Document:

Poly Met Mining Inc.: Exhibit 4.1 - Filed by newsfilecorp.com

 

 

 

STANDBY PURCHASE AGREEMENT 

 

 

 

 

POLYMET MINING CORP. 

and 

GLENCORE AG 

 

 

 

 

Dated: April 10, 2013 

Contents 

	1
      	Definitions
      and Interpretation	2
	 	 	 
	2
      	The
      Rights Offering 	2
      
	 	 	 
	3
      	Representations
      and Warranties 	3
      
	 	 	 
	4
      	Further
      Undertakings 	4
	 	 	 
	5
      	Conditions
      and Termination Rights 	4
      
	 	 	 
	6
      	Exclusivity
      	6
	 	 	 
	7
      	Confidentiality
      and Announcements 	6
      
	 	 	 
	8
      	Further
      Assurance 	7
	 	 	 
	9	Notices
      	9
	 	 	 
	10	General
      	9
      
	 	 	 
	11
      	Governing
      Law and Jurisdiction 	10
      

	Schedule
      1 	Definitions
      
	 	 
	Schedule
      2 	Provisions
      Relating to the Rights Offering 
	 	 
	Schedule
      3 	Form
      of Initial Press Announcement 
	 	 
	Schedule
      4 	Form
      of Preliminary Prospectus 
	 	 
	Schedule
      4.3.3 	Form
      of Corporate Governance Agreement 
	 	 
	Schedule
      5 	Representations
      and Warranties of PolyMet 
	 	 
	Schedule
      5(A)	  
	 	 
	Schedule
      5(E)	  
	 	 
	Schedule
      5(J)	  
	 	 
	Schedule
      5(K) 	  
	 	 
	Schedule
      5(L) 	  
	 	 
	Schedule
      5(Q) 	  
	 	 
	Schedule
      5(R) 	  
	 	 
	Schedule
      5(S) 	  
	 	 
	Schedule
      5(W) 	  
	 	 
	Schedule
      5(X) 	  
	 	 
	Schedule
      6 	Representations
      and Warranties of Glencore 
	 	 
	Schedule
      S1 	Material
      Agreements 
	 	 
	Exhibit
      5.4(e) 	Form
      of Farris, Vaughan, Wills & Murphy LLP Opinion 
	 	 
	Exhibit
      5.4(f) 	Form
      of Troutman Sanders Opinion 

THIS AGREEMENT is entered into as of April 10, 2013 

PARTIES: 

      
     POLYMET MINING CORP., (registered in British
Columbia) whose registered office is at 700 West Georgia Street, Suite 2500,
Vancouver, British Columbia V7Y 1B3 ("PolyMet" or the "Company");

      
     GLENCORE AG, a corporation formed under the laws
of Switzerland whose registered office is at Baarermatstrasse 3, CH-6431, Baar,
Switzerland ("Glencore"). 

WHEREAS 

	(A) 	
      The Company intends to raise US$60,000,000 by way of a
      rights offering (the "Rights Offering") to its Shareholders on the
      terms and conditions set out herein and in the draft Preliminary
  Prospectus attached hereto as Schedule 4.

	 	 
	(B) 	
      Glencore has agreed to provide a standby commitment in
      respect of the Rights Offering on the terms and conditions set out in
      Schedule 2.

	 	 
	(C) 	
      Glencore has agreed to advance US$20 million (the
      "Loan") to PolyMet’s wholly-owned subsidiary, Poly Met Mining, Inc,
      a corporation existing under the laws of Minnesota ("PMI"), by the
      purchase of a Tranche E Debenture (the "Tranche E Debenture") under
      the Purchase Agreement, dated as of October 31, 2008, as amended by Letter
      Agreement, dated November 28, 2008, as further amended by Amendment Letter
      No. 2, dated December 12, 2008, as further amended by Amendment Letter No.
      3, dated December 19, 2008, as further amended by Amendment Letter No. 4,
      dated January 30, 2009, as further amended by Amendment Letter No. 5,
      dated February 24, 2009, as further amended by Amendment Letter No. 6,
      dated March 30, 2009, as further amended by Amendment Letter No. 7, dated
      April 28, 2009, as further amended by Amendment Letter No. 8, dated June
      4, 2009, as further amended by Amendment Letter No. 9, dated August 31,
      2009, as further amended by Amendment Letter No. 10, dated October 20,
      2009, as further amended by Amendment Letter No. 11, dated November 16,
      2009, as further amended by the Amendment and Waiver, dated as of November
      12, 2010, as further amended by Amendment and Waiver, dated as of November
      30, 2011, and as further amended by Amendment No 14 Relating to the
      Purchase Agreement, dated of even date herewith (collectively the
      "Purchase Agreement").

	 	 
	(D) 	
      The Company has issued warrants to Glencore pursuant to
      the Purchase Agreement entitling Glencore to purchase up to an aggregate
      of 5,600,000 Common Shares at a price of US$1.50 per share at any time
      until December 31, 2015.

	 	 
	(E) 	
      PolyMet has waived the application of the Shareholders
      Rights Plan of the Company dated December 4, 2003 as amended and restated
      on May 25, 2007 (approved by the Company's Shareholders on June 27, 2007)
      and January 16, 2008 (approved by the Company's Shareholders on June 17,
      2008 and reapproved by the Company's Shareholders on July 13, 2011 and
      July 10, 2012) (the "Rights Plan") between the Company and
      Computershare Investor Services Inc. (formerly known as Pacific Corporate
      Trust Company) to the transactions contemplated by this
  Agreement.

	 	 
	(F) 	
      Glencore agrees to waive its right of first refusal
      contained in paragraphs 11, 12 and 13 of the subscription agreement dated
      November 12, 2010 between the Company and Glencore (as confirmed by
      paragraph 13 of the subscription agreement dated November 30, 2011 between
      the Company and Glencore), as applicable, to the issue of the Rights and
      the Rights Offering Shares and the Standby
Shares.

- 2 - 

THE PARTIES AGREE as follows: 

	1 	
      Definitions and Interpretation

	 	 	 
	1.1 	
      Words defined in Schedule 1 have, where used in this
      Agreement, the meanings given to them in that Schedule.

	 	 	 
	1.2 	
      In this Agreement:

	 	 	 
		1.2.1 	
      the table of contents and the headings are inserted for
      convenience only and do not affect the interpretation of this
      Agreement;

	 	 	 
		1.2.2 	
      references to Sections, Articles and Schedules are to
      sections of this Agreement, sections of the Schedules, articles of the
      Schedules and schedules to this Agreement respectively unless otherwise
      stated and references to "this Agreement" include the Schedules;

	 	 	 
		1.2.3 	
      references to a statutory provision are references to it
      as from time to time amended, consolidated or re-enacted (with or without
      modification) and include all instruments or orders made under
  it;

	 	 	 
		1.2.4 	
      whenever a provision of this Agreement requires an
      approval or consent and the approval or consent is not delivered in
      writing within the applicable time limit, then, unless otherwise
      specified, the Party whose consent or approval is required shall be
      conclusively deemed to have withheld its approval or consent;

	 	 	 
		1.2.5 	
      unless the context requires otherwise, (i) any definition
      of or reference to any agreement, instrument or other document shall be
      construed as referring to such agreement, instrument or other document as
      from time to time amended, supplemented or otherwise modified (subject to
      any restrictions on such amendments, supplements or modifications set out
      herein or in any such agreement, instrument or other document) in
      accordance with the terms hereof and thereof, (ii) any reference herein to
      any Person shall be construed to include such Person’s successors and
      permitted assigns, and (iii) the words "this Agreement", "herein,"
      "hereof" and "hereunder," and words of similar import, when used in this
      Agreement, shall be construed to refer to this Agreement in its entirety
      and not to any particular provision hereof;

	 	 	 
		1.2.6 	
      where the "including" or "includes" is used in this
      Agreement it means "including (or includes) without limitation";

	 	 	 
		1.2.7 	
      words importing the plural include the singular and vice
      versa; and

	 	 	 
		1.2.8 	
      except as otherwise provided herein, references to a time
      of day are to Vancouver, B.C. time.

	 	 	 
	2 	
      The Rights Offering

	 	 	 
	2.1 	
      In accordance with the terms and conditions of this
      Agreement, the Company agrees to make the Rights Offering and issue Rights
      to the holders of its outstanding Shares on the Record Date and Glencore
      agrees to exercise its Basic Subscription Right in full and has informed
      the Company that it has yet to determine whether or not it will exercise
      its Additional Subscription Privilege, and shall subscribe for the Standby
      Shares in accordance with the provisions of Schedule
2.

- 3 - 

	2.2 	
      Glencore and the Company hereby acknowledge that the
      completion of the Rights Offering will trigger Section 4 of the Purchase
      Warrants which will require the exercise prices in the Purchase Warrants
      to be adjusted in accordance with the formulae set forth in Section 4(c)
      of the Purchase Warrants.

	 	 
	2.3 	
      Glencore and the Company hereby acknowledge that the
      completion of the Rights Offering will trigger Section 12 in the Exchange
      Warrant which will require the exercise prices in the Exchange Warrants to
      be adjusted in accordance with the formulae set forth in Section 12(d) of
      the Exchange Warrant.

	 	 
	2.4 	
      Glencore waives the provisions of paragraphs 11, 12, and
      13 of the Subscription Agreement dated November 12, 2010 between the
      Company and Glencore (as confirmed by paragraph 13 of the Subscription
      Agreement dated November 30, 2011 between the Company and Glencore) with
      respect to the issue of the Rights Offering Securities, provided that the
      waiver contemplated by this Section 2.4 shall be revoked upon (x)
      termination of this Agreement or (y) the Company has committed a material
      breach of this Agreement.

	 	 
	2.5 	
      The Company confirms that the application of the Rights
      Plan has been waived by the Board of Directors of the Company in
      connection with the Rights Offering and the issue of the Rights Offering
      Securities to Glencore.

	 	 
	3 	
      Representations and Warranties

	 	 
	3.1 	
      All representations and warranties of PolyMet and
      Glencore contained in this Agreement shall survive the completion of the
      transactions contemplated herein.

