otherwise payable and which expire in the years 2009 to 2028.

The Company has income tax loss carry forwards of approximately $13.8 million in the United States, which may be used to reduce future income taxes otherwise payable and which expire in the years 2009 to 2028. Virtually all of the unutilized exploration expenses are in the United States.

The tax benefit of the above noted tax assets have been offset by recognition of a valuation allowance in these financial statements.

11. SEGMENTED INFORMATION

The Company is in the feasibility stage of developing its mineral properties in the U.S. and provides for its financing and administrative functions at the head office located in Canada. Segmented information on a geographic basis is as follows:

2008		Canada		U.S.		Consolidated
Segment operating loss	$	3,287	$	403	$	3,690
Identifiable assets	$	20,359	$	68,840	$	89,199
2007
Segment operating loss	$	8,824	$	9,069	$	17,893
Identifiable assets	$	8,498	$	40,233	$	48,731
2006
Segment operating loss	$	4,523	$	11,406	$	15,929
Identifiable assets	$	11,653	$	14,381	$	26,034

12. INVESTMENT

During the quarter ended 31 July 2007, the Company acquired, for cash, common shares of a publicly traded Canadian mining company whose primary business is the operation of a recently recommissioned base metal mine. This investment represents less than 5% of the public mining company’s outstanding common shares and was designated as available-for-sale and, as such, had been marked-to-market with the change in the fair value of the investment from acquisition to quarterly financial statements being recorded in Other Comprehensive Loss.

As at 31 January 2008, the Company has determined that the investment has had an other than temporary decline in value. This determination was based on, among other factors, a significant drop in market price for the investment company’s main product and a continued decline in the share price of the investment company. The initial acquisition cost of the investment was US$2,495,000 (C$2,618,000) and the fair value of the investment at 31 January 2008 was US$1,445,000 (C$1,440,000). As a result, the Company has recorded an investment loss of $1,050,000 in its income statement and reversed the amounts that had previously been recorded in Other Comprehensive Loss. The fair market value of the investment at 24 April 2008 was US$1,223,000 (C$1,240,000).

58 | POLYMET MINING

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Tabular amounts in Thousands of U.S. Dollars except for price per share, shares and options

13. CONTINGENT LIABILITIES AND COMMITMENTS

a)

The Company has instituted a share bonus plan as part of its employment, management and consulting contracts for key management and project personnel. This bonus plan adds incentive for key personnel to reach certain prescribed milestones required to reach commercial production at the NorthMet Project. As at 31 January 2008, the Company had received shareholder approval of the Bonus Shares for Milestones 1 – 4 and regulatory approval for Milestones 1, 2 and 3. Milestone 4 is subject to disinterested shareholder and regulatory approval, which will be sought by the Company in 2008. To date 3,940,000 shares have been issued for the achievement of Milestones 1 and 3. The bonus shares allocated for Milestones 1 thru 4 are valued using the Company’s closing trading price on 28 May 2004 of CDN$0.75 per share, the date of the approval of the bonus plan by the disinterested shareholders.

The summary of the share bonus plan is as follows:

	Bonus Shares
Milestone 1	1,590,000	(i) issued
Milestone 2	1,300,000	(ii)
Milestone 3	2,350,000	(iii) issued
Milestone 4	3,640,000	(iv)

(i) Milestone 1 – Completion of an agreement with Cliffs-Erie LLC for the option to purchase of Cliffs-Erie facility to be used as a part of mining and processing operations for the NorthMet Project. This milestone was achieved on 16 February 2004 and therefore, during the year ended 31 January 2005, the Company expensed a CDN$1,192,500 (US$873,000) bonus as consulting fees and allotted 1,590,000 shares. These shares were issued in March 2005.

(ii) Milestone 2 – Negotiation and completion of an off-take agreement with a senior metals producer for the purchase of nickel-hydroxide produced from the NorthMet Project, and / or an equity investment in the Company by such a producer or producers.

(iii) Milestone 3 – Completion of a “bankable feasibility study” which indicates that commercial production from the NorthMet Project is viable. This milestone was achieved on 25 September 2006 and therefore, during the year ended 31 January 2007, the Company expensed a C$1,762,500 ($1,289,000) bonus as consulting fees and allotted 2,350,000 shares. These shares were issued in October 2006.

(iv)

Milestone 4 – Commencement of commercial production at the NorthMet Project at a time when the Company has not less than 50% ownership interest.

(v)

At the Annual General Meeting of shareholders of the Company, held on 21 June 2006, the shareholders approved the issuance of shares under Milestone 3. Shareholders also approved accelerated vesting of bonus shares whereby, in the event the Company is the subject of a take- over bid, all shares that remain subject to issuance under Milestones 2 and 4 shall be vested and issued provided that no individual will benefit from both accelerated vesting and terminated severance allowances as described in paragraph b) below.

b) As a part of certain employment and management contracts, the Company had agreed to severance allowances for key employees and management in the event of a take-over bid. These allowances were based upon the Company’s implied market capitalization at the time of the take-over bid, calculated by multiplying the number of shares outstanding on a fully diluted basis by the take-over bid price per share. These severance allowances have been terminated pursuant to oral or written amendments to these contracts and will be replaced by termination agreements representing up to three times the average annual compensation in the three years prior to change of control.

2008 ANNUAL REPORT | 59

c)

Pursuant to the Company’s Asset Purchase Agreement with Cliffs (Note 4), for as long as Cliffs owns 1% or more of the Company’s issued shares, Cliffs will have the right to participate on a pro-rata basis in future cash equity financings. This agreement also includes a first right of refusal in favour of the Company should Cliffs wish to dispose of its interest.

d)

On 31 October 2006 the Company entered into an agreement with BNP Paribas Loan Services (“BNPP”) whereby BNPP will advise and assist PolyMet in all aspects of preparation for construction finance. As part of this agreement, BNPP was issued warrants to purchase 600,000 shares of the Company’s common stock at a price of US$4.00 per share at any time prior to 30 October 2010. The fair value of these warrants was $1,197,000. Further, upon delivering a bona fide offer of project financing, warrants to purchase an additional 500,000 shares of the Company at a price of US$4.00 per share at any time prior to 30 October 2010 will vest. As part of the agreement, PolyMet will also pay BNPP a monthly fee for its advice and assistance and pay the costs for BNPP’s independent engineers.

e) On 31 January 2008, the Company had outstanding commitments related to equipment, consultants and the environmental review process of $500,000.

14. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES

These consolidated financial statements are prepared in accordance with Canadian generally accepted accounting principles (“GAAP”). The U.S. Securities and Exchange Commission requires that financial statements of foreign registrants 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 GAAP, the Company capitalizes accretion relating to its asset retirement obligations to mineral property, plant and equipment. Under US GAAP, this amount is expensed.
	The effects of the differences in accounting principles on accretion of asset retirement obligation on net loss and comprehensive loss are as follows:

		2008			2007			2006
Net Loss and Comprehensive Loss:
Net loss - Canadian GAAP basis	$	3,690		$	17,893		$	15,929
Adjustment of accretion to asset retirement obligation		434			233			47
Net loss and comprehensive loss - U.S. GAAP basis	$	4,124		$	18,126		$	15,976
Weighted average number of shares computed
under U.S. GAAP		133,697,572			114,754,213			73,484,490
Loss per share following U.S. GAAP	$	(0.03	)	$	(0.16	)	$	(0.22	)
Shareholders’ Equity – Canadian GAAP basis	$	69,151		$	29,938		$	19,387
Shareholders’ Equity – US.GAAP basis	$	68,437		$	29,658		$	19,340

60 | POLYMET MINING

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Tabular amounts in Thousands of U.S. Dollars except for price per share, shares and options

b)	Recent U.S. Accounting Pronouncements, which relate to the Company’s current operations are summarized as follows:
	In June 2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109” (“FIN 48”). This interpretation clarifies the recognition threshold and measurement of a tax position taken or expected to be taken on a tax return, and requires expanded disclosure with respect to the uncertainty in income taxes. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosures, and transition. FIN 48 is effective for fiscal years beginning after 15 December 2006. The adoption of FIN 48 did not have a material effect on the Company’s financial condition or results of operations.
	In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurement” (“SFAS 157”). The Statement provides guidance for using fair value to measure assets and liabilities. The Statement also expands disclosures about the extent to which companies measure assets and liabilities at fair value, the information used to measure fair value, and the effect of fair value measurement on earnings. This Statement applies under other accounting pronouncements that require or permit fair value measurements. This Statement does not expand the use of fair value measurements in any new circumstances. Under this Statement, fair value refers to the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the entity transacts. SFAS 157 is effective for the Company for fair value measurements and disclosures made by the Company in its fiscal year beginning on 1 February 2008. The Company is currently reviewing the impact of this statement.
	In February 2007, the Financial Accounting Standards Board (the “FASB”) issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (SFAS 159). SFAS 159 allows the company to choose to measure many financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. SFAS 159 is effective for fiscal years beginning after 15 November 2007. The Company is currently evaluating the requirements of SFAS 159 and the potential impact on the Company’s financial statements.

In a continuous disclosure review, the SEC determined that for US GAAP purposes it is generally not possible to treat as equity, warrants whose exercise price is denominated in a currency different from the functional currency of the entity. The SEC’s view is that for US GAAP purposes such warrants are derivative instruments and should be recorded as liabilities and carried at fair value, with changes in fair value recorded in earnings. A recent meeting of the FASB considered the SEC’s view and the FASB have recommended that Companies be allowed to implement this accounting in a future year, as an accounting change. The Company intends to adopt this accounting in the period the FASB recommends and to treat the adjustments as an accounting change.

Corporate Information

Officers & Directors William Murray
Executive Chairman & Director Joseph Scipioni
President & CEO & Director Douglas Newby
Chief Financial Officer Niall Moore
Corporate Secretary,
Group Controller William Corneliuson
Director Dr. David Dreisinger
Director W. Ian L. Forrest
Director George Molyviatis
Director Frank Sims
Director James Swearingen
Director Hoyt Lakes Headquarters
Poly Met Mining, Inc.
P.O. Box 475
6500 County Road 666
Hoyt Lakes, MN USA 55750-0475
Tel: 218-225-4417
Fax: 218-225-4429 Executive Chairman’s Office
PolyMet Mining Corp.
Suite 1003 – 1177 West Hastings Street
Vancouver, BC Canada V6E 2K3
Tel: 604-669-4701
Fax: 604-669-4705 www.polymetmining.com
E-mail: info@polymetmining.com Legal Counsel
Farris Vaughan Wills & Murphy LLP
25th Floor – 700 West Georgia Street
Vancouver, BC Canada V7Y 1B3 Dorsey & Whitney LLP
Suite 1500, 50 South Sixth Street
Minneapolis, MN USA 55402-1498 Troutman Sanders LLP
The Chrysler Building
405 Lexington Avenue
New York, NY USA 10174 Auditors
PricewaterhouseCoopers LLP
7th Floor – 250 Howe Street
Vancouver, BC Canada V6C 3S7 Transfer Agent & Registrar
Computershare
3rd Floor – 510 Burrard Street
Vancouver, BC Canada V6C 3B9 Shares Listed
Toronto Stock Exchange –
Symbol POM
American Stock Exchange –
Symbol PLM

Hoyt Lakes Headquarters
Poly Met Mining, Inc.
P.O. Box 475
6500 County Road 666
Hoyt Lakes, MN USA 55750-0475
Tel: 218-225-4417
Fax: 218-225-4429

Executive Chairman’s Office
PolyMet Mining Corp.
Suite 1003 – 1177 West Hastings Street
Vancouver, BC Canada V6E 2K3
Tel: 604-669-4701
Fax: 604-669-4705

www.polymetmining.com
E-mail: info@polymetmining.com

Design: RedRocketCreative.com
Printed in Canada

EX-99.2

Filed by Automated Filing Services Inc. (604) 609-0244 - PolyMet Mining Corp. - Exhibit 99.2

EX-99.3

POLYMET MINING CORP.
NOTICE OF
ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 17, 2008

Dear Shareholder:

     NOTICE IS HEREBY GIVEN that the 2008 Annual and Special Meeting, (the “Meeting”), of shareholders of PolyMet Mining Corp. (“PolyMet”) will be held on Tuesday, June 17, 2008 at 10:00 a.m. (Vancouver Time), at The Port of Vancouver Room, Renaissance Vancouver Hotel, 1133 West Hastings Street, Vancouver, British Columbia, for the following purposes:

• to receive our 2008 Annual Report, including our audited consolidated financial statements for the fiscal year ended January 31, 2008 and the report of our auditor on those financial statements;
• to fix the number of our directors at eight;
• to elect eight directors to hold office until the close of our next annual meeting of shareholders;
• to appoint PricewaterhouseCoopers LLP as our auditor to hold office until the close of our next annual meeting of shareholders and to authorize our board of directors to fix the remuneration to be paid to our auditor;
• to consider and, if thought fit, approve a resolution amending PolyMet’s Amended and Restated Shareholder Rights Plan as reconfirmed by the shareholders in 2007, by amending the definition of “Permitted Bid” to extend the period for which a take-over bid must be open from 60 to 75 days;
• to consider and, if thought fit, approve, ratify and confirm a resolution authorizing the issuance of 3,640,000 common shares of PolyMet under PolyMet’s Share Bonus Plan upon reaching Milestone 4 under the PolyMet Share Bonus Plan; and
• to transact such further and other business as may properly come before the Meeting or any adjournment thereof.

     Further information regarding the matters to be considered at the Meeting is set out in the accompanying Management Proxy Circular.

     Our board of directors has fixed the close of business on April 30, 2008 as the record date for determining shareholders entitled to receive notice of and to vote at the Meeting. Only our registered shareholders as of the close of business April 30, 2008 will be entitled to vote, in person or by proxy, at the Meeting.

     Whether or not you plan to attend the Meeting, we urge you to, as promptly as possible, complete and return the enclosed paper form of proxy, or vote by proxy over the Internet, as instructed in the accompanying Management Proxy Circular. To be effective, your form of proxy must be received by our registrar and transfer agent, Computershare Investor Services Inc., 9^th Floor, 100 University Avenue, Toronto, Ontario M5J 2Y1, no later than Friday, June 13, 2008, at 10:00 a.m. (Vancouver Time) or, if the Meeting is adjourned or postponed, no later than 48 hours (excluding Saturdays, Sundays and holidays) prior to the time to which the Meeting is adjourned or postponed. Proxies received by Computershare Investor Services Inc. after this time will not be accepted; however, the Chair of the Meeting may determine, in the Chair’s sole discretion, to accept a proxy that is delivered in person to the Chair at the Meeting as to any matter in respect of which a vote has not already been cast.

     If you are a beneficial shareholder and hold your common shares through an intermediary, such as a brokerage firm, bank, clearing agency, securities dealer or other similar organization, you should follow the voting procedures provided by: (a) our registrar and transfer agent, Computershare Investor Services Inc., if you have given permission to your intermediary to disclose your share ownership information to us; or (b) your intermediary, if you have objected to your intermediary’s disclosure of such information.

	By Order of the Board of Directors
	signed “Joseph M. Scipioni”
	Joseph M. Scipioni
	President & Chief Executive Officer
Vancouver, British Columbia
April 28, 2008

POLYMET MINING CORP.

MANAGEMENT PROXY CIRCULAR FOR THE
ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 17, 2008

     Unless the context otherwise requires, in this Management Proxy Circular all references to “PolyMet”, “we”, “our” and “us” refer to PolyMet Mining Corp. and its subsidiaries. Unless otherwise stated, information in this Management Proxy Circular is given as at April 28, 2008.

INFORMATION ABOUT THIS MANAGEMENT PROXY CIRCULAR AND
THE 2008 ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS

Why did I receive this Management Proxy Circular?

     We have sent this Notice of Annual and Special Meeting and Management Proxy Circular, together with the enclosed paper form of proxy (the “Form of Proxy”), because our board of directors is soliciting your proxy to vote at our 2008 Annual and Special Meeting (the “Meeting”) of shareholders. This Management Proxy Circular contains information about the matters to be voted on at the Meeting and important information about us. As many of our shareholders are expected to be unable to attend the Meeting in person, proxies are solicited by mail to give each shareholder an opportunity to vote on all matters that will properly come before the Meeting. References in this Management Proxy Circular to the Meeting include any adjournments or postponements of the Meeting.

     We intend to mail this Management Proxy Circular and accompanying paper Form of Proxy on or about May 26, 2008 to all of our shareholders entitled to vote at the Meeting.

What is the date, time and place of the Meeting?

     The Meeting will be held in The Port of Vancouver Room, Renaissance Vancouver Hotel, 1133 West Hastings Street, Vancouver, British Columbia, on Tuesday, June 17, 2008, at 10:00 a.m. (Vancouver Time).

Who can vote at the Meeting?

     Only registered shareholders as at the close of business on April 30, 2008 will be entitled to vote at the Meeting. There are 137,011,375 common shares without par value of PolyMet (“Common Shares”) issued and outstanding. Each person voting at the Meeting has one vote in a vote by show of hands. If a ballot is taken, each person voting at the Meeting will have one vote for each Common Share held.

Registered Shareholder: Common Shares Registered in Your Name

     If on April 30, 2008, your Common Shares were registered directly in your name with our registrar and transfer agent, Computershare Investor Services Inc., then you are a registered shareholder. As a registered shareholder, you may vote in person at the Meeting or vote by proxy. Whether or not you plan to attend the Meeting, we urge you to, as promptly as possible, complete and return the enclosed paper Form of Proxy, or vote by proxy over the Internet, as instructed below to ensure your vote is counted.

Beneficial Shareholder: Common Shares Registered in the Name of an Intermediary such as a Brokerage Firm, Bank, Dealer or other Similar Organization

     If on April 30, 2008, your Common Shares were held in an account with an intermediary, such as a brokerage firm, bank, dealer or other similar organization, then you are a beneficial shareholder and your Common Shares are held in “street name”. The intermediary holding your account, or a clearing agency (such as CDS Clearing and Depositary Services Inc. in Canada or Cede & Co. in the United States) of which the intermediary is a participant, is considered the registered shareholder for purposes of voting at the Meeting. As a beneficial shareholder, you have the right to direct the intermediary or clearing agency on how to vote the Common Shares

2

registered in their name. You are also invited to attend the Meeting; however, since you are not the registered shareholder, you will not be able to vote your Common Shares registered in the name of the intermediary or clearing agency unless you have been appointed as a proxyholder by the intermediary or clearing agency.

What am I voting on at the Meeting?

     At the Meeting, our shareholders will be asked to vote on the following resolutions:

• to fix the number of our directors at eight;
  
• to elect eight directors to hold office until the close of our next annual meeting of shareholders;
  
• to consider and, if thought fit, approve a resolution amending PolyMet’s Amended and Restated Shareholder Rights Plan as reconfirmed by the shareholders in 2007, by amending the definition of “Permitted Bid” to extend the period for which a take-over bid must be open from 60 to 75 days;
  
• to consider and, if thought fit, approve, ratify and confirm a resolution authorizing the issuance of 3,640,000 Common Shares of PolyMet under PolyMet’s Share Bonus Plan upon reaching Milestone 4 under the PolyMet Share Bonus Plan; and
  
• to appoint PricewaterhouseCoopers LLP as our auditor to hold office until the close of our next annual meeting of shareholders and to authorize our board of directors to fix the remuneration to be paid to our auditor.

How does the Board recommend that I vote?

     Our board of directors believes that the fixing of the number of our directors at eight, the election of our management’s eight nominees to our board of directors, the appointment of PricewaterhouseCoopers LLP as our auditor, the approval of the resolution amending our Amended and Restated Shareholder Rights Plan and the approval of the resolution authorizing the issuance of the Common Shares upon PolyMet having reached Milestone 4 under PolyMet’s Share Bonus Plan are each in the best interests of PolyMet and our shareholders and, accordingly, recommends that each shareholder vote his or her shares “FOR” each of the named management nominees for election to our board of directors and “FOR” each of the other matters.

What vote is required in order to approve each proposal?

     Directors are elected by a plurality of votes cast by proxy or in person at the Meeting, which means that those nominees for election to our board of directors who receive the largest number of favourable votes will be elected our directors, up to the maximum number of directors established by our shareholders. Shareholders are not entitled to cumulative votes for the election of directors. Abstention from voting on the election of directors will have no impact on the outcome of this proposal since no vote will have been cast in favour of any nominee.

     A simple majority of the votes cast by proxy or in person at the Meeting is required to approve the appointment of PricewaterhouseCoopers LLP as our auditor and independent registered public accounting firm.

     A simple majority of the votes cast by proxy or in person at the Meeting is required to approve the amendment and reconfirmation of the Amended and Restated Shareholder Rights Plan, other than votes cast by directors and officers of PolyMet and their respective affiliates.

     A simple majority of the votes cast by disinterested shareholders (i.e. excluding the votes of our insiders who are eligible to receive Bonus Shares upon reaching Milestone 4), by proxy or in person at the Meeting is required to approve the issuance of 3,640,000 Common Shares of PolyMet upon PolyMet having reached Milestone 4 of the Share Bonus Plan, other than votes cast by directors and officers of PolyMet and their respective associates.

     Proxies returned by intermediaries as “non-votes” because the intermediary has not received instructions from the beneficial shareholder with respect to the voting of certain of our Common Shares or, under applicable stock exchange or other rules, the intermediary does not have the discretion to vote those Common Shares on one or more of the matters that come before the Meeting, will be treated as not entitled to vote on any such matter and will

3

not be counted as having been voted in respect of any such matter. Common Shares represented by such broker “non-votes” will, however, be counted in determining whether there is a quorum for the Meeting.

How do I vote?

Registered Shareholder: Common Shares Registered in Your Name

     If you are a registered shareholder you may vote by proxy or in person at the Meeting. Whether or not you plan to attend the Meeting, we urge you to vote by proxy to ensure your vote is counted. You may still attend the Meeting and vote in person if you have already voted by proxy.

• To vote in person at the Meeting, please come to the Meeting and we will give you an attendance card when you arrive.
• To vote using the enclosed paper Form of Proxy, please complete, sign, date and return your Form of Proxy in accordance with the instructions on the Form of Proxy.
• To vote by proxy over the Internet, go to www.computershare.com/proxy and follow the online voting instructions and refer to your holder account number and proxy access number provided on the enclosed paper Form of Proxy.

     Whether you are voting by paper or Internet proxy, your proxy must be received by our registrar and transfer agent, Computershare Investor Services Inc. of 9^th Floor, 100 University Avenue, Toronto, Ontario M5J 2Y1, facsimile: (416) 263-9394, no later than June 13, 2008 at 10:00 a.m. (Vancouver Time) or, if the Meeting is adjourned or postponed, no later than 48 hours (excluding Saturdays, Sundays and holidays) prior to the time to which the Meeting is adjourned or postponed. Proxies received by Computershare Investor Services Inc. after this time will not be accepted; however, the Chair of the Meeting may determine, in the Chair’s sole discretion, to accept a proxy that is delivered in person to the Chair at the Meeting as to any matter in respect of which a vote has not already been cast.

     If the instructions you give in your proxy are clear, and if the proxy is properly completed and delivered as described above and has not been revoked, the Common Shares represented by your proxy will be voted or withheld from voting on any poll that may be called for and, if you specify a choice with respect to any matter to be acted upon, the Common Shares will be voted on any poll in accordance with your instructions.

     You have the right to appoint another person to attend and act on your behalf at the Meeting other than the persons named in the enclosed paper Form of Proxy. To exercise this right, please insert the name of your nominee in the blank space provided. A person appointed as a proxyholder need not be a shareholder.

Beneficial Shareholder: Common Shares Registered in the Name of an Intermediary such as a Brokerage Firm, Bank, Dealer or other Similar Organization

     We have two kinds of beneficial shareholders – those who have given permission to their intermediary to disclose their ownership information to us, otherwise referred to as “non-objecting beneficial owners”, and those who have objected to their intermediary’s disclosure of this information, otherwise referred to as “objecting beneficial owners”. As allowed under Canadian provincial securities laws, we have obtained a list of our non-objecting beneficial owners from intermediaries and have used that list to distribute proxy-related materials directly to non-objecting beneficial owners.

     If you are a non-objecting beneficial owner, then you will receive a voting instruction form from Computershare Investor Services Inc., our registrar and transfer agent. If you are an objecting beneficial owner, then you will receive a voting instruction form from your intermediary.

     The voting instruction form that you will receive is similar to the proxy that we provide to our registered shareholders. However, its purpose is limited to instructing your intermediary or clearing agency, as the registered shareholder, on how to vote on your behalf. No person will be admitted at the Meeting to vote by presenting a voting instruction form.