	 	 
		
      Representations and Warranties of the
    Company

	 	 
	3.2 	
      The Company represents and warrants to Glencore as set
      out in Schedule 5.

	 	 
	3.3 	
      The Company shall not do, or omit to do, anything which
      would or might reasonably be expected to cause a representation or
      warranty set out in Schedule 5 to become untrue, inaccurate or misleading
      at any time (by reference to the circumstances subsisting at that time)
      before the Rights Offering Closing Date.

	 	 
	3.4 	
      The Company shall notify Glencore immediately if it
      becomes aware of a fact or circumstance which has caused or would be
      reasonably likely to cause a representation or warranty set out in
      Schedule 5 to become untrue, inaccurate or misleading at any time (by
      reference to circumstances subsisting at that time) before the Rights
      Offering Closing Date.

	 	 
	3.5 	
      The Company accepts that Glencore is relying upon the
      representations and warranties set out in Schedule 5 in connection with
      entering into this Agreement and consummating the transactions
      contemplated hereby.

	 	 
		
      Representations and Warranties of
  Glencore

	 	 
	3.6 	
      Glencore represents and warrants to the Company as set
      out in Schedule 6.

	 	 
	3.7 	
      Glencore accepts that the Company is relying upon the
      representations and warranties set out in Schedule 6 in connection with
      entering into this Agreement and consummating the transactions
      contemplated hereby.

- 4 - 

	4	
      Further Undertakings

	 	 	 
		
      Conduct of Business During Rights
  Offering

	 	 	 
	4.1 	
      The Company hereby undertakes that, except with the prior
      written approval of Glencore, between the date of this Agreement and the
      Rights Offering Closing Date it shall (and procure that its Subsidiaries
      shall):

	 	 	 
		4.1.1 	
      operate their business in the ordinary course, provided
      that for the avoidance of doubt the transactions which are entered
      pursuant to this Agreement or in connection with the Loan shall be deemed
      to be in the ordinary course for this purpose; and

	 	 	 
		4.1.2 	
      not enter into or agree to enter into, or amend, any
      material contracts.

	 	 	 
	4.2 	
      The Company shall allow representatives of Glencore
      reasonable access to the operations of the Company and its Subsidiaries
      (subject to the Company receiving reasonable notice), subject always to
      appropriate restrictions to ensure that the Company or any of its
      Subsidiaries does not breach any legal or contractual confidentiality
      obligations.

	 	 	 
	4.3 	
      Nomination of Directors and Corporate Governance
      Agreements

	 	 	 
		4.3.1 	
      Subject to Section 4.3.2, effective as of the Rights
      Offering Closing Date, the Board shall resolve as necessary to appoint or
      nominate (as the case may be) such number of directors (the "Glencore
      Nominees") nominated by Glencore to the Board proportional to the
      number of issued and outstanding Shares held by Glencore (on a fully
      diluted basis) at the applicable time relative to all the issued and
      outstanding Shares (on a fully diluted basis) rounding down to the nearest
      whole director.

	 	 	 
		4.3.2 	
      Notwithstanding anything in this Section 4.3, Glencore
      does not intend to exercise the right set forth in Section 4.3.1 any
      earlier than January 1, 2014.

	 	 	 
		4.3.3 	
      The Company covenants and agrees, prior to the Rights
      Offering Closing Date to execute the corporate governance agreement in
      substantially the form set out in Schedule 4.3.3 (the "Corporate
      Governance Agreement") to give effect to this Section 4.

	 	 	 
			
      Demand Registration

	 	 	 
	4.4 	
      Effective as of the Rights Offering Closing Date,
      Glencore and the Company shall, execute and deliver a registration rights
      agreement (the "Registration Rights Agreement") substantially in
      the form of the registration rights agreement entered into between the
      Company and Glencore AG dated November 12, 2010, pursuant to which the
      Company will agree to provide registration rights under the 1933 Act, and
      the rules and regulations promulgated thereunder, and applicable state
      securities laws, and qualification rights under Canadian Securities Laws
      with respect to the Shares acquired by Glencore in connection with this
      Agreement.

	 	 	 
	5	
      Conditions and Termination Rights

	 	 	 
	5.1 	
      For the avoidance of doubt, no obligation under this
      Agreement is subject to any conditions precedent other than as expressly
      set out in this Section 5 or Article 5 of Schedule 2.

	 	 	 
	5.2 	
      The Company will use its best efforts to procure that
      each of the conditions set out in the relevant sections of Article 5 of
      Schedule 2 and this Section 5 are fulfilled by the time referred to
      therein or herein or by such later time as may be agreed in writing with
      Glencore. The Company shall notify Glencore immediately in the event that
      the Company or any of its directors or officers
become aware that any such condition has become or might
      reasonably be expected to become incapable of fulfilment by the time
      referred to therein or by such later time as may be agreed in writing with
  Glencore.

- 5 - 

	5.3 	
      Neither Party shall be entitled to claim that any
      obligation under this Agreement need not be performed as a result of any
      condition set out in Article 5 of Schedule 2 not being satisfied if the
      failure to satisfy such condition is as a result of any action or inaction
      by the Party seeking to rely on it.

	 	 	 
		
      Termination Rights

	 	 	 
	5.4 	
      Glencore may terminate this Agreement by providing
      written notice to the Company at any time if PolyMet shall have not
      prepared and filed the Preliminary Prospectus with the Securities
      Authorities and Registration Statement with the SEC and obtained a receipt
      or analogous decision document (the "Decision Document") on or as
      of the date that this Agreement is executed.

	 	 	 
	5.5 	
      Glencore may terminate this Agreement by providing
      written notice to the Company at any time prior to, but not after, the
      date on which the Final Prospectus and Registration Statement is mailed to
      the Qualifying Shareholders pursuant to Section 2.6(b) of Schedule 2
      if:

	 	 	 
		5.5.1 	
      the Company has committed a material breach of this
      Agreement (which shall include, for the avoidance of doubt, any material
      breach of any representations or warranties set out in this Agreement)
      and, if capable of cure, has not cured it within a reasonable
  time;

	 	 	 
		5.5.2 	
      an Event of Default (as defined in the Debentures) has
      occurred and is continuing under the Debentures; or

	 	 	 
		5.5.3 	
      the Company has committed a material breach of any other
      material agreement between the Company and/or its Affiliates on the one
      hand and Glencore and/or its Affiliates on the other hand and if capable
      of cure, has not been cured in the time permitted under the applicable
      agreement.

	 	 	 
	5.6 	
      The Company may terminate this Agreement by giving
      written notice to Glencore: (i) if payment for the Tranche E Debenture is
      not received by the Issuer pursuant to Amendment No. 14 related to the
      Purchase Agreement on or before the date therein provided for due to the
      fault or negligence of Glencore; and (ii) at any time prior to, but not
      after, the date on which the Final Prospectus and Registration Statement
      is mailed to the Qualifying Shareholders pursuant to Section 2.6(b) of
      Schedule 2 if Glencore has committed a material breach of this Agreement
      and, if capable of cure, has not cured it within a reasonable
  time.

	 	 	 
		
      Consequences of Termination

	 	 	 
	5.7 	
      If this Agreement is terminated pursuant to Sections 5.4,
      5.5, or 5.6, or Article 6 of Schedule 2, then:

	 	 	 
		5.7.1 	
      this Agreement shall terminate and the Parties&rsquo;
      obligations under this Agreement shall cease immediately, except as set
      out in Section 5.7.4;

	 	 	 
		5.7.2 	
      neither Party will have any Claim against any other Party
      except, provided however that this limitation shall not apply in the event
      of fraud or a material breach of this Agreement (which fraud or breach and
      liability therefore shall not be effected by the termination of this
      Agreement);

- 6 - 

	 	5.7.3 	
      the applications for the listing of the Rights Offering
      Securities shall be withdrawn and the Company shall procure that the
      listing will not become effective (except to the extent such listing has
      already become effective); and

	 	 	 
	 	5.7.4 	
      the provisions of Sections 1, 4.3, 4.4, 7.5, 7.6, 9 to 11
      and Article 7 of Schedule 2 will remain in full force and
  effect.

	6 	
      Exclusivity

	 	 	 
	6.1	
      The Company hereby agrees that, from the date of this
      Agreement until the earliest of (a) the Rights Offering Closing Date, or
      (b) the termination of this Agreement in accordance with its terms, it
      shall not, and shall procure that none of its Subsidiaries,
      representatives, advisers, agents or employees shall, directly or
      indirectly:

	 	 	 
		6.1.1 	
      solicit, negotiate or initiate the submission of
      proposals, indications of interest or offers of any kind which could lead
      to a Competing Transaction;

	 	 	 
		6.1.2 	
      enter into or participate in any discussions or
      negotiations with any third party in relation to a proposal or request in
      respect of a Competing Transaction, or which may lead to a Competing
      Transaction;

	 	 	 
		6.1.3 	
      provide any information to any third party in connection
      with a possible Competing Transaction; or

	 	 	 
		6.1.4 	
      recommend any Competing Transaction to its
      Shareholders.

	 	 	 
	6.2 	
      The Company hereby agrees that, with immediate effect, it
      shall and shall procure that its Subsidiaries and its or their
      representatives, advisors, agents or employees shall cease any ongoing
      activities that are prohibited pursuant to Section 6.1.

	 	 	 
	6.3 	
      The Company will promptly (and in any event within one
      Business Day) inform Glencore if the Company or any of its advisers
      receives or is informed of any proposal that could lead to a Competing
      Transaction.

	 	 	 
	7 	
      Confidentiality and Announcements

	 	 	 
	7.1 	
      The Company shall release the Initial Press Announcement
      immediately after the conclusion of trading on the TSX and NYSE MKT on the
      date of execution of this Agreement or, in the event that this Agreement
      is executed outside of trading hours of the TSX and NYSE MKT, before the
      commencement of trading on the next trading day following the execution of
      this Agreement.

	 	 	 
	7.2 	
      The Company shall release press announcements as required
      in relation to:

	 	 	 
		7.2.1 	
      obtaining a receipt for the Final Prospectus from the
      Securities Authorities and the filing of the Registration Statement, the
      setting of the Record Date and the commencement of the Rights Offering;
      and

	 	 	 
		7.2.2 	
      the levels of take up of Rights following the expiry of
      the Rights Offering;

the above being referred to as the
"Press Announcements", provided that any Press Announcement shall, so far
as is practicable, be made after consultation with Glencore and after taking
into account its reasonable requirements regarding the content, timing and
manner of the Press Announcement. 

- 7 - 

	7.3	
      Subject to Section 7.4, no announcement, circular or
      communication (each an " Announcement") concerning the existence or
      content of this Agreement shall be made by either Party (or any of its
      Subsidiaries or, in the case of Glencore, any Subsidiaries of Glencore
      International plc) without the prior written approval of the other Party
      provided that, for the avoidance of doubt, Glencore hereby approves the
      release of the Initial Press Announcement.

	 	 	 
	7.4 	
      Section 7.3 does not apply to any Announcement if, and to
      the extent that, it is required to be made by the rules of any Securities
      Authority or any governmental, regulatory, stock exchange or supervisory
      body or court of competent jurisdiction ("Relevant Authority") to
      which the Party making the Announcement is subject, whether or not any of
      the same has the force of Law, provided that any Announcement shall, so
      far as is practicable, be made after consultation with the other Party and
      after taking into account its reasonable requirements regarding the
      content, timing and manner of despatch of the Announcement in
    question.

	 	 	 
	7.5 	
      Subject to Section 7.6, each Party shall treat as
      strictly confidential all information received or obtained as a result of
      entering into or performing this Agreement which relates to the subject
      matter and provisions of this Agreement; the negotiations relating to this
      Agreement; or the other Party.

	 	 	 
	7.6 	
      A Party may disclose information which would otherwise be
      confidential if and to the extent:

	 	 	 
		7.6.1 	
      required by the law of any relevant
  jurisdiction;

	 	 	 
		7.6.2 	
      required by any Relevant Authority to which the Party
      making the disclosure is subject, whether or not such requirement has the
      force of law;

	 	 	 
		7.6.3 	
      disclosure is made to the professional advisers, auditors
      and bankers of either Party;

	 	 	 
		7.6.4 	
      the information has come into the public domain through
      no fault of that Party; or

	 	 	 
		7.6.5 	
      the other Party has given prior written approval to the
      disclosure,

	 	 	 
		
      provided that any disclosure shall, so far as is
      practicable, be made only after consultation with the other
  Party.

	 	 	 
	8 	
      Further Assurance

	 	 	 
	8.1 	
      The Company and Glencore each undertake that they will
      execute such further documents and give any such further consents as may
      be required in order to give effect to this Agreement.

	 	 	 
	8.2 	
      The Company and Glencore will provide all reasonable
      assistance and co-operation and supply all such information as may be
      required in order to obtain the necessary approvals for the transactions
      contemplated hereunder (subject always to any legal or contractual
      confidentiality obligations owed to third parties).

	 	 	 
	9 	
      Notices

	 	 	 
	9.1 	
      Except as otherwise provided in this Agreement, a notice
      or other communication given under or in connection with this Agreement (a
      "Notice") must be:

	 	 	 
		9.1.1 	
      in writing;

	 	 	 
		9.1.2 	
      in the English language; and

	 	 	 
		9.1.3 	
      sent by a Permitted Method to the Notified
  Address.

- 8 - 

	9.2 	
      A Permitted Method means any of the methods set out in
      the first column below. The second column sets out the time on which a
      Notice given by such Permitted Method will be deemed to be given and in
      proving service of such Notice it will be sufficient to prove that
      delivery was made or that the Notice was properly addressed and posted or
      faxed or emailed in full to the Notified
Address.

	(1) 
Permitted Method 	(2) 
Date on which
      Notice Deemed Given 
	Personal delivery 	
      When delivered at the Notified Address if delivered
      before 6.00 p.m. (recipient’s time) on any Business Day and in any other
      case at 9.00 a.m. (recipient’s time) on the Business Day following
      delivery 

	First class pre-paid post 	
      Two Business Days after posting 

	Fax transmission 	
      On completion of transmission if before 6.00 p.m.
      (recipient’s time) on any Business Day and in any other case at 9.00 a.m.
      (recipient’s time) on the Business Day following transmission 

	Email transmission 	
      On completion of transmission if before 6.00 p.m.
      (recipient’s time) on any Business Day and in any other case at 9.00 a.m.
      (recipient’s time) on the Business Day following transmission
  

	9.3 	
      The Notified Addresses of each of the parties is as set
      out below:

	Name of Party 	Address 	Fax number/Email 	Attention: 
	Glencore 

	Baarermattstrasse 3 
PO Box 777, 6341 Baar
      
Switzerland 	+41 41 709 2621 

	General 
Counsel 

	Copy to (which shall 
not constitute 
notice): 	Baarermattstrasse 3 
PO Box 777, 6341 Baar
      
Switzerland 	Rajiv.Singhal@glencore.com 

	Rajiv Singhal 

	Copy to (which shall 
not constitute 
notice):

	301 Tresser Boulevard 
14th Floor
      
Stamford, CT 06901 
USA 	+1 203 328 3177
      
Stephen.Rowland@glencore-us.com 

	Stephen 
Rowland 

	Copy to (which shall 
not constitute 
notice):
      

	Bennett Jones LLP 
3400 One First
      Canadian 
Place, P.O. Box 130 
Toronto, ON M5X 1A4 
Canada 	+1 416-863-1716 
taylora@bennettjones.com
      

	Adam Taylor 

	Company 

	c/o Farris, Vaughan Wills & 
Murphy LLP
      
700 West Georgia Street 
Suite 2500 
Vancouver, BC V7Y 1B3
      
Canada 	+1 604-661-9349 

	Company 
Secretary 

	Copy to (which shall 
not constitute 
notice):
      

	Troutman Sanders LLP 
The Chrysler
      Building 
405 Lexington Avenue 
New York, NY 10174 
United States
    	+1 212-704-5950
      
henry.rothman@troutmansanders.com 

	Henry I. 
Rothman 

	Copy to (which shall 
not constitute 
notice): 	Farris, Vaughan, Wills &
      
Murphy LLP 
700 West Georgia Street 

      Suite 2500 

Vancouver, BC V7Y 1B3 

Canada 	+1 604-661-9349 
mgropper@farris.com 
	Mitchell H. 
Gropper, Q.C.

- 9 -

		
      or such other Notified Address as any of the parties may,
      by written notice to the other parties, substitute for their Notified
      Address set out above.

	 	 
	10 	
      General

	 	 
	10.1 	
      This Agreement may be executed in any number of
      counterparts, each of which when executed and delivered is an original and
      all of which taken together evidence the same agreement.

	 	 
	10.2 	
      This Agreement, and each other agreement or instrument
      entered into in connection herewith or therewith or contemplated hereby or
      thereby, and any amendments hereto or thereto, to the extent signed and
      delivered by means of a facsimile machine or by a PDF attachment to an
      email, shall be treated in all manner and respects as an original
      agreement or instrument and shall be considered to have the same binding
      legal effect as if it were the original signed version thereof delivered
      in person. At the request of any Party hereto or to any such agreement or
      instrument, each other Party hereto or thereto shall re-execute original
      forms thereof and deliver them to all other Parties. No Party hereto or to
      any such agreement or instrument shall raise the use of a facsimile
      machine or by a PDF attachment to an email to deliver a signature or the
      fact that any signature or agreement or instrument was transmitted or
      communicated through the use of a facsimile machine or email as a defence
      to the formation or enforceability of a contract and each such Party
      forever waives any such defence.

	 	 
	10.3 	
      This Agreement is binding on and enures for the benefit
      of the successors, assigns or legal personal representatives of the
      Parties.

	 	 
	10.4 	
      No Party may assign its rights under this Agreement
      without the prior written consent of the other Party. Notwithstanding the
      foregoing, Glencore may assign its rights and interests in this Agreement
      to an Affiliate without PolyMet’s prior written consent subject to the
      transferee agreeing in writing to be bound by the terms and conditions
      hereof.

	 	 
	10.5 	
      Other than in respect of the Glencore Indemnified Parties
      in Article 7 of Schedule 2, nothing in this Agreement, express or implied,
      is intended to or shall confer upon any Person, other than the Parties,
      any right, benefit, or remedy of any nature whatsoever under or by reason
      of this Agreement. With respect to those provisions of the Agreement
      applicable to Glencore Indemnified Parties, Glencore is executing,
      delivering and holding this Agreement as agent and trustee for such
      Glencore Indemnified Parties.

	 	 
	10.6 	
      The obligations of the Parties under this Agreement have
      effect notwithstanding anything revealed in any investigation made by or
      on behalf of any Person.

	 	 
	10.7 	
      The language used in this Agreement is the language
      chosen by the Parties to express their mutual intent, and no rule of
      strict construction shall apply against any Party.

	 	 
	10.8 	
      No failure by any Party to exercise any right or remedy
      under any provision of this Agreement will operate as a waiver and no
      single or partial exercise of any right or remedy of any Party will
      preclude the further exercise or enforcement of any such right or
      remedy.

	 	 
	10.9 	
      No amendment of this Agreement or of any of the documents
      referred to in this Agreement will be effective unless it is in writing,
      refers specifically to this Agreement and is duly executed by each
      Party.

- 10 - 

	10.10 	
      This Agreement shall not create, nor shall be deemed to
      create, any partnership, fiduciary relationship or duty between the
      Parties or constitute either Party the agent or legal representative of
      the other.

	 	 
	10.11 	
      Unless otherwise specified, time periods within or
      following which any payment is to be made or act is to be done, shall be
      calculated by excluding the day on which the period commences and
      including the day on which the period ends and by extending the period to
      the next Business Day following if the last day of the period is not a
      Business Day.