4

• To vote using the voting instruction form, simply complete and return the voting instruction form in accordance with its instructions.
• To vote in person at the Meeting, you must instruct Computershare Investor Services Inc. if you are a non-objecting beneficial owner, or your intermediary if you are an objecting beneficial owner, to appoint you as proxyholder.

     If you have any questions, contact Computershare Investor Services Inc. if you are a non-objecting beneficial owner, or your intermediary if you are an objecting beneficial owner.

How will proxies be exercised?

     The proxyholder will vote according to instructions in the proxy on any ballot which may be called for and for which a choice has been specified. Unless otherwise indicated by you on the proxy, your Common Shares will be voted “FOR” the election of our management’s nominees for election to our board of directors and “FOR” each of the other motions proposed to be made at the Meeting as stated in the proxy.

     The proxy also confers upon the proxyholder discretionary authority to vote all Common Shares represented by the proxy with respect to amendments or variations to matters identified in the Notice of Meeting and any other matter that properly comes before the Meeting. Our board of directors know of no such amendment, variation or other matter that is to be presented for action at the Meeting. However, if any other matters which are not now known to our board of directors should properly come before the Meeting, the proxies will be voted, or withheld, by the proxyholder in his or her discretion.

What is the quorum for the Meeting?

     A quorum of shareholders must be present at the commencement of the Meeting, either in person or by proxy. Under our bylaws, the quorum for the Meeting is two of our shareholders present in person or by proxy holding or representing at least 5% of our Common Shares. If a quorum is not present at the commencement of the Meeting or within a reasonable period of time thereafter, the shareholders present in person or by proxy may adjourn the Meeting to a fixed time and place but may not transact any other business at the Meeting.

What does it mean if I receive more than one set of proxy materials?

     This means that you own Common Shares that are registered under different names. For example, you may own some Common Shares directly as a registered shareholder and other Common Shares as a beneficial shareholder through an intermediary, or you may own Common Shares through more than one such organization. In these situations, you will receive multiple sets of proxy materials. It is necessary for you to, as promptly as possible, complete and return all paper proxies, or vote by proxy over the Internet, and complete and return all voting instruction forms in order to vote all of the Common Shares you own. Each paper proxy you receive will come with its own return envelope. If you vote by mail, please make sure you return each paper proxy in the return envelope that accompanies that proxy.

Can I revoke my proxy?

     Yes, if you are a registered shareholder and have voted by paper or Internet proxy, you may revoke your proxy by delivering a duly executed proxy by paper or Internet with a later date or a form of revocation of proxy. Your proxy may be revoked by an instrument in writing signed by you or by your attorney duly authorized in writing and, if you are a corporation or association, the instrument in writing should bear the seal of the corporation or association and must be executed by an officer or by an attorney duly authorized in writing, and deposited at our registered office at Farris, Vaughan, Wills & Murphy LLP, 25^th Floor, 700 West Georgia Street, Vancouver, British Columbia, V7Y 1B3, Attention: Mitchell Gropper, at any time up to and including the last business day preceding the day of the Meeting or any adjournment thereof.

     Alternatively, you may revoke your proxy and vote in person, by delivering a form of revocation of proxy to the Chair of the Meeting at the Meeting, or any adjournments or postponements of the Meeting thereof, before the taking of a vote in respect of which the proxy is to be used. You may also revoke your proxy in any other manner permitted by law.

5

     If you are a non-objecting beneficial owner, you should contact Computershare Investor Services Inc. in order to obtain instructions regarding the procedures for revoking any voting instructions that you previously provided to Computershare Investor Services Inc. Similarly, if you are an objecting beneficial owner, you should contact the intermediary that holds your Common Shares in order to obtain instructions regarding the procedures for revoking any voting instructions that you previously provided to your intermediary.

Who pays the cost of the proxy solicitation?

     We will pay the cost of soliciting these proxies, including the printing, handling and mailing of the proxy materials. Copies of these materials will be given to brokerage firms, banks, dealers or other similar organizations that hold our Common Shares for our beneficial shareholders. We will reimburse these brokerage firms, banks, dealers or other similar organizations for their reasonable out of pocket expenses in forwarding proxy materials to our beneficial shareholders. In addition, proxies may be solicited by certain of our directors, executive officers and employees personally or by telephone, mail, facsimile or e-mail. No additional compensation will be paid to our directors, officers or other employees for soliciting proxies. We may, if determined advisable, retain at our cost an agency to solicit proxies for us in Canada and in the United States.

How can I make a shareholder proposal for PolyMet’s 2009 Annual Meeting?

     If you want to propose a matter for consideration at our 2009 Annual Meeting, then that proposal must be submitted to us at our registered office at Farris, Vaughan, Wills & Murphy LLP, 25^th Floor, 700 West Georgia Street, Vancouver, British Columbia, V7Y 1B3, Attention: Mitchell Gropper, 90 days before the anniversary date of the Notice of Meeting for the 2009 Annual Meeting. To be eligible to submit a proposal, a person:

must be, for at least the six month period immediately before the day on which the shareholder submits the proposal, the registered holder or the beneficial owner of the number of our Common Shares:
-	that is equal to at least 1% of the total number of our outstanding Common Shares, as of the day on which the shareholder submits the proposal; or
-	our shares whose fair market value, as determined at the close of business on the day before the shareholder submits the proposal to us, is at least $2,000; or
must have the support of persons who, in the aggregate, and including or not including the person that submits the proposal, have been, for at least the six month period immediately before the day on which the shareholder submits the proposal, the registered holders, or the beneficial owners of the number of our Common Shares:
-	that is equal to at least 1% of the total number of our outstanding Common Shares, as of the day on which the shareholder submits the proposal; or
-	our Common Shares whose fair market value, as determined at the close of business on the day before the shareholder submits the proposal to us, is at least $2,000.
For a proposal to be valid, it must, subject to the Business Corporations Act (British Columbia), contain:
the name and address of the person and of the person’s supporters, if applicable; and
the number of Common Shares held or owned by the person and the person’s supporters, if applicable, and the date the Common Shares were acquired.

6

What if I have any questions regarding the Meeting?

     If you have any questions regarding the Meeting, please contact our registrar and transfer agent, Computershare Investor Services Inc.:

• by phone: 1-800-564-6253
• by e-mail: service@computershare.com
• by mail: 9^th Floor, 100 University Avenue, Toronto, Ontario M5J 2Y1

How can I find out the results of the voting at the Meeting?

     Preliminary voting results will be announced at the Meeting. Final voting results will be filed with the Canadian provincial securities regulatory authorities and be available on the Internet at www.sedar.com and will also be furnished to the United States Securities and Exchange Commission published in a report on Form 6-K and be available on the Internet at www.sec.gov.

VOTING SHARES AND PRINCIPAL HOLDERS THEREOF

     As of April 28, 2008, to the knowledge of the directors and officers, no one person beneficially owns, controls or directs, directly or indirectly, more than 10% of our issued and outstanding Common Shares. Our directors and executive officers as a group beneficially own, control or direct, directly or indirectly, an aggregate of 12,171,496 or approximately 8.88% of our issued and outstanding Common Shares.

BUSINESS TO BE CONDUCTED AT THE MEETING

Fixing the Number of Directors

     Our articles and bylaws provide that our board of directors is to consist of a minimum of three directors and a maximum number to be determined from time to time by ordinary resolution of our shareholders. Our board of directors currently consists of eight individuals. Our board of directors proposed to fix the number of our directors at eight.

     A simple majority of the votes cast by proxy or in person at the Meeting is required to approve the proposal to fix the number of our directors at eight.

     The persons named in our management’s proxy intend to vote the Common Shares represented by proxies for which either of them is appointed proxyholder “FOR” fixing the number of our directors at eight.

Our Board of Directors recommends a vote “FOR” fixing the number of our directors at eight.

Election of Directors

Director Nominees for Election

     All of our current directors intend to stand for election to our board of directors. Our management has put forward the names of the current directors as nominees as outlined below.

     The term of each of our present directors expires at the conclusion of the Meeting. Each director elected at the Meeting will hold office until the conclusion of our next annual meeting of shareholders or until his or her successor is duly elected or appointed, unless he or she resigns, is removed or becomes disqualified in accordance with our bylaws or our governing legislation.

     We are not aware that any of our nominees will be unable or unwilling to serve as one of our directors; however, should we become aware of such an occurrence before the election of directors takes place at the Meeting and if the persons named in the accompanying paper Form of Proxy are appointed as proxyholder, it is intended that the discretionary power granted under such proxy will be used to vote for any substitute nominee or nominees whom our board of directors in its discretion, may select.

7

     Directors are elected by a plurality of votes cast by proxy or in person at the Meeting, which means that those nominees for election to our board of directors receiving the largest number of favourable votes will be elected as our directors, up to the maximum number of directors fixed by our shareholders. Shareholders are not entitled to cumulate votes for the election of directors and no class of shareholders has the right to elect a specified number of directors or to cumulate their votes with respect to the election of directors. Abstention from voting on the election of directors will have no impact on the outcome of this proposal since no vote will have been cast in favour of any nominee.

     The persons named in our management’s proxy intend to vote the Common Shares represented by proxies for which either of them is appointed proxyholder “FOR” each named nominee.

Our Board of Directors recommends a vote “FOR” each named nominee.

Information about Nominees for Directors

     The following table provides certain information regarding our management’s nominees for election to our board of directors. This information has been provided to us as of April 28, 2008 by the respective nominees.

			Number and
			Approximate
			Percentage of Common
			Shares Beneficially
			Owned, Controlled or
			Directed, Directly or
Name of and Province and			Indirectly(1)
Country of Residence of
Proposed Nominee Directors	Director Since	Position with PolyMet	Number	Percent
William D. Corneliuson (2,3,4)	March 8, 2007	Director	360,000	0.26%
Wisconsin, United States
Dr. David Dreisinger, Ph. D.	October 3, 2003	Director	426,300	0.31%
British Columbia, Canada
W. Ian L. Forrest (2, 3, 4)	October 3, 2003	Director	1,403,000	1.02%
Vaud, Switzerland
George Molyviatis (2, 3, 4)	March 17, 2003	Director	8,184,920	5.97%
Athens, Greece
William Murray, P. Eng.	March 17, 2003	Director,	1,797,276	1.31%
British Columbia, Canada		Executive Chairman
Joseph M. Scipioni	February 19, 2008	Director,	Nil	0.00%
Minnesota, United States		President & Chief
		Executive Officer
Frank L. Sims	February 19, 2008	Director	Nil	0.00%
Minnesota, United States
James Swearingen	December 17, 2004	Director	Nil	0.00%
Minnesota, United States

Notes:

(1)	The information as to the number of Common Shares owned, controlled or directed, directly or indirectly, has been based upon information provided by each of the proposed nominees for director and reports filed on the System for Electronic Disclosure by Insiders (SEDI) at www.sedi.ca.
(2)	Member of our Compensation Committee.
(3)	Member of our Audit Committee.
(4)	Member of our Nominating and Corporate Governance Committee.

The following is a brief profile of each of the nominees for election to our board of directors:

William D. Corneliuson Mr. Corneliuson has served as a member of our board of directors since March 8, 2007. He also serves on our audit, nominating and corporate governance, and compensation committees. In April 1993, Mr. Corneliuson founded B.C. Holdings and to date remains as the President and Chief Investment Officer. He has over

8

30 years of investment experience in a range of asset management positions including managing large institutional portfolios, mutual funds and a private investment fund. Prior to founding B.C. Holdings, Mr. Corneliuson co-founded Strong Capital Management in 1976, which became Strong/Corneliuson Capital Management, where he served as the firm's President and raised and managed several billion dollars of institutional assets and a variety of mutual funds that achieved superior ratings. Mr. Corneliuson received a B.A. in Political Science and subsequently an MBA from Michigan State University. He served in the U.S. Marine Corps where he achieved the rank of Captain. Mr. Corneliuson also serves as Chairman of the board of Medwave Inc., a medical device development company. Mr. Corneliuson currently resides in the United States.

Dr. David Dreisinger Dr. Dreisinger has served as a member of our board of directors since October 3, 2003. Dr. Dreisinger also served on our audit committee prior to June 2006. Since 1988, Dr. Dreisinger has been a member of the faculty at the University of British Columbia in the Department of Metal and Material Engineering. He has published over 100 papers and has been extensively involved as a process consultant in industrial research programs with metallurgical companies. Dr. Dreisinger has participated in 11 U.S. patents for work in areas such as pressure leaching, ion exchange removal of impurities from process solutions, use of thiosulfate as an alternative to cyanide in gold leaching, leach-electrolysis treatment of copper recovery from sulfide ores, and the Sepon Copper Process for copper recovery from sulfidic-clayey ores. Dr. Dreisinger also serves as a director of International Nickel Ventures, Inc. Dr. Dreisinger currently resides in Canada.