	 	 
	10.12 	
      If any provision of this Agreement is or becomes illegal,
      invalid or unenforceable under the law of any jurisdiction, neither the
      legality, validity nor enforceability of the remaining parts of this
      Agreement will be affected or impaired in any way.

	 	 
	10.13 	
      Each Party shall bear its own expenses in the preparation
      of this Agreement.

	 	 
	10.14 	
      This Agreement and the documents contemplated herein
      represent the entire agreement with respect to the subject matter dealt
      with herein and supersede all prior discussions and
negotiations.

	 	 
	10.15 	
      Time is of the essence in this Agreement.

	 	 
	10.16 	
      Unless otherwise provided, all dollar amounts referred to
      in this Agreement are to United States currency or "American dollars". If,
      in connection with any action or proceeding brought in connection with
      this Agreement or any resulting judgment, it becomes necessary to convert
      any amount due hereunder in one currency (the "first currency")
      into another currency (the " second currency"), then the conversion
      shall be made at the Judgment Conversion Rate on the first Business Day
      prior to the day on which payment is received. If the conversion is not
      able to be made in the manner contemplated by the preceding paragraph in
      the jurisdiction in which the action or proceeding is brought, then the
      conversion shall be made at the Judgment Conversion Rate on the day on
      which the judgment is given. If the Judgment Conversion Rate on the date
      of payment is different from the Judgment Conversion Rate on such first
      Business Day or on the date of judgment, as the case may be, the party
      shall pay such additional amount (if any) in the second currency as may be
      necessary to ensure that the amount paid on such payment date is the
      aggregate amount in the second currency which, when converted at the
      Judgment Conversion Rate on the date of payment, is the amount due in the
      first currency, together with all costs, charges and expenses of
      conversion. Any additional amount owing pursuant to the provisions of this
      section shall be due as a separate debt and shall give rise to a separate
      cause of action and shall not be affected by or merged into any judgment
      obtained for any other amounts due under or in respect of this
      Agreement.

	 	 
	10.17 	
      The term "Judgment Conversion Rate" used in this
      section means the noon rate of exchange for Canadian dollars in the other
      currency published by the Bank of Canada for the date in
  question.

	 	 
	11 	
      Governing Law and Jurisdiction

	 	 
	11.1 	
      This Agreement shall be governed, including as to
      validity, interpretation and effect, by the laws of the Province of
      British Columbia and the federal laws of Canada applicable therein, and
      shall be construed and treated in all respects as a British Columbia
      contract. Each Party hereby irrevocably attorns to the non-exclusive
      jurisdiction of the courts of the Province of British Columbia in respect
      to all matters arising under and in relation to this
  Agreement.

Signatures to appear on the following page. 

- 11 - 

           
This Agreement has been entered into on the date stated at the beginning of this
Agreement.

 

	Signed by Douglas Newby, 	  
	President and Chief Executive Officer 	“Douglas Newby” 
	for and on behalf of 	Authorised signatory 
	POLYMET MINING CORP. 	  
	  	  
	  	  
	  	  
	Signed by Richard Marshall, Officer 	  
	for and on behalf of 	“Richard Marshall” 
	GLENCORE AG 	Authorised signatory 
	  	  
	  	  
	  	  
	Signed by Andreas Hubmann, Director 	  
	for and on behalf of 	“Andreas Hubmann” 
	GLENCORE AG 	Authorised signatory 

SCHEDULE 1 
DEFINITIONS 

	
      1933 Act 
	
      means the U.S. Securities Act of 1933, as amended, and
      the rules and regulations promulgated thereunder 

	
      1934 Act 
	
      means the U.S. Securities Exchange Act of 1934, as
      amended, and the rules and regulations promulgated thereunder 

	
      2010 Purchase Warrant 
	
      means the non-transferable common share purchase warrant
      to acquire 2,600,000 Shares that was issued by PolyMet to Glencore AG on
      December 6, 2011, as such warrant may be amended, restated and/or modified
      from time to time 

	
      2011 Purchase Warrant 
	
      means the non-transferable common share purchase warrant
      to acquire 3,000,000 Shares that was issued by PolyMet to Glencore AG on
      November 12, 2010, as such warrant may be amended, restated and/or
      modified from time to time 

	
      Additional Subscription Privilege 
	
      has the meaning given to it in Section 2.2 of Schedule 2
      

	
      Additional Subscription Shares 
	
      has the meaning given to it in Section 2.7(b) of Schedule
      2 

	
      Affiliate 
	
      has the meaning given to it under NI 45-106, and in the
      case of Glencore, includes all investment funds and other Persons that
      Glencore or an Affiliate manages or exercises control over or in respect
      of which it has discretionary trading authority over such investment
      fund’s or Person’s investments 

	
      AGP Technical Report 
	
      means the technical report entitled "Updated NI 43-101
      Technical Report on the NorthMet Deposit, Minnesota, USA" dated January
      14, 2013 prepared by AGP Mining Consultants Inc. 

	
      Agreement 
	
      means this Standby Purchase Agreement 

	
      Announcement 
	
      has the meaning given to it in Section 7.3

	
      Annual Report 
	
      means the Company’s Annual Report on Form 20- F for the
      fiscal year ended January 31, 2012, as amended 

	
      Applicable Pension Legislation 
	
      means, at any time, any applicable Canadian or United
      States federal, state or provincial pension legislation, including all
      regulations made thereunder and all rules, regulations, rulings,
      guidelines, directives and interpretations made or issued by any
      Governmental Entity in Canada or the United States having or asserting
      jurisdiction in respect thereof, each as amended or replaced from time to
      time 

	
      Basic Entitlement Shares 
	
      has the meaning given to it in Section 2.5(d) of Schedule
      2

	
      Basic Subscription Right 
	
      has the meaning given to it in Section 2.5(c) of Schedule
      2

	
      BCSC 
	
      means the British Columbia Securities Commission
  

1 - 2 

	
      Benefit Plan 
	
      means all employee benefit plans or arrangements that are
      not Pension Plans, including all profit sharing, savings, supplemental
      retirement, retiring allowance, severance, pension, deferred compensation,
      stock, stock option, welfare, bonus, incentive compensation, phantom
      stock, legal services, supplementary unemployment benefit plans or
      arrangements and all life, health, dental and disability plans and
      arrangements in which the employees or former employees of the Company
      participate or are eligible to participate 

	
      Board or Board of Directors 
	
      means the Board of Directors of PolyMet 

	
      Business Day 
	
      means any day, other than a Saturday or a Sunday, upon
      which banks are open for business in the City of Vancouver, Canada and the
      City of Zurich, Switzerland 

	
      CE Remediation Obligations 
	
      has the meaning given to it in Schedule 5(W) 

	
      claim 
	
      any actual or potential claims, actions, proceedings or
      investigations (whether by governmental or regulatory bodies or
      otherwise), demands, judgments or awards 

	
      Company or PolyMet 
	
      means PolyMet Mining Corp., a British Columbia company
      

	
      Company AGM 
	
      has the meaning given to it in Section 2(b) of Schedule
      4.3.3 

	
      Competing Transaction 
	
      any transaction or proposed transaction involving the
      Company under which a third party would (i) acquire any of the business
      (otherwise than in the ordinary course of business) or assets of the
      Company or any of its Subsidiaries or (ii) acquire, from the Company or
      any of its Subsidiaries, any Shares or other securities in the Company or
      any of its Subsidiaries; or (iii) undertake any merger, business
      combination, recapitalisation, amalgamation, scheme of arrangement or
      similar transaction involving the Company or any of its Subsidiaries; or
      (iv) provide any equity or debt financing to the Company or any of its
      Subsidiaries, (provided that the Rights Offering shall not constitute a
      Competing Transaction) 

	
      Computershare 
	
      means Computershare Trust Company of Canada, the
      registrar and transfer agent of the Company 

	
      Corporate Governance Agreement 
	
      has the meaning given to it in Section 4.3.3 

	
      Debentures 
	
      means the Tranche A Debenture, the Tranche B Debenture,
      the Tranche C Debenture and the Tranche D Debenture, each as defined in
      the Purchase Agreement, and the Tranche E Debenture 

	
      Decision Document 
	
      has the meaning given to it in Section 5.4 

	
      Disclosure Documents 
	
      means the Company’s Management Information Circular dated
      June 15, 2012; the Company’s Annual Information Form (on Form 20- F) for
      the year ended January 31, 2012 dated May 1, 2012; and the audited
      consolidated financial statements and accompanying management’s
  discussion and analysis and all interim financial
      statements, interim management’s discussion and analyses and material
      change reports filed pursuant to applicable Securities Laws since January
      31, 2012; any material change report required to be filed under Securities
      Laws since January 31, 2012; the Annual Report; all other reports filed by
      the Company pursuant to the 1934 Act since January 31, 2012 and any other
      disclosure documents incorporated by reference in the Prospectus or
Registration Statement 

1 - 3 

	Encumbrance 	
      means any hypothec, mortgage, pledge, security interest,
      encumbrance, lien, charge, deposit arrangement, lease, adverse claim,
      right of set-off or agreement, trust, deemed trust or any other
      arrangement or condition that in substance secures payment or performance
      of an obligation of the Company, statutory and other non- commercial
      leases or encumbrances and includes the interest of a vendor or lessor
      under any conditional sale agreement, capital lease or other title
      retention agreement 

	Environmental Laws 	
      has the meaning given to it in Section 5(w) of Schedule 5      

	Erie Plant 	
      means the owned taconite concentrator and pellet plant
      and supporting infrastructure and surrounding lands located approximately
      six miles west of the NorthMet Deposit, together with all related property
      and assets 

	Event of Default 	
      means (i) an “Event of Default” as defined in the
      Debentures, and (ii) an event of default under a Material Agreement that
      has had, or reasonably could have, a Material Adverse Effect 

	Exchange Warrant 	
      means the exchange warrant to purchase Shares that was
      issued by PolyMet to Glencore AG pursuant to the Purchase Agreement, as
      such exchange warrant may be amended, restated and/or modified from time
      to time 

	Exercise Price 	
      has the meaning given to it in Section 2.5(a) of Schedule
      2

	fair market value 	
      has the meaning given to it in Section 1.1 of MI 61-101      

	Final Prospectus 	
      means the (final) short form prospectus to be filed by
      PolyMet with the Securities Authorities (and the Prospectus to be filed
      with the SEC pursuant to the Multi-Jurisdictional Disclosure System) in
      connection with the Rights Offering, as amended by any Prospectus
      Amendment 

	first currency 	
      has the meaning given to it in Section 10.16

	Glencore 	
      means Glencore AG, a corporation existing under the laws
      of Switzerland 

	Glencore Indemnified Parties 	
      has the meaning given to it in Section 7.1 of Schedule
      2

	Glencore Nominees 	
      has the meaning given to it in Section 4.3.1

	Governmental Entity 	
      means (a) any multinational, federal, provincial, state,
      regional, municipal, local or other government, governmental or public
    department, central bank, court, tribunal, arbitral body, commission,    board, bureau or agency, domestic or foreign, (b) any
      subdivision, agent, commission, board or authority of any of the
      foregoing, (c) any quasi-governmental or private body, including any
      tribunal, commission, regulatory agency or self-regulatory organization,
      exercising any regulatory, expropriation or taxing authority under or for
      the account of any of the foregoing, or (d) any stock exchange, including
    the TSX and NYSE MKT 

1 - 4 

	
      IFRS 
	
      means international financial reporting standards, as
      issued by the International Accounting Standard Board and as adopted in
      Canada, as in effect from time to time 

	
      Indemnified Party 
	
      has the meaning given to it in Section 7.5 of Schedule
      2

	
      Indemnifying Party 
	
      has the meaning given to it in Section 7.5 of Schedule
      2

	
      Initial Press Announcement 
	
      means the press announcement, in form attached as
      Schedule 3

	
      Intellectual Property Rights 
	
      has the meaning given to it in Section 5(v) of Schedule 5      

	
      Judgment Conversion Rate 
	
      has the meaning given to it in Section 10.17

	
      laws 
	
      means any and all applicable laws including all statutes,
      codes, ordinances, decrees, rules, regulations, municipal by-laws,
      judicial or arbitral or administrative or ministerial or departmental or
      regulatory judgments, orders, decisions, rulings or awards, instruments,
      policies, guidelines, and general principles of common law and equity,
      binding on or affecting the Person referred to in the context in which the
      word is used 

	
      Loan 
	
      has the meaning given to it in the Recitals to this
      Agreement 

	
      Loss (or Losses) 
	
      has the meaning given to it in Section 7.1 of Schedule
      2

	
      Market Capitalization 
	
      has the meaning given to it in section 1.1 of MI 61-101      

	
      Market Capitalization Limit 
	
      has the meaning given to it in Section 2.4(a) of Schedule
      2 

	
      Market Price 
	
      has the meaning given to it in Section 2.5(a) of Schedule
      2 

	
      Material Adverse Effect 
	
      means any event, occurrence or condition (or series of
      related events, occurrences or conditions) which, individually or in the
      aggregate, could reasonably be expected to have a material adverse effect
      on or results in a material adverse change in any of the following: (i)
      the condition (financial or otherwise), business, assets or results of
      operations of the Company and its Subsidiaries considered as a whole; (ii)
      the ability of the Company to perform any of its obligations under the
      terms of this Agreement; and (iii) the validity or enforceability of any
      of this Agreement or the rights and remedies of Glencore under the terms
      of this Agreement, except any such effect resulting from or arising in
      connection with: (a) any change in IFRS (b) any change in the global,
      national or regional political conditions (including the outbreak of war
      or acts of terrorism) or in the general economic, business, regulatory,
      political or market conditions or in the national or global financial or
  capital markets, (c) any change in the industry in which the Company operates, provided that for the
      purposes of (b) and (c) such effect does not primarily relate to (or have
      the effect primarily relating to) the Company or disproportionately
      adversely affects the Company compared to other entities operating in the
    industries in which the Company operates 

1 - 5 

	
      Material Agreements 
	
      means (i) those agreements listed on Schedule S1 (as
      amended, restated, supplemented or replaced as permitted hereunder), and
      (ii) those agreements (as amended, supplemented, revised or restated as
      permitted herein from time to time) of PolyMet or PMI, the breach, non-
      performance or cancellation of which or the failure of which to renew
      could reasonably be expected to have a Material Adverse Effect 

	
      material change 
	
    has the meaning given to it in the Securities Act  

	
      material fact 
	
    has the meaning given to it in the Securities Act  

	
      Maximum Investment 
	
      has the meaning given to it in Section 2.4(b) of Schedule
      2

	
      MI 61- 101 
	
      means Multilateral Instrument 61-101 – Protection of
      Minority Shareholders in Special Transactions of the Ontario
      Securities Commission and the AMF 

	
      Mineral Rights 
	
      has the meaning given to it in Section 5(x) of Schedule 5      

	
      Misrepresentation 
	
      means: (a) a "misrepresentation" as defined in Section
      1(1) of the Securities Act; or (b) as to any document, any untrue
      statement of a material fact or omission to state any material fact
      required to be stated therein or necessary in order to make the statements
      therein, in the light of the circumstances under which they were made, not
      misleading 

	
      MPCA 
	
      has the meaning given to it in Section 2 of Schedule 5(W)      

	
      NI 45-106 
	
      means National Instrument 45- 106 – Prospectus and
      Registration Exemptions of the Canadian Securities Regulators      

	
      NI 54-101 
	
      means National Instrument 54-101 – Communication with
      Beneficial Owners of Securities of a Reporting Issuer of the
      Canadian Securities Regulators 

	
      NorthMet Deposit 
	
      means the polymetallic copper-nickel-cobalt-platinum
      group element deposit situated on a mineral lease of approximately 4,200
      acres located in St. Louis County in northeastern Minnesota, U.S.A., at
      approximately latitude 47° 36’ north, longitude 91° 58’ west, about 70
      miles north of the City of Duluth and 6.5 miles south of the town of
      Babbitt, together with all related property and assets 

	
      NorthMet Project 
	
      means the mining project comprised of the NorthMet
      Deposit and the Erie Plant 

	
      Notice 
	
      has the meaning given to it in Section 9.1

	
      NYSE MKT 
	
      means the NYSE MKT LLC 

1 - 6 

	Omnibus Share Compensation Plan 	
      means the PolyMet Mining Corp. 2007 Omnibus Share
      Compensation Plan, as amended and restated 

	Owned Real Property 	
      means the land and premises listed on, and legally
      described in, Schedule 5(K) and the buildings and fixtures thereon
  

	Parties or Party 	
      means Glencore and the Company; "Party" means any one of
      them and reference to either of them includes a reference to that Party’s
      legal personal representatives, successors and permitted assigns

	Pension Plan 	
      means any plan, program, agreement or arrangement for the
      purpose of Applicable Pension Legislation or under the Tax Act (whether or
      not required under such law) that is maintained or contributed to or to
      which there is or may be an obligation to contribute by the Company in
      respect of their respective employees or former employees 

	Permitted Encumbrances 	
      means the following types of encumbrances: (i) statutory
      Encumbrances of landlords and Encumbrances of carriers, warehousemen,
      mechanics, suppliers, material men, repairmen and other Encumbrances
      imposed by law incurred in the ordinary course of business and
      Encumbrances for taxes, assessments or governmental charges or claims, in
      either case, for sums not yet overdue or being contested in good faith by
      appropriate proceedings, if such reserve or other appropriate provision,
      if any, as shall be required by IFRS shall have been made in respect
      thereof; (ii) Encumbrances incurred or deposits made in the ordinary
      course of business in connection with workers’ compensation, unemployment
      insurance and other types of social security, or to secure the performance
      of tenders, statutory obligations, surety and appeal bonds, bids, leases,
      government contracts, performance and return- of-money bonds and other
      similar obligations (exclusive of obligations for the payment of borrowed
      money); (iii) Encumbrances upon specific items of inventory or other goods
      and proceeds of any Person securing such Person’s obligations in respect
      of bankers’ acceptances issued or created for the account of such Person
      to facilitate the purchase, shipment or storage of such inventory or other
      goods; (iv) Encumbrances encumbering deposits made to secure obligations
      arising from statutory, regulatory, contractual or warranty requirements
      of the Company, including rights of offset and setoff; (v) bankers’ liens,
      rights of setoff and other similar Encumbrances existing solely with
      respect to cash on deposit in one or more accounts maintained by the
      Company, in each case granted in the ordinary course of business in favour
      of the bank or banks with which such accounts are maintained, securing
      amounts owing to such bank with respect to cash management and operating
      account arrangements, including those involving pooled accounts and
      netting arrangements; provided, however, that in no case shall any such
      Encumbrances secure (either directly or indirectly) the repayment of any
      debt; (vi) leases or subleases (or any Encumbrances related thereto)
      granted to others that do not materially interfere with the ordinary
      course of business of the Company; (vii) attachment or judgment
      Encumbrances not giving rise to an Event of Default and which are being
      contested in good faith by appropriate proceedings; (viii) easements,
      rights-of-way, restrictions and other similar charges or encumbrances not
      materially interfering with the ordinary course of
business of the Company; (ix) zoning restrictions,
      licenses, restrictions on the use of real property or minor irregularities
      in title thereto, which do not materially impair the use of such real
      property in the ordinary course of business of the Company and its
      Subsidiaries or the value of such real property for the purpose of such
      business; (x) any right of first refusal, right of first offer, option,
      contract or other agreement to sell an asset existing on the date hereof;
      and (xi) Encumbrances securing hedging obligations entered into for bona
    fide hedging purposes of the Company not for the purpose of speculation      

1 - 7 

	
      person 
	
      includes an individual, corporation, partnership, limited
      partnership, limited liability partnership, limited liability company,
      association, trust, estate, custodian, trustee, executor, administrator,
      nominee or other entity or organization, including (without limitation) a
      Governmental Entity or political subdivision or an agency or
      instrumentality thereof 

	
      PMI 
	
      means Poly Met Mining Inc. 