W. Ian L. Forrest Mr. Forrest has served as a member of our board of directors since October 3, 2003 and served as Chairman of our board until February 5, 2008. He also serves on our audit, nominating and corporate governance, and compensation committees. Mr. Forrest is a member of the Institute of Chartered Accountants of Scotland and continues to practice as a public accountant in Geneva, Switzerland. Mr. Forrest has more than 30 years of experience with public companies in the resource sector. His experience encompasses the areas of promotion, financing, exploration, production and company management. He has also participated in several notable projects including Gulfstream's North Dome gas discovery, Qatar, Reunion Mining's Scorpion zinc project in Namibia, which was subsequently developed by Anglo American, and Ocean Diamond Mining which pioneered the independent diamond dredging industry off the west coast of southern Africa. He also serves as a director of Mengold Resources Inc. Having played an important role in the revival of PolyMet Mining Corporation in 2003, he was appointed Chairman in May 2004. Mr. Forrest currently resides in Switzerland.

George Molyviatis Mr. Molyviatis has served as a member of our board of directors since March 17, 2003. He also serves on our audit, nominating and corporate governance, and compensation committees. Mr. Molyviatis has approximately 20 years experience as an investment banker and businessman. He started his career with BNP Paribas in Geneva in 1986 where he held increasingly senior positions, ultimately becoming a Senior Vice-President. In 1994 he joined the Credit Suisse Group as a Senior Vice-President and left in 1996 to join Pegasus Securities, S.A., a Greek investment bank that he ran until 1999, when it was sold. Since then Mr. Molyviatis has been a private investor in several natural resource companies and owns several large forestry and timber processing facilities in Georgia and Russia. Mr. Molyviatis currently resides in Greece.

William Murray Mr. Murray served as our President and Chief Executive Officer until February 5, 2008 and has served as a member of our board of directors since March 17, 2003. Mr. Murray was appointed Executive Chairman on February 5, 2008. Mr. Murray is an engineer in the mining industry with more than 35 years of experience in construction management and project evaluation in North America and Africa. From April 1993 to 2003, Mr. Murray provided consulting services to the mining industry as a principal of Optimum Project Services Ltd. Prior to that, Mr. Murray was employed by Fluor Daniel, a large U.S. Engineering & Construction contractor, as the Director of New Business from October 1989 to April 1993. From September 1981 to May 1986, Mr. Murray was a Director of Project Services at Denison Mines where he was part of the core team that built the $1.2 billion Quintette Coal project. From September 1970 to August 1981, Mr. Murray held a number of positions at Anglo American Corp in South Africa, principally in the Gold Division. Mr. Murray is also a director of Baja Mining Corp and Aura Minerals, Inc. Mr. Murray currently resides in Canada.

Joseph M. Scipioni Mr. Scipioni has served as our President and Chief Executive Officer since February 5, 2008 and as a member of our board of directors since February 19, 2008. Mr. Scipioni served as our Chief Operating Officer from March 2007 to February 2008 and as General Manager of our Minnesota operations from July 2006 to February 2008. Prior to June 2006, Mr. Scipioni's career spanned more than 30 years with United States Steel Corporation where he worked in a number of progressively senior positions in operations. His last position was Plant Manager at the Keewatin Taconite plant in Minnesota. In addition, Mr. Scipioni has served in leadership positions with the Iron Mining Association of Minnesota, Central Iron Range Initiative, United Way of Northeastern Minnesota and Hibbing Chamber of Commerce. Mr. Scipioni currently resides in the United States.

9

Frank L. Sims Mr. Sims has served as a member of our board of directors since February 19, 2008. Mr. Sims is a recognized business leader whose career has been focused in Minnesota and the upper Midwest. Mr. Sims held a series of progressively senior positions with Cargill, Incorporated between 1972 and his retirement in December 2007. Most recently he served as Corporate Vice President for Cargill. Cargill is an international provider of food, agricultural and risk management products and services. He currently serves on the board of Piper Jaffray Companies. Mr. Sims has previously served on the board of Tennant Company, as Vice-Chair of the U.S. Marine Transportation System National Advisory Council, was a Chairman of the board of the North American Export Grain Association, and as Chairman of the Federal Reserve Bank of Minneapolis. Mr. Sims currently resides in the United States.

James Swearingen Mr. Swearingen has served as a member of our board of directors since January 14, 2005. From September 1994 to April 2003, Mr. Swearingen was General Manager of US Steel Corporation’s Minnesota Ore Operations located at the Minntac mine and plant, the largest mining operation in North America. He held a series of progressively senior positions with US Steel Corporation between 1964 and his retirement in 2003. He has served as co-chair of the Governor's Committee on Minnesota's Mining Future. Mr. Swearingen is also active with other groups that bring new technology to north-eastern Minnesota to develop non-ferrous mines and new, value added, projects in steel making. He is also an active advisor to the University of Minnesota's Natural Resources Research Institute based in Duluth, Minnesota and was recently elected to the City Counsel of Biwabik, Minnesota. Mr. Swearingen currently resides in the United States.

     To the knowledge of our management, none of the proposed directors is, at the date hereof, or has been, within the 10 years prior to the date hereof, a director or executive officer of any other company that, while that person was acting in that capacity: (i) was the subject of a cease trade order or similar order, or an order that denied the relevant company access to any exemption under Canadian securities legislation, for a period of more than 30 consecutive days; (ii) was subject to an event that resulted, after the director or executive officer ceased to be a director or executive officer in the company being the subject of a cease trade or similar order or an order that denied the relevant company access to any exemption under securities legislation, for a period of more than 30 consecutive days; or (iii) within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted to any proceedings, arrangement or compromise with creditors or had a receiver, receiver-manager or trustee appointed to hold its assets, except that W. Ian L. Forrest was a director of AB Airlines plc from June 30 to July 30, 1999 and, on August 2, 1999, AG Airlines plc was placed in administrative receivership.

     To the knowledge of our management, none of the proposed directors (i) is, at the date hereof, or has been, during the 10 years prior to the date hereof, a director or executive officer of any company that, while that person was acting in that capacity or within a year of that person ceasing to act in that capacity became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or became subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver-manager or trustee appointed to hold assets of the proposed director; or (ii) has, within the 10 years before the date hereof, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangements or compromises with creditors, or had a receiver, receiver manager or trustee appointed to hold assets of the proposed director.

Appointment of Auditors

     The firm of PricewaterhouseCoopers LLP has served as our auditor since April 18, 2006. Upon the recommendation of our audit committee, our management proposes that PricewaterhouseCoopers LLP be appointed as our auditor to hold office until the close of our next annual meeting of shareholders and that our board of directors be authorized to fix the remuneration to be paid to our auditor. We have been advised that a representative of PricewaterhouseCoopers LLP will attend the Meeting and will have the opportunity to make a statement and respond to questions relating to their duties as auditor.

     A simple majority of the votes cast by proxy or in person at the Meeting is required to approve the proposed appointment of PricewaterhouseCoopers LLP.

     The persons named in our management’s proxy intend to vote the Common Shares represented by proxies for which either of them is appointed proxyholder “FOR” the appointment of PricewaterhouseCoopers LLP as our auditor to hold office until the close of our next annual meeting of shareholders and that our board of directors be authorized to fix the remuneration to be paid to our auditor. If the resolution is not adopted, the Business Corporations Act (British Columbia) provides that our current auditor, PricewaterhouseCoopers LLP, will continue to act for us until such time as our shareholders approve an alternative auditor.

10

Our Board of Directors recommends a vote “FOR” appointing PricewaterhouseCoopers LLP.

Amendment to Shareholder Rights Plan

     At our Annual and Special Meeting of PolyMet held on June 27, 2007, our shareholders approved the amendment and restatement of the shareholder rights plan (the “Shareholder Rights Plan”). The Shareholder Rights Plan is embodied in an amended and restated shareholder rights plan agreement dated as of May 25, 2007 between PolyMet and Pacific Corporate Trust Company. A copy of the Shareholder Rights Plan may be obtained on the internet at the site for Polymet Mining Corp. at www.sedar.com.

     PolyMet is asking our shareholders to approve an amendment to the definition of “Permitted Bid” to extend the period for which a take-over bid is to be open from 60 to 75 days. After giving effect to the proposed amendment, sub-clause (x) of paragraph 1.1(mm)(ii)(A) of the definition of “Permitted Bid” in the Shareholder Rights Plan will read as follows:

prior to the close of business on a date which is not less than 75 days following the date of the Take-Over Bid;

     Our board of directors is of the view that, in the event a take-over bid is made for the shares of PolyMet that is not recommended by our board of directors, a period of 60 days is insufficient for the board of directors, acting in the best interests of PolyMet, to seek, document and recommend a transaction to shareholders. Our board of directors is of the view that a 75 day period would better enable the board of directors to seek a transaction that is in the best interests of the shareholders so that all shareholders receive the maximum available value for their investment and are given adequate time to properly assess the bid on a fully informed basis.

     The text of the proposed resolution amending the Shareholder Rights Plan is as follows:

     ‘‘BE IT RESOLVED THAT:

1.

The amendment to the definition of “Permitted Bid” by changing the figure “60” appearing in sub- clause (x) of paragraph 1.1(mm)(ii)(A) thereof to “75” be approved; and

2.

Any director or officer of PolyMet be and is hereby authorized, for and on behalf of PolyMet, to execute and deliver all documents and instruments and take such other actions as such director or officer may determine to be necessary or desirable to implement this ordinary resolution and the matters authorized hereby, such determination to be conclusively evidenced by the execution and delivery of any such documents or instruments and the taking of any such actions.”

     To be effective, the resolution must be approved by a majority of the votes cast on the resolution at the Meeting in person or by proxy, other than votes cast by directors and officers of PolyMet and their respective affiliates.

Our Board of Directors has determined that the proposed amendment to the Shareholder Rights Plan is in the best interests of PolyMet and unanimously recommends a vote “FOR” the resolution approving the amendment of the Shareholder Rights Plan.

Issuance of Shares upon the attainment of Milestone 4 under PolyMet’s Share Bonus Plan

     PolyMet has established a bonus share incentive plan (the “Share Bonus Plan”) for its directors and key employees and consultants (the “Key Employees”). The directors and Key Employees are collectively referred to as the “Share Bonus Plan Participants”. The Share Bonus Plan provides for our Common Shares to be issued to the Share Bonus Plan Participants upon PolyMet reaching certain identifiable milestones in its business plan, and is intended to reward the Share Bonus Plan Participants for their unique expertise and experience in achieving these milestones. Our 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 incentives to its Key Employees exclusively in the form of incentive stock options, since our share price can vary in accordance with a range of external factors not related to the performance of management and its Key Employees.

     The Share Bonus Plan was initially adopted by our board of directors on November 5, 2003, at which time the market price of our shares was $0.19 per share. The Share Bonus Plan was approved by 98.42% of our disinterested shareholders at our Annual and Special Meeting held on May 28, 2004.

11

     On November 4, 2004, PolyMet adopted, and the shareholders approved, revisions to the existing Share Bonus Plan which limited the aggregate number of shares that may be issued under the Share Bonus Plan and PolyMet’s Incentive Stock Option plan to not more than 20% of our issued shares from time to time. As a result, at that time, the number of shares issuable under the Share Bonus Plan was limited to Milestones l and 2, for an aggregate number of 2,890,000 Common Shares. To date, Milestone 1 has been reached and the 1,590,000 shares issuable upon the achievement of Milestone 1 of the Share Bonus Plan have been issued. Milestone 2 – negotiation and completion of an off-take agreement with a senior metals producer for the purchase and shipping off-site of the nickel hydroxide concentrate produced from our NorthMet Property - has not been achieved, and 1,300,000 Common Shares remain reserved for issuance upon the achievement of Milestone 2.

     At our Annual and Special Meeting held on June 21, 2006, 98.82% of our disinterested shareholders approved the issue of a total of 2,350,000 shares to the Share Bonus Plan Participants upon the attainment of Milestone 3 - completion of a bankable feasibility study which indicates that production from our NorthMet Property is commercially feasible. Milestone 3 was met on October 24, 2006 and the 2,350,000 shares issuable upon the achievement of Milestone 3 have been issued.

     At our Annual and Special Meeting held on June 27, 2007, 97.83% of our disinterested shareholders approved Polymet’s Omnibus Share Compensation Plan (the “Omnibus Plan”). The Omnibus Plan provides for the issuance of a total of 4,940,000 Common Shares under the Share Bonus Plan, subject to the approval by our disinterested shareholders of the shares of be issued upon the achievement of Milestone 4 (except in the event of an unsolicited take over bid as described in the next paragraph).

     The issuance of our shares upon the achievement of Milestone 4 – commencement of commercial production for our NorthMet Property - has not been approved by our disinterested shareholders, except that our disinterested shareholders approved, at the meeting of our shareholders held on June 21, 2006, the issuance of these shares upon an unsolicited take-over bid which is recommended by our directors and more than 50% of the our issued shares are tendered and not withdrawn under the bid.

     PolyMet is asking our shareholders to approve the issuance of shares under Milestone 4 of the Share Bonus Plan.

     Milestone 4 is the Commencement of Commercial Production of the NorthMet Property.

     Share Bonus Participants: On the achievement of Milestone 4, a total of 3,640,000 Common Shares will be issued to the Share Bonus Plan Participants as follows:

To Directors and Officers:

Name of Director and/or Officer	Number of Common Shares
David Dreisinger	400,000
Ian Forrest	400,000
George Molyviatis	400,000
William Murray	800,000
Joseph Scipioni	240,000
James Swearingen	400,000
Total	2,640,000

12

To other Bonus Share Plan Participants:

Name of Director and/or Officer	Number of Common Shares
Don Hunter (1)	400,000
Gaston Reymenants (2)	400,000
Jim Scott (3)	200,000
Total	1,000,000

Notes:

(1)	Don Hunter is the project manager for the NorthMet Project and responsible for the overall completion of the bankable feasibility study.
(2)	Gaston Reymenants has been retained as a specialist in metal sales to assist with off-take negotiations and project financing.
(3)	Jim Scott is responsible for the permitting process and involved in the project environmental impact statement.

     The value of the 3,640,000 Common Shares issuable on achieving Milestone 4 was Cdn$691,600 on the initiation of the Share Bonus Plan, and on April 28, 2008 is Cdn$13,358,800.

     The text of the proposed resolution authorizing the issuance of 3,640,000 Common Shares upon PolyMet having reached Milestone 4 is as follows:

     “BE IT RESOLVED THAT:

1. the issuance of 3,640,000 Common Shares of PolyMet under the Share Bonus Plan of PolyMet upon PolyMet having reached Milestone 4 under the Share Bonus Plan, as set out in the Management Proxy Circular dated April 28, 2008, be approved, ratified and confirmed.”

     To be effective, the resolution must be approved by a majority of the votes cast on the resolution at the Meeting in person or by proxy, other than votes cast by directors and officers of PolyMet and their respective affiliates.

     Insiders, to whom shares may be issued under the Share Bonus Plan, and their respective associates and affiliates, will abstain from voting on the foregoing resolution. The approval of a majority of disinterested shareholders of PolyMet is therefore sought. Accordingly, a total of 13,175,576 Common Shares held by insiders of PolyMet and their associates and affiliates may not be voted in respect of the resolution to approve the issuance of Milestone 4 Common Shares under the Share Bonus Plan.

Our Board of Directors has determined that the proposed authorization to issue 3,640,000 Common Shares upon PolyMet having reached Milestone 4 of the Share Bonus Plan is in the best interests of PolyMet and unanimously recommends a vote “FOR” the resolution authorizing PolyMet to issue 3,640,000 Common Shares upon PolyMet having reached Milestone 4 of the Share Bonus Plan.

EQUITY COMPENSATION PLANS

The following provides information regarding our existing Omnibus Plan and our Share Bonus Plan.

Omnibus Share Compensation Plan

     PolyMet’s executive compensation plan, the Omnibus Plan, was approved by our shareholders at the 2007 Annual and Special Meeting held on June 27, 2007 and is administered by the Compensation Committee. The Compensation Committee is currently composed of three independent directors whose responsibilities include reviewing the performance of the officers and recommending for board approval the overall compensation for executives.

     PolyMet designs its compensation plans in order to attract and retain highly qualified executives, motivate performance and align the interests of its management team with those of its shareholders. Compensation for management, including the Named Executive Officers, currently comprises a base salary, participation in the Omnibus Plan and bonuses that are subject to personal and corporate performance measures (see – “Share Bonus Plan”). The level of compensation is determined by the individual’s position and contribution, and by the performance of PolyMet relative to annual corporate goals which are set each fiscal year and are approved by our board of directors.

13

Share Bonus Plan

     For a full description of the Share Bonus Plan, see “Issuance of Shares upon the attainment of Milestone 4 under PolyMet’s Share Bonus Plan”.

     The number of shares to be issued under the Share Bonus Plan to each of the Named Executive Officers who are Share Bonus Plan Participants is as follows:

	Number of Shares to be Issued
Named Executive Officer	Upon Achievement of Milestone 2	Upon Achievement of Milestone 4 (1)
William Murray	300,000	800,000
Douglas Newby	100,000	Nil
Joseph Scipioni	50,000	240,000

Note:

 (1) The issuance of these shares remains subject to approval by disinterested shareholders set to be voted at the Meeting as set out under  “Issuance of Milestone 4 Shares under the Bonus Share Incentive Plan”.

Securities Authorized for Issuance Under Equity Compensation Plans

     The following table provides information with respect to our compensation plans under which our equity securities are authorized for issuance in effect as of January 31, 2008:

			Number of securities
			remaining available for
	Number of securities	Weighted-average	future issuance under
	to be issued upon	exercise price of	equity compensation
	exercise of outstanding	outstanding options,	plans (excluding
	options, warrants and	warrants and rights	securities reflected in
	rights under	under compensation	column (a)) under
	compensation plans as	plans as at January 31,	compensation plans as
Plan Category	at January 31, 2008	2008	at January 31, 2008
Equity compensation plans	11,312,800	$2.24	2,343,087
approved by securityholders(1)
Equity compensation plans	4,940,000	N/A	1,000,000
approved by securityholders(2)
Equity compensation plans not	Nil	Nil	Nil
approved by securityholders
Total	16,252,800	$2.24	3,343,087

Notes:

(1)	Includes the Omnibus Plan.
(2)	Includes the Share Bonus Plan.

14

EXECUTIVE COMPENSATION

Summary Compensation Table

     The following table provides a summary of compensation earned during the financial years ended January 31, 2008, 2007 and 2006 by our current and former President and Chief Executive Officer, our Chief Financial Officer and our former Chief Operating Officer. No other executive officer’s salaries and bonuses combined exceeded $150,000. We refer to such person elsewhere in this Management Proxy Circular as the “Named Executive Officers”:

		Annual Compensation			Long Term Compensation
					Awards		Payouts
						Shares
					Securities	Subject
					Under	to
Named Executive					Options/	Resale
				Other Annual	SARs	Restricti	LTIP	All Other
Officer and Principal		Salary	Bonus	Compensation	Granted	ons	Payouts	Compensation
Position	Year	(US$)	(US$) (1)	(US$)	(#)	(US$)	(US$)(2)	(US$)
William Murray (3)	2008	252,948	Nil	147,913	Nil	Nil	Nil	Nil
President & Chief	2007	232,610	274,388	Nil	450,000	Nil	532,852	Nil
Executive Officer	2006	179,280	Nil	Nil	300,000	Nil	229,708	Nil
Douglas Newby	2008	187,167	Nil	150,000	Nil	Nil	Nil	Nil
Chief Financial Officer	2007	162,750	109,755	Nil	500,000	Nil	592,058	Nil
	2006	18,750	Nil	Nil	350,000	Nil	240,858	Nil
Joseph Scipioni (4)	2008	175,667	Nil	50,000	250,000	Nil	334,000	Nil
Chief Operating	2007	84,000	Nil	Nil	500,000	Nil	561,992	Nil
Officer	2006	Nil	Nil	Nil	Nil	Nil	Nil	Nil

Notes:

(1)	Bonuses are milestone shares issued.
(2)	Long term incentive payments are the fair value of stock options granted.
(3)	Mr. Murray was President and Chief Executive Officer until February 5, 2008 and is now our Executive Chairman.
(4)	Mr. Scipioni was Chief Operating Officer until February 5, 2008 and is now our President and Chief Executive Officer.

Stock Option Grants and Exercises in 2008

     The following tables show certain information regarding options granted to, exercised by and held by our Named Executive Officers at January 31, 2008.

     PolyMet granted the following options to the Named Executive Officers during the financial year ended January 31, 2008:

	Option/SAR Grants During 2008 Financial Year
				Market Value
				of Securities
		% of Total		Underlying
	Securities,	Options/SARs		Options/SAR
	Under	Granted to	Exercise or	s on the Date
	Options/SARs	Employees in	Base Price	of Grant	Expiration
Named Executive Officer	Granted (#)	Financial Year	(Cdn$/Security)	(Cdn$)	Date
William Murray	Nil	Nil	Nil	Nil	Nil
Douglas Newby	Nil	Nil	Nil	Nil	Nil
Joseph Scipioni	250,000	9.31%	2.92 USD	$334,000	March 12, 2012

15

     The following options were exercised by the Named Executive Officers during the financial year ended January 31, 2008:

Aggregated Options/SAR Exercises During 2008 Financial Year
and Financial Year-End Option/SAR Values
				Value (Cdn$) of
				Unexercised
			Unexercised	in-the-Money
	Securities	Aggregate	Options/SARs at	Options/SARs
	Acquired	Value	January 31, 2008	at January 31, 2008
	on	Realized	Exercisable/	Exercisable/
Named Executive Officer	Exercise	(Cdn$)	Unexercisable	Unexercisable(1)
William Murray	Nil	Nil	850,000/0	$644,000/$0
Douglas Newby	Nil	Nil	850,000/0	$561,800/$0
Joseph Scipioni	Nil	Nil	750,000/0	$0/$0

Note:

(1) Amounts presented under the caption “Value of Unexercised in-the-Money Options at January 31, 2008” are based on Cdn$2.80 per share, which was the last reported sale price of our common shares on the TSX as of January 31, 2008, minus the exercise price, multiplied by the number of shares subject to the stock option, without taking into account any taxes that might be payable in connection with the transaction.

Option/SAR Repricings During the 2008 Financial Year

     During the financial year ended January 31, 2008, we did not reprice downward any options or freestanding SARs held by our Named Executive Officers.

Defined Benefit or Actuarial Plan

     We did not have a defined benefit or actuarial plan for our Named Executive Officers under which benefits are determined primarily by final compensation (or average final compensation) and years of service.

Employment Contracts, Termination of Employment and Change in Control Agreements

     PolyMet has recently amended and restated the executive employment agreements with each of our Named Executive Officers. The following is a summary of these agreements, including payments to be made by us to each of the Named Executive Officers in the event of their resignation, retirement or other termination of employment or a change of control of us or any of our subsidiaries.

     William Murray, our Executive Chairman, is entitled to an annual salary of Cdn$300,000 plus an annual cash bonus as determined by our Compensation Committee in its sole discretion. In the event Mr. Murray’s employment is terminated by us, other than for cause, or by Mr. Murray within one year of a change of control and within 90 days of the occurrence of an event defined in the agreement as “good reason” (which includes the good faith determination by Mr. Murray that as a result of a change of control or any action or event thereafter, his status or responsibility with us has been diminished or he has been effectively prevented from carrying out his duties and responsibilities as they existed immediately prior to a change of control), we have agreed to pay Mr. Murray an amount equal to three times his annual salary and most recent bonus, and to continue for 36 months the benefit plans in which he participated at the time of termination. No amount is payable to Mr. Murray in the event of his death or disability or by us for cause. The executive employment agreement also contains the agreement of Mr. Murray to maintain the confidentiality of our confidential information and a non-competition agreement by which he agrees not to be involved during his employment with us or for two years following the termination of his employment with us in any business that is engaged or proposed to be engaged in mining or mining exploration within 50 miles of any mineral property in which we have or are then proposing to acquire an interest.

     Mr. Murray is a Share Bonus Plan Participant. See “Issuance of Shares upon the attainment of Milestone 4 under PolyMet’s Share Bonus Plan” and “Share Bonus Plan” for a description of the Share Bonus Plan and the number of shares to which Mr. Murray may become entitled under the Share Bonus Plan.