	
      Preliminary Prospectus 
	
      means the preliminary short form prospectus in the form
      attached as Schedule 4 to be filed by PolyMet with the Securities
      Authorities including in the case of the Preliminary Prospectus filed with
      the SEC, prepared in accordance with the Multi-Jurisdictional Disclosure
      System, in connection with the Rights Offering, as amended by any
      Prospectus Amendment 

	
      Press Announcements 
	
      has the meaning given to it in Section 7.2

	
      Prospectus 
	
      means, collectively, the Preliminary Prospectus, the
      Final Prospectus, and any Prospectus Amendment(s) 

	
      Prospectus Amendment 
	
      means any amendment to the Preliminary Prospectus or the
      Final Prospectus 

	
      Purchase Agreement 
	
      has the meaning given to it in the Recitals to this
      Agreement 

	
      Purchase Warrants 
	
      means the 2010 Purchase Warrant and 2011 Purchase Warrant      

	
      Qualifying Jurisdictions 
	
      means the Provinces of British Columbia, Alberta and
      Ontario 

	
      Qualifying Shareholders 
	
      has the meaning given to it in Section 2.1 of Schedule
      2

	
      Record Date 
	
      means the record date established pursuant to Section
      2.6(a) of Schedule 2 for the purpose of determining the holders of Shares
    who are entitled to receive Rights pursuant to the Rights Offering  

	
      registration 
	
      means the qualification of Shares under Securities Laws,
      by prospectus or otherwise, for distribution in any of the provinces or
      territories of Canada in which PolyMet is a "reporting issuer", or in the
      United States 

	
      Registration Rights Agreement 
	
      has the meaning given to it in Section 4.4 

	
      Registration Statement 
	
      means the registration statement on Form F-10 of which
      the Prospectus shall form a part, as amended, registering, inter alia, the      Rights Offering Securities under the 1933 Act and
      prepared in accordance with the Multi-Jurisdictional Disclosure System
      including the exhibits and any schedules thereto and the documents
      incorporated by reference therein 

1 - 8 

	
      Relevant Authority 
	
      has the meaning given to it in Section 7.4

	
      Rights 
	
      means the transferable rights to subscribe for Shares
      offered by PolyMet pursuant to the Rights Offering, with each holder of
      Shares receiving one right per Share held 

	
      Rights Certificate 
	
      has the meaning given to it in Section 2.6(b) of Schedule
      2

	
      Rights Issue Date 
	
      means the date on which the Rights are issued by the
    Company to the holders of record of its Shares on the Record Date  

	
      Rights Offering 
	
      has the meaning given to it in the Recitals to the
      Agreement 

	
      Rights Offering Closing Date 
	
      has the meaning given to it in Section 5.1 of Schedule
      2

	
      Rights Offering Closing Time 
	
      has the meaning given to it in Section 5.1 of Schedule
      2

	
      Rights Offering Expiry Date 
	
      means the date on which the Rights will expire and become
      null and void as set out in the Final Prospectus and Registration
      Statement, such date being the 21st day following the date on which the
      Final Prospectus or Registration Statement is delivered to holders of
      record of the Shares on the Record Date, or such other date as may be
      agreed in writing by PolyMet and Glencore 

	
      Rights Offering Expiry Time 
	
      means 5:00 p.m. (Toronto time) on the Rights Offering
      Expiry Date 

	
      Rights Offering Ratio 
	
      has the meaning given to it in Section 2.5(d) of Schedule
      2

	
      Rights Offering Securities 
	
      means, collectively, the Rights, the Shares issuable upon
      exercise of the Rights and the Standby Shares 

	
      Rights Offering Shares 
	
      means the Shares issuable pursuant to the Rights Offering      

	
      Rights Plan 
	
      has the meaning given to it in the Recitals to this
      Agreement 

	
      Sarbanes- Oxley Act 
	
      means the Sarbanes-Oxley Act of 2002 and all rules and
      regulations promulgated thereunder 

	
      SEC 
	
    means the U.S. Securities and Exchange Commission  

	
      second currency 
	
      has the meaning given to it in Section 10.16

	
      Securities Act 
	
      means the Securities Act (British Columbia) and the
      rules, regulations and published policies made thereunder, as now in
    effect and as they may be promulgated or amended from time to time  

	
      Securities Authorities 
	
      means the TSX, the BCSC, the SEC and the NYSE MKT and the
      applicable securities commissions and other securities regulatory
    authorities in each of the other provinces and territories of Canada    

1 - 9 

	Securities Laws 	
      means the Securities Act, together with all other
      applicable Canadian provincial and territorial securities laws, rules and
      regulations and published policies thereunder, the 1933 Act, the 1934 Act
      and all other applicable U.S. federal and state securities laws and rules
      and regulations promulgated thereunder, as now in effect and as they may
      be promulgated or amended from time to time, together with the applicable
      rules of the TSX and NYSE MKT 

	Shareholder 	
      means a holder of Shares from time to time 

	Shares 	
      means common shares in the capital of PolyMet 

	Standby Commitment 	
      has the meaning given to it in Section 2.3(a) of Schedule
      2

	Standby Purchaser 	
      means Glencore 

	Standby Shares 	
      has the meaning given to it in Section 2.3(a) of Schedule
      2

	Subscription Agent 	
      means Computershare 

	Subsidiary 	
      has the meaning given to it in NI 45-106 

	Tax Act 	
      means the Income Tax Act (Canada), as amended 

	Tranche E Debenture 	
      has the meaning given to it in the Recitals to this
      Agreement 

	TSX 	
      means the Toronto Stock Exchange 

	US or United States 	
      means the United States of America its territories and
      possessions and any of the United States of America and the District of
      Columbia and other areas subject to its jurisdiction 

	VWAP 	
      has the meaning given to it in Section 2.5 of Schedule
      2

	Warrants 	
      means the Exchange Warrants and the Purchase Warrants
    

SCHEDULE 2 

  PROVISIONS RELATING TO THE
RIGHTS OFFERING 

ARTICLE 1 
INTERPRETATION 

	1.1 	
      Definitions.
      The defined terms used in this Schedule 2, unless the context
      otherwise requires, are set out in Schedule 1.

ARTICLE 2 
TIMING AND STANDBY COMMITMENT 

	2.1 	
      Conduct of Rights Offering. Subject to and in
      accordance with the provisions hereof, PolyMet agrees to offer, in
      accordance with Securities Laws and pursuant to the Prospectus and
      Registration Statement, the Rights to Persons that are the holders of
      record of Shares on the Record Date: (a) with an address in one of the
      Qualifying Jurisdictions; or (b) with an address in any other
      jurisdiction, where PolyMet has satisfied itself that such holder is
      entitled to receive the Rights Offering Securities under the Rights
      Offering in accordance with the laws of such jurisdiction and without
      obliging PolyMet to register the Rights Offering Securities or file a
      prospectus or other disclosure document or to make any other filings or
      become subject to any reporting or disclosure obligations that PolyMet is
      not already obligated to make (together, "Qualifying
      Shareholders"). The Parties hereby acknowledge and agree that Glencore
      is a Qualifying Shareholder. With respect to non-Qualifying Shareholders,
      the Parties acknowledge and agree that Rights will be issued to the
      Subscription Agent to hold for their benefit.

	 	 	 
	2.2 	
      Additional Subscription Privilege. PolyMet shall
      ensure that each Qualifying Shareholder who has exercised its Rights in
      full by the Rights Offering Expiry Time shall have the right to subscribe
      for additional Shares immediately prior to the Rights Offering Expiry Time
      (if such are available) as a result of Rights that are not exercised by
      the Rights Offering Expiry Time, subject to pro ration as provided for in
      the Prospectus (the "Additional Subscription Privilege").

	 	 	 
	2.3 	
      Standby Commitment.

	 	 	 
		(a) 	
      Subject to and in accordance with the provisions hereof,
      Glencore hereby agrees to subscribe for and PolyMet hereby agrees to issue
      to Glencore at the Exercise Price and on the Rights Offering Closing Date,
      as fully paid and non-assessable Shares, such number of Shares (the
      "Standby Shares") equal to the lesser of: (A) the number of Shares
      available under the Maximum Investment; and (B) the result of (x) minus
      (y), where: (x) equals the number of Shares determined by dividing US$60
      million by the Exercise Price; and (y) equals the number of Shares
      subscribed for and taken up under the Rights Offering by holders of
      Rights, including Glencore, pursuant to the Basic Subscription Right and
      Additional Subscription Privilege (if any) (such commitment referred to as
      the "Standby Commitment").

	 	 	 
		(b) 	
      Glencore and PolyMet hereby agree that it is the intent
      of both Parties that Glencore, by virtue of acting as Standby Purchaser
      hereunder, shall not be deemed an "underwriter" or deemed to be engaged in
      broker-dealer activity requiring registration as defined in Applicable
      Securities Laws, and Glencore and PolyMet shall in the fulfillment of
      their obligations hereunder act in accordance with this mutual
      understanding.

	 	 	 
	2.4 	
      Maximum Investment.

	 	 	 
		(a) 	
      Notwithstanding any other provision, the Parties agree
      that Glencore shall not be required or permitted to subscribe for any
      Rights Offering Shares and/or Standby Shares pursuant to its Basic
      Subscription Right, Additional Subscription Privilege and/or
  Standby Commitment if the subscription for such Shares would
      result in the value of Glencore’s aggregate subscription under the Rights
      Offering having a fair market value greater than the result of: (x) 24.99%
      of PolyMet’s Market Capitalization as of the date of this Agreement; less
      (y) the sum of: (A) the Standby Fee; and (B) the fair market value of all
      other transactions contemplated by the Rights Offering and related
      transaction in so far as they relate to Glencore (other than the Loan) as
      determined by the Board acting reasonably (the "Market Capitalization
      Limit") such amount being US$53,063,160. If the fair market value of
      the subject matter of, or the fair market value of the consideration, for
      the transactions contemplated by this Agreement exceeds 25% of PolyMet’s
      Market Capitalization as of the date of this Agreement the Parties shall
      endeavour in good faith negotiations to amend this Agreement and any
      related document which amendments the economic effect of which would come
      as close to as possible of the intent of the Parties underlying this
Agreement and applicable related documents.

2 - 2 

	 	(b) 	
      Notwithstanding anything to the contrary in this
      Agreement, Glencore shall not be required or permitted to subscribe for
      any Rights Offering Shares and/or Standby Shares pursuant to its Basic
      Subscription Right, Additional Subscription Privilege and/or Standby
      Commitment to the extent that any such subscription for any such Shares
      would result in Glencore's ultimate parent entity (within the meaning of
      the HSR Act) holding (within the meaning of the HSR Act) more than 49.99%
      of PolyMet's then outstanding Shares (with the Market Capitalization Limit
      the "Maximum Investment"). For the avoidance of doubt, the
      foregoing shall not be construed to limit any right and/or obligation of
      Glencore hereunder to subscribe for any Rights Offering Shares and/or
      Standby Shares to the extent that any such subscription for any such
      Shares would not result in Glencore's ultimate parent entity (within the
      meaning of the HSR Act) holding (within the meaning of the HSR Act) more
      than 49.99% of PolyMet's then outstanding Shares. If, through Glencore's
      subscription for the Rights Offering Shares and/or Standby Shares,
      Glencore's ultimate parent entity would hold more than 49.99% of PolyMet’s
      outstanding Shares, the Parties shall endeavour in good faith negotiations
      to amend this Agreement and any related document which amendments the
      economic effect of which would come as close to as possible of the intent
      of the Parties underlying this Agreement and applicable related
      documents.

	2.5 	
      Offering Size and Price Determination

	 	 	 
		(a) 	
      The gross proceeds from the Rights Offering will, subject
      as provided in Section 2.5(c) of this Schedule 2 below, be equal (as
      nearly as reasonably practicable) to US&#36;60 million. The exercise
      price per Rights Offering Share (the "Exercise Price") will be
      payable in US dollars (and the US dollar price will be fixed on the date
      of the filing of the Final Prospectus). The Exercise Price will be
      determined by the Board of PolyMet at the date of filing of the Final
      Prospectus in consultation with Glencore, provided that it shall be no
      greater than the U.S. dollar equivalent of the Market Price of the Shares
      determined as of the date of filing the Final Prospectus less a 20%
      discount, subject to TSX rules. For the purposes of this Section 2.5(a),
      "Market Price" means the VWAP on TSX for the five trading days
      ending on the trading date immediately preceding the date of filing of the
      Final Prospectus, and “VWAP" means the volume weighted average
      trading price of the Shares on the TSX, calculated by dividing the total
      value by the total volume of securities traded for the relevant period and
      by converting the total value of the trading prices of such securities on
      the TSX into U.S. dollars at the Judgement Conversion Rate.

	 	 	 
		(b) 	
      The aggregate number of Rights Offering Shares (as nearly
      as practicable) which are issuable will be determined by dividing
      US&#36;60 million by the Exercise Price, which number will be subject
      to increase as described in Section 2.5(d) of this Schedule 2
  below.

2 - 3 

	 	(c) 	
      For each Right held, the holder thereof will be entitled
      to subscribe for a fractional number of Shares (the "Basic Subscription
      Right") determined by dividing the total number of Rights Offering
      Shares (calculated in accordance with Section 2.5(b) of this Schedule 2
      above) by the total the number of Shares outstanding determined on the
      latest practicable date before the date of the filing of the Final
      Prospectus.

	 	 	 
	 	(d) 	
      The ratio of new Rights Offering Shares offered pursuant
      to the Basic Subscription Right ("Basic Entitlement Shares") for
      each existing Share held will be fixed at the date of the filing of the
      Final Prospectus as described above ("Rights Offering Ratio").
      However, if any Shares are issued prior to the Record Date (where such
      Shares are not already included in the number of shares determined on the
      Record Date), the Rights Offering Ratio will remain fixed as determined in
      the Prospectus and consequently, the number of Rights issued and the
      Rights Offering Shares will be increased. For the avoidance of doubt, this
      will not increase the Standby Commitment of Glencore nor raise the Maximum
      Investment.

	 	 	 
	 	(e) 	
      Where a holder’s exercise of Rights would otherwise
      entitle such holder to fractional Shares, such holder’s entitlement will
      be reduced to the next lowest whole number of Shares. PolyMet will not be
      required to issue fractional Shares or to pay cash in lieu
  thereof.

	2.6 	
      Timing of Rights Offering. Subject to and in
      accordance with the provisions hereof, PolyMet agrees that it will file
      with the Securities Authorities in the Qualifying Jurisdictions and with
      the SEC: (i) the Preliminary Prospectus and the Registration Statement as
      soon as practicable following the execution of this Agreement and in any
      event no later than the date hereof; and (ii) the Final Prospectus and the
      Registration Statement on or before the day which is five Business Days
      immediately following the date on which all necessary approvals and
      consents are received from the Securities Authorities that are necessary
      or advisable, in PolyMet’s opinion, acting reasonably, to proceed with the
      filing of the Final Prospectus and the Registration Statement and
      completion of the Rights Offering (or such other date as the Parties may
      agree acting reasonably). PolyMet will use its best efforts to obtain a
      Decision Document as soon as possible following the filing of each of the
      Preliminary Prospectus and Final Prospectus with the Securities
      Authorities and to obtain final TSX and NYSE MKT approval of the Rights
      Offering as soon as possible following the filing of the Final Prospectus
      with the Securities Authorities and the Registration Statement with the
      SEC. On receipt of the Decision Document and final TSX and NYSE MKT
      approval, PolyMet shall:

	 	 	 
		(a) 	
      as soon as reasonably practicable announce that the
      record date will be the date falling not less than seven trading days
      after that announcement (the "Record Date"); and

	 	 	 
		(b) 	
      (i) within two Business Days after the Record Date, mail
      to holders of record in a Qualifying Jurisdiction a certificate (a
      "Rights Certificate") evidencing the total number of rights to
      which a Qualifying Shareholder is entitled, together with a commercial
      copy of the Final Prospectus or the Registration Statement, as applicable,
      (ii) within six Business Days after the Record Date, mail to beneficial
      holders in a Qualifying Jurisdiction (determined pursuant to and in the
      manner contemplated by NI 54- 101) a Rights Certificate evidencing the
      total number of rights to which a Qualifying Shareholder is entitled,
      together with a commercial copy of the Final Prospectus or the
      Registration Statement, as applicable, (iii) within two Business Days
      after the Record Date, mail to holders of record not in a Qualifying
      Jurisdiction a commercial copy of the Final Prospectus or the Registration
      Statement, as applicable, together with a letter advising them that their
      Rights Certificates will be issued to and on their behalf by the
      Subscription Agent; and (iv) within six Business Days after the Record
      Date, mail to beneficial holders not in a Qualifying Jurisdiction
      (determined pursuant to and in the manner contemplated by NI 54- 101) a
      commercial copy of the Final Prospectus or the Registration
Statement, as applicable together with a letter advising them that their Rights Certificates will be issued to and on their behalf by the Subscription Agent.

2 - 4 

	2.7	
      Additional Subscription Shares and Standby
      Shares.

	 	 	 
		(a) 	
      Subject to and in accordance with the provisions hereof,
      on the Rights Offering Closing Date, Glencore will pay in immediately
      available funds by wire transfer to an account designated by PolyMet, the
      aggregate Exercise Price that is payable for the Basic Entitlement Shares
      and the Standby Shares to be purchased by it hereunder, and PolyMet will
      issue the Basic Entitlement Shares and the Standby Shares to Glencore as
      fully paid and non- assessable Shares, shall update the share register of
      the Company to enter Glencore as a holder of record of those Shares, and
      shall deliver to Glencore a certificate in respect of those
  Shares.

	 	 	 
		(b) 	
      In the event that Glencore exercises, in full or in part,
      its Additional Subscription Privilege, Glencore shall be obligated to pay
      for such Shares ("Additional Subscription Shares") in accordance
      with the provisions of the Rights Offering, and on the Rights Offering
      Closing Date PolyMet will issue the Additional Subscription Shares to
      Glencore as fully paid and non-assessable Shares, shall update the share
      register of the Company to enter Glencore as a holder of record of those
      Shares, and shall deliver to Glencore a certificate in respect of those
      Shares.

	 	 	 
	2.8	
      Standby Fee to Glencore. Subject to the successful
      completion of the Rights Offering and the Standby Commitment on the Rights
      Offering Closing Date, in consideration of Glencore providing the Standby
      Commitment, the Company shall pay Glencore a standby commitment fee equal
      to 2.00% of the Maximum Investment, being US$1,061,263. Such fee shall be
      payable in cash on the Rights Offering Closing Date.

	 	 	 
	2.9 	
      Payment Mechanics. Notwithstanding Section 2.7 and
      2.8 of this Schedule 2, PolyMet hereby irrevocably authorizes and directs
      Glencore (i) to pay and apply such amount of the funds owing by Glencore
      under Section 2.7 of this Schedule 2 against and in satisfaction of the
      amounts owing to Glencore by PolyMet under Section 2.8 of this Schedule 2
      and under the Tranche E Debenture on account of all principal and interest
      outstanding, and (ii) to pay the balance of the funds owing by Glencore to
      PolyMet under Section 2.7 of this Schedule 2 in immediately available
      funds by wire transfer to an account designated by PolyMet.

	 	 	 
	2.10 	
      Registration Rights Agreement. On or before the
      Rights Offering Closing Date, the Company and Glencore shall execute and
      deliver to the other the Registration Rights Agreement.

	 	 	 
	2.11 	
      Miscellaneous. Any Shares held by a member of the
      Glencore International plc group of companies, other than Glencore, shall
      for all purposes of this Schedule 2, be deemed to be held by Glencore and
      Glencore shall be entitled to execute and deliver (as agent or otherwise
      for such other members of the Glencore International plc group of
      companies) any and all notices and/or other documents to be executed
      and/or delivered by a holder of Shares or Rights and PolyMet shall accept
      any such notices or other documents so executed and/or
  delivered.