     Douglas Newby, our Chief Financial Officer, is employed by our wholly owned subsidiary, Poly Met Mining, Inc. Mr. Newby is entitled to an annual salary of US$200,000 plus an annual cash bonus as determined by our Compensation Committee in its sole discretion. In addition, Mr. Newby is entitled to a bonus of not less than

16

US$100,000 upon our obtaining and approving a commitment for senior construction financing. Our agreement with Mr. Newby also contains provisions for payments on termination of his employment and confidentiality and non-competition provisions that are the same as those contained in our agreement with Mr. Murray.

     Mr. Newby is a Share Bonus Plan Participant. See “Issuance of Shares upon the attainment of Milestone 4 under PolyMet’s Share Bonus Plan” and “Share Bonus Plan” for a description of the Share Bonus Plan and the number of shares to which Mr. Newby may become entitled under the Share Bonus Plan.

     Joseph Scipioni, our President and Chief Executive Officer, is employed by our wholly owned subsidiary, Poly Met Mining, Inc. Mr. Scipioni is entitled to an annual salary of US$200,000 plus an annual cash bonus as determined by our Compensation Committee in its sole discretion. Our agreement with Mr. Scipioni also contains provisions for payments on termination of his employment and confidentiality and non-competition provisions that are the same as those contained in our agreement with Mr. Murray.

     Mr. Scipioni is a Share Bonus Plan Participant. See “Issuance of Shares upon the attainment of Milestone 4 under PolyMet’s Share Bonus Plan” and “Share Bonus Plan” for a description of the Share Bonus Plan and the number of shares to which Mr. Scipioni may become entitled under the Share Bonus Plan.

Remuneration of Directors

     We do not pay fees to our directors. Directors are entitled to be reimbursed for expenses incurred by them. Our directors participate in our stock option Plan and our Share Bonus Plan.

     The following table shows options granted to our directors in our most recently completed financial year.

			Market Value of
	Securities		Underlying
	Under Options	Exercise	Securities on Date of
Name	Granted	Price	Grant (Cdn$)	Expiration Date
William Corneliuson	400,000	US$2.88	540,600	March 8, 2012
David Dreisinger	Nil	Nil	Nil	Nil
W. Ian L. Forrest	Nil	Nil	Nil	Nil
George Molyviatis	Nil	Nil	Nil	Nil
William Murray(1)	Nil	Nil	Nil	Nil
Joe Scipioni(2)	250,000	US$2.92	334,000	March 12, 2012
Frank Sims	Nil	Nil	Nil	Nil
James Swearingen	Nil	Nil	Nil	Nil

Notes:

(1)	Mr. Murray was President and Chief Executive Officer until February 5, 2008 and is now our Executive Chairman.
(2)	Mr. Scipioni was Chief Operating Officer until February 5, 2008 and is now our President and Chief Executive Officer.

17

     The following table shows securities that our directors are entitled to under the Share Bonus Plan in our most recently completed financial year.

	Securities Upon	Securities Upon
	Achievement of	Achievement of
Name	Milestone 2	Milestone 4
William Corneliuson	Nil	Nil
David Dreisinger	150,000	400,000
W. Ian L. Forrest	150,000	400,000
George Molyviatis	150,000	400,000
William Murray(1)	300,000	800,000
Joe Scipioni(2)	50,000	240,000
Frank Sims	Nil	Nil
James Swearingen	150,000	400,000

Notes:

(1)	Mr. Murray was President and Chief Executive Officer until February 5, 2008 and is now our Executive Chairman.
(2)	Mr. Scipioni was Chief Operating Officer until February 5, 2008 and is now our President and Chief Executive Officer.

Indebtedness of Directors and Executive Officers

     No director, executive officer, proposed nominee for election as a director, nor any of their respective associates or affiliates is or has been at any time since the beginning of the last completed financial year indebted to PolyMet.

Director and Officer Indemnification and Insurance

Indemnification of Directors or Officers

     There is no indemnification payable this financial year to directors or officers of PolyMet.

Directors and Officers’ Insurance

     We maintain liability insurance for our directors and officers in the aggregate amount of $1,000,000. The current annual premium of $35,000 is paid by us.

Report of the Compensation Committee

Composition of the Compensation Committee

     During the year ended January 31, 2008, the following individuals served as members of our Compensation Committee: Ian Forrest, George Molyviatis and William Corneliuson who were directors of PolyMet during the time they served. None of the members of the Compensation Committee are officers or employees or were former officers or employees of PolyMet or any of our subsidiaries, had or has any relationship that requires disclosure hereunder in respect of indebtedness owed to PolyMet or any interest in material transactions involving PolyMet. In addition, none of our executive officers have served on the compensation committee (or in the absence of such committee the entire board of directors) of another issuer whose executive officer is a member of the Compensation Committee or board of directors.

Report of the Compensation Committee on Executive Compensation

     The Compensation Committee is responsible for making recommendations to the board of directors regarding the compensation to be paid to each of the executive officers of PolyMet. In addition, the Compensation Committee makes recommendations regarding compensation programs and policies and the granting of options and other stock-based awards under the Omnibus Plan.

18

     PolyMet’s compensation program reflects the fact that at the time of PolyMet’s re-activation in 2003, PolyMet did not have the financial resources to pay cash compensation levels required to obtain the services of qualified and experienced personnel required to bring the NorthMet Project to feasibility and, subsequently, production. Accordingly, to obtain the services of qualified and experienced personnel for relatively low levels of cash compensation, it was necessary for PolyMet to create a long-term compensation plan. This plan involved the issuance of shares of PolyMet upon the achievement of specific milestones in PolyMet’s business plan for the development of the NorthMet property, combined with the stock option plan. PolyMet has been able to engage personnel with exceptional competence and experience who were prepared to be rewarded against achievements in the form of bonus shares and stock options, As PolyMet grows, the NorthMet project approaches permitting and production and more personnel are hired, long term incentive rewards are being provided under the Omnibus Plan with specific vesting conditions. Executives who have benefited from previous long term incentive programs have smaller relative positions in these stock options.

     PolyMet’s compensation program is designed to reward commitment, endeavour and achievement, both in the increased value of PolyMet and the attainment of individual objectives.

     Cash compensation is now in the range of the average of cash compensation paid to executives in equivalent positions in companies within the mining industry of similar market capitalization. However, stock-options and other stock-based awards, with specific vesting criteria, are still an important incentive for new employees.

     Compensation packages for new staff members and adjustments for existing personnel are now recommended by the Executive Chairman and Chief Executive Officer and reviewed by the Compensation Committee before being submitted to the board of directors for approval. These compensation packages may include cash bonuses as well as long term incentive awards through the use of stock options or other stock based-awards. The Compensation Committee and the board of directors are considering awarding stock options on an annual basis.

     Bonuses will be considered by the Compensation Committee in discussion with senior management for individual meritorious achievement. In the past, bonuses in shares have been related to specific milestones and two elements of these remain to be achieved, namely signature of a product off-take agreement and commercial production.

     PolyMet makes adjustments to stock option awards pursuant to the Omnibus Plan.

     The inferred cost of the bonus shares is charged to the NorthMet Project or administration costs, as appropriate, as and when the shares are issued at the value ascribed to them based on the market price when shareholders first approved the awards. Stock options are charged at fair value, using the Black Scholes model, as and when they vest.

     The Compensation Committee has received comparable industry analyses from external consultants and considers that appropriate levels of remuneration are now being paid, taking into account the developmental stage of PolyMet’s property.

     The Executive Chairman and the Chief Executive Officer play a major role in determining, with the Compensation Committee, levels and types of compensation for all positions, other than the Chief Executive Officer. The Executive Chairman and the Chief Executive Officer’s compensation are determined by the board of directors.

Specific Components of Executive Compensation

     PolyMet’s compensation package for its executive officers consists of base salary, bonuses, stock compensation awards, stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards, and other stock-based awards granted pursuant to the Omnibus Plan and Share Bonus Plan.

     PolyMet provides customary employment benefits to certain executive officers. Benefits are provided at PolyMet’s expense and include: medical, extended health and dental benefits.

19

Chief Executive Officer’s Compensation

     The compensation of the Chief Executive Officer is determined in accordance with the considerations described above for the compensation of PolyMet’s executive officers.

Submitted by the Compensation Committee:

W. Ian L. Forrest, George Molyviatis, and William D. Corneliuson

Common Share Performance Graph

     Our Common Shares trade on the Toronto Stock Exchange (the “TSX”) under the symbol “POM”. Assuming an initial investment of $100, the following graph illustrates the cumulative total shareholder return on our Common Shares (based upon the trading prices on the TSX) relative to the cumulative total return on the S&P/TSX Composite Index (formerly TSX 300 Composite Index) for the period of February 1, 2003 to January 31, 2008.

CUMULATIVE VALUE OF A $100 INVESTMENT
ASSUMING REINVESTMENT OF
DIVIDENDS

(in Cdn$)	2003	2004	2005	2006	2007	2008
PolyMet Mining Corp	100.00	449.98	916.61	4,566.36	5,966.26	4,454.81
S&P/TSX Composite Index	100.00	131.71	144.75	191.33	213.97	221.37
S&P/TSX Composite Index -	100.00	162.87	200.54	346.79	509.59	575.60
Metals & Mining

20

STATEMENT ON CORPORATE GOVERNANCE

     On June 30, 2006, National Instrument 58-101 - Disclosure of Corporate Governance Practices (the “Disclosure Instrument”) and National Policy 58-201 - Corporate Governance Guidelines (the “Guidelines”) came into force in every province and territory in Canada. In addition, PolyMet is subject to Multilateral Instrument 52-110 - Audit Committees (“Audit Committee Instrument”), which has been adopted in various Canadian provinces and territories and which prescribes certain requirements in relation to audit committees and defines the meaning of independence with respect to directors. These reflect current regulatory guidelines of the Canadian Securities Administrators (CSA) as well as certain U.S. initiatives under the Sarbanes-Oxley Act of 2002 and newly adopted corporate governance rules of the NYSE and NASDAQ National Market.

     PolyMet’s Corporate Governance Disclosure in the form required by the Disclosure Instrument is set out in Appendix “A”.

     The Common Shares are listed on The American Stock Exchange ("AMEX"). Section 110 of the AMEX Company Guide permits AMEX to consider the laws, customs and practices of a non-U.S. issuer in relaxing certain AMEX listing criteria, and to grant exemptions from AMEX listing criteria based on these considerations. PolyMet has obtained relief under this provision. Section 123 of the AMEX Company Guide requires a quorum of not less than 33-1/3 of a listed company's shares issued and outstanding entitled to vote at a meeting of shareholders. Under PolyMet’s bylaws the quorum for the Meeting is two of our shareholders present in person or by proxy holding or representing more than 5% of our Common Shares.

INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS

     Other than as disclosed herein, we are not aware of any material interest, direct or indirect, involving any director or executive officer or proposed nominee for election as a director or any shareholder who holds more than 10% of our outstanding voting securities, or any associate or affiliate of any of the foregoing, which has been entered into since the commencement of our last completed financial year or in any proposed transaction which, in either case, has materially affected or will materially affect PolyMet or any of our subsidiaries.

ADDITIONAL INFORMATION

     Additional information relating to PolyMet may be found on the System for Electronic Document Analysis and Retrieval (“SEDAR”) at www.sedar.com and on the Electronic Data Gathering, Analysis and Retrieval system (“EDGAR”) at www.sec.gov under the company name “PolyMet”. Additional financial information is provided in our audited consolidated financial statements and our MD&A for our most recently completed financial year. Copies of our financial statements and MD&A can be obtained by contacting the Corporate Secretary of PolyMet in writing at 1003 – 1177 West Hastings Street, Vancouver, British Columbia V6E 2K3 or by e-mail at info@polymetmining.com. Copies of such documents will be provided to shareholders free of charge.

PARTICULARS OF OTHER MATTERS TO BE ACTED UPON

     Management knows of no other matters to come before the Meeting other than those referred to in the Notice of Meeting. However, if any other matters which are not now known to us shall properly come before the said Meeting, the Form of Proxy given pursuant to the solicitation by management will be voted on such matters in accordance with the best judgment of the persons voting the proxy.

APPROVAL

     The contents and the sending of this Management Proxy Circular have been approved by the board of directors of PolyMet.

     DATED at Vancouver, British Columbia, as of the 28^th day of April, 2008.

By Order of the Board of Directors

signed “Joseph M. Scipioni”

Director, President & Chief Executive Officer

21

APPENDIX “A”

POLYMET MINING CORP.
CORPORATE GOVERNANCE DISCLOSURE

CORPORATE GOVERNANCE DISCLOSURE REQUIREMENT	OUR CORPORATE GOVERNANCE PRACTICES
1. Board of Directors (a) Disclose the identity of directors who are independent.	Our board of directors has determined that William D. Corneliuson, W. Ian L. Forrest, George Molyviatis, Frank L. Sims, and James Swearingen are “independent”. Mr. Sims was appointed to the board of directors on February 19, 2008. Under the Canadian Securities Administrators’ National Instrument 58-101 – Disclosure of Corporate Governance Practices, a director is “independent” if he or she has no direct or indirect material relationship with us that could, in the view of our board of directors, be reasonably expected to interfere with the exercise of that director’s independent judgment.
(b) Disclose the identity of directors who are not independent, and describe the basis for that determination.	Our board of directors has determined that Dr. David Dreisinger, William Murray, and Joseph Scipioni are not independent. Mr. Scipioni was appointed to the board of directors on February 5, 2008 and also serves as our President and Chief Executive Officer. Mr. Murray did serve as our President and Chief Executive Officer until February 5, 2008 and is now our Executive Chairman. Dr. Dreisinger is paid consulting fees in addition to regular fees for serving as a director.
(c) Disclose whether or not a majority of directors are independent.	A majority of our directors are independent.
(d) If a director is presently a director of any other issuer that is a reporting issuer (or the equivalent) in a jurisdiction or a foreign jurisdiction, identify both the director and the other issuer.	Our directors who are directors of other reporting issuers (or the equivalent) are:
	Name	Reporting Issuer
	William D. Corneliuson	Medwave Inc.
	Dr. David Dreisinger	International Nickel Ventures Corporation
	W. Ian L. Forrest	Mengold Resources Inc. Georex SA, France Belmore Resourses plc, Ireland Viatrade plc, England
	William Murray	Baja Mining Corp. Aura Minerals Inc.
	Frank Sims	Piper Jaffray Companies

A-1

CORPORATE GOVERNANCE DISCLOSURE REQUIREMENT	OUR CORPORATE GOVERNANCE PRACTICES
(e) Disclose whether or not the independent directors hold regularly scheduled meetings at which non-independent directors and members of management are not in attendance. If the independent directors hold such meetings, disclose the number of meetings held since the beginning of the issuer’s most recently completed financial year. If the independent directors do not hold such meetings, describe what the board does to facilitate open and candid discussion among its independent directors.	Our directors have not held regularly scheduled meetings at which non-independent directors and members of management are not present. However, our independent directors regularly hold frequent informal meetings by telephone at which non-independent directors and members of management are excluded.
(f) Disclose whether or not the Chair of the board is an independent director. If the board has a chair or lead director who is an independent director, disclose the identity of the independent chair or lead director, and describe his or her role and responsibilities. If the board has neither a chair that is independent nor a lead director that is independent, describe what the board does to provide leadership for its independent directors.	The Chair is not an independent director. W. Ian L. Forrest, our Chairman until February 5, 2008 and an independent director, provides leadership to our independent directors.
(g) Disclose the attendance record of each director for all board meetings held since the beginning of the issuer’s most recently completed financial year.	The attendance record of each of our present and former directors for all board of directors meetings for the period February 1, 2007 to January 31, 2008 is as follows:
	Name	Attendance
	William D. Corneliuson	8/9
	Dr. David Dreisinger	8/10
	W. Ian L. Forrest	10/10
	George Molyviatis	10/10
	William Murray	10/10
	Joseph Scipioni	N/A (Mr. Scipioni was appointed to the board of directors on February 19, 2008)
	Frank Sims	N/A (Mr. Sims was appointed to the board of directors on February 19, 2008)
	James Swearingen	9/10

A-2

CORPORATE GOVERNANCE DISCLOSURE REQUIREMENT	OUR CORPORATE GOVERNANCE PRACTICES
2. Board Mandate – Disclose the text of the board’s written mandate. If the board does not have a written mandate, describe how the board delineates its role and responsibilities.	The Board Mandate was approved by the board of directors on January 16, 2008. The Board Mandate is attached to this Management Proxy Circular as Schedule I.
3. (a) Disclose whether or not the board has developed written position descriptions for the chair and the chair of each board committee. If the board has not developed written position descriptions for the chair and/or the chair of each board committee, briefly describe how the board delineates the role and responsibilities of each such position.	The board of directors has developed a written position for the Executive Chair. The Charter of each Committee sets out the responsibilities, duties and authority of all Committee members.
(b) Disclose whether or not the board and Chief Executive Officer have developed a written position description for the Chief Executive Officer. If the board and Chief Executive Officer have not developed such a position description, briefly describe how the board delineates the role and responsibilities of the Chief Executive Officer.	The board of directors and the Chief Executive Officer have developed a written position description of the Chief Executive Officer.
4. (a) Briefly describe what measures the board takes to orient new directors regarding: (i) the role of the board, its committees and its directors, and (ii) the nature and operation of the issuer’s business.	New directors are provided with an information package on PolyMet which includes mandates of certain board committees, corporate disclosure policy and code of ethics. Orientation as to the nature and operation of the issuer’s business occurs through attendance at board strategy sessions and through informal meetings. W. Ian L. Forrest is a member of the Institute of Chartered Accountants of Scotland and as such undertakes continuing professional development.
(b) Briefly describe what measures, if any, the board takes to provide continuing education for its directors. If the board does not provide continuing education, describe how the board ensures that its directors maintain the skill and knowledge necessary for them to meet their obligations as directors.	Our directors are made aware of their responsibility to keep themselves up to date with best director and corporate governance practice and are encouraged and funded to attend seminars that will increase their own and our board of director’s effectiveness.
5. (a) Disclose whether or not the board has adopted a written code for the directors, officers and employees. If the board has adopted a written code:	Our board of directors has adopted a written Code of Business Conduct and Ethics, (the “Code”), for its directors, officers and employees.
(i) disclose how an interested party may obtain a copy of the written code.	A copy of our Code is available on our website at www.polymetmining.com.

A-3

CORPORATE GOVERNANCE DISCLOSURE REQUIREMENT	OUR CORPORATE GOVERNANCE PRACTICES
(ii) describe how the board monitors compliance with its code, or if the board does not monitor compliance, explain whether and how the board ensures compliance with its code; and	Our board monitors compliance with the Code through its Audit Committee and our Corporate Secretary. In addition to answering questions or concerns regarding the Code, our Corporate Secretary is responsible for: investigating possible violations of the Code (in conjunction with the Audit Committee) and ensuring that new directors, officers and employees are given a copy of the Code including any referenced policies.
(iii) provide a cross-reference to any material change report(s) filed since the beginning of the issuer’s most recently completed financial year that pertains to any conduct of a director or executive officer that constitutes a departure from the code.	No material change reports have been filed by us since February 1, 2007, the beginning of our most recently completed financial year, that pertain to any conduct of a director or executive officer that constitutes a departure from our Code.
(b) Describe any steps the board takes to ensure directors exercise independent judgement in considering transactions and agreements in respect of which a director or executive officer has a material interest.	Our board of directors takes measures to exercise independent judgment in considering transactions and agreements in respect of which any of our directors or executive officers may have a material interest. Where appropriate, our directors absent themselves from portions of a meeting of our board of directors or of a board committee to allow independent discussion of points in issue. We comply with the relevant provisions under the Business Corporations Act (British Columbia) that deal with conflict of interest situations. Through directors’ and officers’ questionnaires and other systems, we also gather and monitor relevant information in relation to potential conflicts of interest that a director or officer may have.
(c) Describe any other steps the board takes to encourage and promote a culture of ethical business conduct.	Our board evaluates and ensures the integrity of the Chief Executive Officer and other executive officers, and ensures that the Chief Executive Officer and other executive officers create a culture of integrity and conduct themselves in an ethical manner and in compliance with applicable laws and rules, audit and accounting principles, and our governing policies. Our board reviews, adopts, and confirms distribution of, the Code and other governing policies, as applicable. Our directors, officers and employees are reminded on an annual basis that they are responsible for reading, understanding and complying with the Code and related policies and, in the case of directors, also with the Board Mandate.

A-4

CORPORATE GOVERNANCE DISCLOSURE  REQUIREMENT	OUR CORPORATE GOVERNANCE PRACTICES
6. (a) Describe the process by which the board identifies new candidates for board nomination.	Our Nominating and Corporate Governance Committee has the primary responsibility for identifying, evaluating, reviewing and recommending qualified candidates to serve on our board, including consideration of any potential conflicts of interest as well as applicable independence and experience requirements. In making its recommendations to our board on director nominees, the Nominating and Corporate Governance Committee considers what competencies and skills our board as a whole should possess, it assesses what competencies and skills each existing director possesses, and then it assesses what competencies and skills each nominee will bring to our board and whether such nominee is independent and can devote sufficient time and resources to his or her duties as a board member.
(b) Disclose whether or not the board has a nominating committee composed entirely of independent directors. If the board does not have a nominating committee composed entirely of independent directors, describe what steps the board takes to encourage an objective nomination process.	Our Nominating and Corporate Governance Committee is composed entirely of independent directors. The members of the Nominating and Corporate Governance Committee are William D. Corneliuson, W. Ian L. Forrest and George Molyviatis.
(c) If the board has a nominating committee, describe the responsibilities, powers and operation of the nominating committee.	The Nominating and Corporate Governance Committee Charter was approved by the board of directors on January 16, 2008. The Nominating and Corporate Governance Committee Charter is attached to this Management Proxy Circular as Schedule II. The Nominating and Corporate Governance Committee has full access to our books, facilities, records and personnel to allow it to discharge its responsibilities, and may retain the advice and assistance of those internal or external legal, accounting or other advisors it deems necessary or appropriate.
7. (a) Describe the process by which the board determines the compensation for your company’s directors and officers.	Compensation for directors and officers is determined by our Compensation Committee. In determining compensation for our directors, the Compensation Committee internally reviews director compensation paid by companies with a comparable profile to us. In determining compensation for officers, the Compensation Committee utilizes the process described in our Management Proxy Circular under the heading “Executive Compensation Report of the Compensation Committee on Executive Compensation”.
(b) Disclose whether or not the board has a compensation committee composed entirely of independent directors. If the board does not have a compensation committee composed entirely of independent directors, describe what steps the board takes to ensure an objective process for determining such compensation.	Our Compensation Committee is composed entirely of independent directors. The members of the Committee are William D. Corneliuson, W. Ian L. Forrest and George Molyviatis.

A-5

CORPORATE GOVERNANCE DISCLOSURE REQUIREMENT	OUR CORPORATE GOVERNANCE PRACTICES
(c) If the board has a compensation committee, describe the responsibilities, powers and operation of the compensation committee.	The Compensation Committee Charter was approved by the board of directors on January 16, 2008. The Compensation Committee Charter is attached to this Management Proxy Circular as Schedule III. The Compensation Committee has full access to our books, facilities, records and personnel to allow it to discharge its responsibilities, and may retain the advice and assistance of those internal or external legal, accounting or other advisors it deems necessary or appropriate.
(d) If a compensation consultant or advisor has, at any time since the beginning of the issuer’s most recently completed financial year, been retained to assist in determining compensation for any of the issuer’s directors and officers, disclose the identity of the consultant or advisor and briefly summarize the mandate for which they have been retained. If the consultant or advisor has been retained to perform any other work for the issuer, state that fact and briefly describe the nature of the work.	None.
8. Other Board Committees - If the board has standing committees other than the audit, compensation and nominating committees identify the committees and describe their function.	None.
9. Assessments – Disclose whether or not the board, its committees and individual directors are regularly assessed with respect to their effectiveness and contribution. If assessments are regularly conducted, describe the process used for the assessments. If assessments are not regularly conducted, describe how the board satisfies itself that it, its committees, and individual directors are performing effectively.	Our Nominating and Corporate Governance Committee is mandated to ensure that the contributions of board members, committees of the board, and our board as a whole, are reviewed on an annual basis. Additionally, our Nominating and Corporate Governance Committee monitors the quality of the relationship between our management and our board of directors, in order to recommend ways to improve that relationship.

A-6

SCHEDULE I

POLYMET MINING CORP.

MANDATE FOR THE BOARD OF DIRECTORS

1. PURPOSE

The Board has responsibility for the stewardship of PolyMet Mining Corp. (the “Company”) by supervising the Company’s affairs with the goal of enhancing shareholder value and maintaining a culture of integrity throughout the Company.

2. STRUCTURE AND OPERATIONS

The Board shall be composed of not less than five (5) directors and shall have a majority of independent directors. The members of the Board shall be nominated by the Nominating and Corporate Governance Committee and appointed or reappointed at the annual general meeting of the shareholders of the Company (the “AGM”). Directors may be nominated to bring special expertise or perspective to Board deliberations; however, they are not chosen to represent a particular constituency. The best interests of the Company must be paramount at all times.

The Board shall appoint or reappoint, at the meeting of the Board immediately following the AGM, a chairman among their number. The chairman shall serve as a liaison between the Board and members of the Company’s management team (“Management”).

Meetings of the board shall be held on a quarterly basis, provided that due notice is given and a quorum of a majority of the members is present. Where a meeting is not possible, resolutions in writing which are signed by all members of the Board are as valid as if they had been passed at a duly held meeting. The frequency and nature of the meeting agendas are dependent upon business matters and affairs which the Company faces from time to time.

To facilitate the functioning of the Board independently of Management:

(a)	the proportion of members of Management on the Board shall be limited to a minority of the directors;
(b)	when appropriate, members of Management shall not be present for the discussion and determination of certain matters at meetings of the Board;
(c)	under the By-laws of the Company, a director may, and the secretary or an assistant secretary of the Company, if any, on the request of a director must call a meeting of the directors at any time; and
(d)	Management’s compensation shall be reviewed, in their absence, by the Compensation Committee.

The Board shall discharge its responsibilities for the stewardship of the Company directly or with the assistance of the following three (3) standing committees:

(a)	Audit Committee;
(b)	Nominating and Corporate Governance Committee, and
(c)	Compensation Committee.

When appropriate, ad hoc committees shall be appointed by the Board to address certain issues of a more short-term nature.

3. SPECIFIC DUTIES OF THE BOARD

As part of the Board’s overall responsibility for the stewardship of the Company, its principle duties include, but shall not be limited to, the following:

1

Oversight of Management

1.	The Board shall approve the appointment of the President and CEO and all other officers, and approve the compensation of officers based upon the recommendations of the Compensation Committee.
2.	To the extent possible, the Board shall satisfy itself as to the integrity of the officers and ensure that they create a culture of integrity throughout the Company.
3.	The Board has delegated authority to the President and CEO for the overall management of the Company, including strategy and operations, to ensure the long term success of the Company and to maximize shareholder value.
4.	The Board may from time to time delegate authority to other officers, subject to specified limits.
5.	Review and prior approval by the Board shall be required for all material transactions in which the Company is involved including, without limitation, the acquisition or disposition by the Company of significant assets and properties, the issuance of securities and any matters that are outside the scope of authority delegated to officers.
6.	The Board shall regularly review and maintain the Company’s succession plan, which includes the appointment, training and monitoring of officers.

Board Organization

1.

The Board shall respond to recommendations received from the Nominating and Corporate Governance Committee, but shall retain the responsibility for managing its own affairs by approving the following: its composition; the candidates nominated for election; appointments to committees; the selection of the chairmen of the Board and of its committees, and committee charters.

2.

The Board may delegate certain responsibilities to its committees, including: the review and assessment of Board and officers compensation levels; the interim financial results; the performance of the Board and officers; the internal controls systems; the orientation and continuing education of Board members; and safety matters. However, the Board shall retain its oversight function and ultimate responsibility for these matters and all other delegated responsibilities.

Monitoring of Financial Performance and other Financial Reporting Matters

The Board shall be responsible for the following:

1.	reviewing and questioning the strategies and plans of the Company;
2.	identifying principal business risks and ensuring the implementation of appropriate systems to manage such risks including, insurance coverage, conduct of material litigation and the effectiveness of internal controls;
3.	considering appropriate measures to be taken if the performance of the Company falls short of its goals;
4.	reviewing and upon the recommendations of the Audit Committee, approving the audited financial statements and notes thereto;
5.	overseeing the accurate reporting of the financial performance of the Company to its shareholders on a timely and regular basis;
6.	overseeing that the financial results are reported fairly and in accordance with generally accepted accounting standards, and
7.	reviewing and approving those matters which the Board is required to approve under its governing legislation and documents, including the payment of distributions and material expenditures.

Policies and Procedures

The Board shall approve, maintain and monitor compliance with all policies, codes, charters and procedures developed to ensure that the Company operates at all times within applicable laws and regulations and to the highest ethical and moral standards.

2

Reporting

1.	The Board shall review and maintain the integrity of the internal control and management information systems of the Company.
2.	The Board shall implement measures for receiving feedback from stakeholders and ensure that material information is disseminated to the public in a timely manner and in accordance with the Company’s Corporate Disclosure Policy.

4. SPECIFIC DUTIES OF EACH DIRECTOR

The following expectations and responsibilities are meant to serve as a framework to guide individual directors in their participation on the Board, with a view to enabling the Board to meet its duties and responsibilities:

1.	assuming a stewardship role and overseeing the management of the affairs of the Company;
2.	maintaining a clear understanding of the Company, including:
	(a)	its strategic and financial plans and objectives;
	(b)	emerging trends and issues;
	(c)	significant strategic initiatives;
	(d)	capital allocations and expenditures;
	(e)	principal business risks and management of such risks;
	(f)	internal systems, processes and controls;
	(g)	compliance with applicable laws and regulations, and
	(h)	governance, audit and accounting principles and practices.
3.	preparing for each Board and committee meeting by reviewing materials provided and requesting, where appropriate, information that will allow the director to properly participate in the deliberations, make informed business judgments and exercise oversight;
4.	absent a compelling reason, attend every Board and committee (of which the director is a member) meeting, and actively participating in deliberations and decisions. When attendance is not possible, a director should become familiar with the matters to be covered at the meeting;
5.	voting on all decisions of the Board or its committees, except when a conflict of interest may exist;
6.	preventing personal interests from conflicting with, or appearing to conflict with, the interests of the Company and disclosing details of such conflicting interests should they arise; and
7.	acting in the highest ethical manner and with integrity in all professional dealings.

Approved by the Board on January 16, 2008.

3

SCHEDULE II

POLYMET MINING CORP.

NOMINATING AND CORPORATE GOVERNANCE COMMITTEE CHARTER

1. PURPOSE

The purpose of the Nominating & Corporate Governance Committee (in this charter, the “Committee”) is to identify and recommend qualified individuals as members of the Board and of its committees, to review and set out recommendations for non-stock based remuneration for Board members to the Board and to monitor and review PolyMet Mining Corp’s. (the “Company”) corporate governance practices and policies and make recommendations for changes when appropriate.

2. STRUCTURE AND OPERATIONS

The Committee shall be composed of not less than three (3) directors. Members of the Committee shall be independent and appointed or reappointed at the meeting of the Board, immediately following the AGM, and in the normal course of business will serve a minimum of three (3) years. Each member shall continue to be a member of the Committee until a successor is appointed, unless the member resigns, is removed or ceases to be a director. The Board may fill a vacancy that occurs in the Committee at any time.

The Board or, in the event of its failure to do so, the members of the Committee, shall appoint or reappoint at the meeting of the Board, immediately following the AGM, a chairman among their number. The chairman shall not be a former Officer of the Company and shall serve as a liaison between the Committee and Management.

Meetings of the Committee shall be held at least once annually, provided that due notice is given and a quorum of the majority of the members is present. Where a meeting is not possible, resolutions in writing which are signed by all members of the Committee are as valid as if they had been passed at a duly held meeting. The frequency and nature of the meeting agendas are dependent upon business matters and affairs which the Company faces from time to time.

The Committee shall report to the Board on its activities after each of its meetings. In addition, it shall review and assess the adequacy of this charter annually and, where necessary, recommend changes to the Board for approval. The Committee shall undertake and review with the Board an annual performance evaluation of the Committee.

3. SPECIFIC DUTIES

The Committee shall:

1.	review the composition of the Board, taking into consideration the current strengths, skills and experience of the Board; the strategic direction of the Company; the competencies and skills that the Committee considers to be necessary for the Board, as a whole, to possess; and the qualification of the current Board members;
2.	recommend to the Board nominees for election and re-election as members and specify the qualifications that each new nominee will bring to the Board, including without limitation:

a.	personal qualities, characteristics, skills, experiences, accomplishments and reputation in the business community;
b.	current knowledge and contacts in the countries and/or communities in which the Company does business and in the Company’s industry sector or other industries relevant to the Company’s business;
c.	ability and willingness to commit adequate time and resources to Board and Committee matters, and be responsive to the needs of the Company, and
d.	compliance with all legal and regulatory requirements of a Board member.

3. ensure that a comprehensive orientation is received by new directors and that continuing education opportunities are available to all directors;

1

4.	recommend to the Board prior to the annual meeting of the Board, the allocation of the directors to each of the committees of the Board. Where a vacancy occurs at any time in the membership of any committee of the Board, recommend to the Board a member to fill such vacancy;
5.	annually assess the performance of the Board, each director and the committees of the Board and make recommendations to the Board;
6.	review with the Board, on a regular basis, the methods and processes by which the Board fulfills its duties and responsibilities, including without limitation:

a.	the size and composition of the Board;
b.	the number and content of Board meetings;
c.	resources available to the directors, and
d.	the communication process between the Board, its committees and Management.

7.	recommend non-stock based directors’ compensation to the Board;
8.	review at least annually the corporate governance policies and practices and make appropriate recommendations for their improvement;
9.	prepare recommendations for the board regarding any reporting required or recommended on corporate governance (e.g. public disclosure documents required by the TSX guidelines);
10.	retain and compensate such independent advisors as it may deem necessary or advisable to permit it to carry out its duties. The expenses related to such engagement shall be funded by the Company, and
11.	have such other powers and duties as delegated to it by the Board.

Approved by the Board on January 16, 2008.

2

SCHEDULE III

POLYMET MINING CORP.

COMPENSATION COMMITTEE CHARTER

1. PURPOSE

The Compensation Committee (in this charter, the “Committee”) shall assist the Board in its oversight role with respect to PolyMet Mining Corp.’s (the “Company”) global human resource strategy, policies and programs, and all matters relating to the proper utilization of human resources within the Company, with special focus on management succession, development and compensation.

2. STRUCTURE AND OPERATIONS

The Committee shall be composed of not less than three (3) directors. Members of the Committee shall be independent and appointed or reappointed at the meeting of the Board, immediately following the AGM, and in the normal course of business will serve a minimum of three (3) years. Each member shall continue to be a member of the Committee until a successor is appointed, unless the member resigns, is removed or ceases to be a director. The Board may fill a vacancy that occurs in the Committee at any time.

The Board or, in the event of its failure to do so, the members of the Committee, shall appoint or reappoint, at the meeting of the Board immediately following the AGM, a chairman among their number. The chairman shall not be a former officer of the Company and shall serve as a liaison between the Committee and Management.

Meetings of the Committee shall be held at least once annually, provided that due notice is given and a quorum of a majority of the members is present. Where a meeting is not possible, resolutions in writing which are signed by all members of the Committee are as valid as if they had been passed at a duly held meeting. The frequency and nature of the meeting agendas are dependent upon business matters and affairs which the Company faces from time to time.

The Committee shall report to the Board on its activities after each of its meetings. In addition, it shall review and assess the adequacy of this charter annually and, where necessary, recommend changes to the Board for approval. The Committee shall undertake and review with the Board an annual performance evaluation of the Committee.

3. SPECIFIC DUTIES

The Committee shall review and make recommendations to the Board at least annually regarding the following:

1.	the appointment, performance, succession and remuneration of officers;
2.	the Company’s succession and leadership plans;
3.	remuneration and compensation policies, including short and long-term incentive compensation plans, such as stock option and share bonus grants;
4.	the granting of stock options to directors, officers and other key employees and consultants of the Company;
5.	all other remuneration matters, including severance arrangements, with respect to officers, and
6.	executive compensation disclosure prior to its public release.

The Committee shall have the authority to retain and compensate such independent advisors as it may deem necessary or advisable to fulfill its duties. The expenses related to such engagement shall be funded by the Company.

The Committee shall have such other powers and duties as delegated to it by the Board.

Approved by the Board on January 16, 2008.

1

EX-99.4

EX-99.5