ARTICLE 3 
COVENANTS OF POLYMET 

	3.1 	
      Subject to and in accordance with the provisions hereof,
      PolyMet undertakes and agrees with and in favour of Glencore
  that:

	 	 	 
		(a) 	
      Preliminary Prospectus. As provided in Section 2.6
      of this Schedule 2, PolyMet will file with the Securities Authorities in
      the Qualifying Jurisdictions, the Preliminary Prospectus and with the SEC
      the Registration Statement relating to the proposed distribution of
    the Rights Offering Securities. The Company will provide
      Glencore with the reasonable opportunity to review and comment on the
      Preliminary Prospectus and Registration Statement and will take into
      account Glencore’s reasonable comments thereon. If requested by PolyMet
      (acting reasonably), Glencore shall provide to PolyMet, for the purposes
      of the Prospectus, Registration Statement and any Press Announcement,
      information regarding Glencore’s future intentions for its holding in
      PolyMet and will confirm the accuracy of such information
provided.

2 - 5 

	 	(b) 	
      Final Prospectus and Qualification. As provided in
      Section 2.6 of this Schedule 2, PolyMet will file with the Securities
      Authorities in the Qualifying Jurisdictions the Final Prospectus and with
      the SEC the Registration Statement relating to the proposed distribution
      of the Rights Offering Securities, and take all other reasonable steps and
      proceedings that may be necessary in order to qualify the distribution of
      the Rights Offering Securities in each of the Qualifying Jurisdictions in
      which the Final Prospectus and Registration Statement has been filed. The
      Company will provide Glencore with the reasonable opportunity to review
      and comment on the Final Prospectus and Registration Statement and will
      take into account Glencore&rsquo;s reasonable comments
  thereon.

	 	 	 
	 	(c) 	
      Supplementary Material. If required by Securities
      Laws, PolyMet will prepare any Prospectus Amendments or amendments to the
      Registration Statement and/or any documentation supplemental thereto
      and/or any amending or supplemental documentation and/or any similar
      document required to be filed by it under the Securities Laws. PolyMet
      will also promptly, and in any event within any applicable time
      limitation, comply with all applicable filing and other requirements under
      the Securities Laws as a result of any material change. The Company will
      provide Glencore with the reasonable opportunity to review and comment on
      any such documentation and will take into account Glencore’s reasonable
      comments thereon.

	 	 	 
	 	(d) 	
      Consents and Approvals. PolyMet will use its best
      efforts to obtain all necessary consents, approvals or exemptions for the
      creation, offering and issuance of the Rights Offering Securities in all
      Qualifying Jurisdictions and to Glencore as contemplated herein and in the
      Prospectus and Registration Statement and the entering into and
      performance by it of the Agreement (including, for the avoidance of doubt,
      the issuance of the Rights Offering Securities).

	 	 	 
	 	(e) 	
      Cease Trade Order or Other Investigation. From the
      date hereof through the earlier of: (i) the Rights Offering Closing Date;
      and (ii) the termination of the Agreement in accordance with its terms, it
      will immediately notify Glencore in writing of any written demand, request
      or inquiry (formal or informal) by any of the Securities Authorities of
      the NYSE MKT or SEC or other Governmental Entity that concerns any matter
      relating to the affairs of PolyMet that may affect the Rights Offering,
      the transactions contemplated herein, or any other matter contemplated by
      the Agreement, or that relates to the issuance, or threatened issuance, by
      any such authority of any cease trading or similar order or ruling
      relating to any securities of PolyMet. Any notice delivered to Glencore as
      aforesaid will contain reasonable details of the demand, request, inquiry,
      order or ruling in question. PolyMet will use its best efforts to prevent
      the issuance of any orders contemplated in this Section 3.1(e) and, if
      issued, to obtain their prompt withdrawal.

	 	 	 
	 	(f) 	
      Listing. PolyMet will take all lawful action as
      may be required and appropriate so that the Rights Offering Securities
      have been conditionally approved for listing on the TSX and NYSE MKT,
      subject to receipt of customary final documentation.

	 	 	 
	 	(g) 	
      Securities Laws. PolyMet will take all lawful
      action as may be necessary and appropriate so that the Rights Offering and
      the other transactions contemplated in the Agreement will be effected in
      accordance with Securities Laws. It will consult with Glencore and its
      advisors upon their reasonable request regarding the manner in
  which the Rights Offering and the other transactions
      contemplated herein will comply with applicable Securities Laws, and it
      will provide to Glencore and its advisors copies of any documents that are
      to be submitted by it to any Securities Authorities or other regulatory
      authority for such purpose prior to being so submitted and it will give
      Glencore and its advisors an opportunity to comment on same and will take
  into account Glencore's reasonable comments thereon.

2 - 6 

	 	(h) 	
      Obtaining of Report. PolyMet will cause
      Computershare to deliver to Glencore, as soon as is practicable following
      the Rights Offering Expiry Time, details concerning the total number of
      Shares duly subscribed and paid for by holders of Rights under the Rights
      Offering, including (without limitation) those Shares subscribed and paid
      for pursuant to the Additional Subscription Privilege, and accordingly the
      number of Standby Shares for which Glencore must subscribe pursuant to
      Section 2.3 of this Schedule 2.

	 	 	 
	 	(i) 	
      Mailing of Materials. PolyMet will effect and
      complete the mailing of commercial copies of the Final Prospectus and
      Registration Statement and the other materials as set out in Section
      2.6(b) of this Schedule 2.

	 	 	 
	 	(j) 	
      Application of Proceeds. PolyMet shall immediately
      apply the proceeds of the Rights Offering to repay in full the principal
      and interest outstanding on the Loan. The balance of the proceeds from the
      Rights Offering shall be applied in the manner and for the purposes
      described in the Final Prospectus and Registration Statement.

	 	 	 
	 	(k) 	
      Registration Rights Agreement. On or before the
      Rights Offering Closing Date, PolyMet shall execute and deliver the
      Registration Rights Agreement to Glencore.

ARTICLE 4 
CHANGES 

	4.1 	
      Material Change During Distribution.

	 	 	 	 
		(a) 	
      During the period from the date of the Agreement to the
      Rights Offering Closing Date, PolyMet will promptly (and in any event
      within one Business Day) notify Glencore in writing of any material change
      (actual, anticipated, contemplated or threatened, financial or otherwise)
      in the business, affairs, operations, assets, liabilities (contingent or
      otherwise) or capital of PolyMet and its Subsidiaries taken as a
    whole.

	 	 	 	 
		(b) 	
      During the period from the date hereof to the Rights
      Offering Closing Date, PolyMet will promptly (and in any event within one
      Business Day) notify Glencore in writing of:

	 	 	 	 
			(i) 	
      any material fact that has arisen or been discovered and
      that would be required to be disclosed in the Prospectus or Registration
      Statement if filed on such date; and

	 	 	 	 
			(ii) 	
      any change in any material fact contained in the
      Prospectus or Registration Statement, including (without limitation) all
      documents incorporated by reference, which fact or change is, or may be,
      of such a nature as to result in a Misrepresentation in the Prospectus or
      Registration Statement or that would result in the Prospectus or
      Registration Statement not complying with applicable Securities
    Laws.

	 	 	 	 
		(c) 	
      PolyMet will promptly, and in any event within any
      applicable time limitation, comply, to the satisfaction of Glencore,
      acting reasonably, with all applicable filings and other requirements
      under the Securities Laws as a result of such fact or
  change.

2 - 7 

	4.2 	
      Change in Securities Laws. If during the period of
      distribution to the public of the Rights, there is any change in the
      Securities Laws that, in the opinion of Glencore, acting reasonably,
      requires the filing of a Prospectus Amendment or an amendment to the
      Registration Statement, PolyMet will promptly prepare and file such
      Prospectus Amendment with the appropriate Securities Authority in each of
      the Qualifying Jurisdictions where such filing is required and file any
      amendment to the Registration Statement with the SEC. PolyMet will provide
      Glencore with the reasonable opportunity to review any comment on any
      Prospectus Amendment and any amendment to the Registration Statement and
      will take into account Glencore’s reasonable comments thereon.

	 	 
	4.3 	
      Change in Rights Offering Closing Date. If a
      material change occurs after the date of filing of the Final Prospectus
      with the Securities Authorities and the filing of the Registration
      Statement with the SEC and prior to the Rights Offering Closing Date, the
      Rights Offering Closing Date will be, unless PolyMet and Glencore
      otherwise agree in writing, the earlier of the previously scheduled Rights
      Offering Closing Date and the sixth Business Day following the date on
      which all applicable filings or other requirements of the Securities Laws
      with respect to such material change have been complied with in all
      Qualifying Jurisdictions and any appropriate documents obtained for such
      filings and notice of such filings from PolyMet or PolyMet’s counsel have
      been received by Glencore.

ARTICLE 5 
RIGHTS OFFERING CLOSINGS AND CONDITIONS

	5.1 	
      Rights Offering Closing. The closing of the Rights
      Offering, including the closing of the purchase by Glencore and sale by
      PolyMet of the Standby Shares, if any, to be purchased by Glencore
      hereunder will be completed at 5:30 a.m. (Vancouver time) (the "Rights
      Offering Closing Time") on the second Business Day following the
      Rights Offering Expiry Date (the "Rights Offering Closing Date") or
      at such other time and/or on such other date as PolyMet and Glencore may
      agree upon in writing. On such date, and upon payment being made by
      Glencore in accordance with Sections 2.7 and 2.9 of this Schedule 2
      PolyMet will: (x) deliver (or cause to be delivered) to Glencore
      definitive certificates representing the number of Shares that is equal to
      the aggregate of (a) the number of Basic Entitlement Shares to be
      purchased by Glencore, (b) the number of any Standby Shares to be
      purchased by Glencore, and (c) the number of any Additional Subscription
      Shares to be purchased by Glencore, such certificates to be registered in
      the name of Glencore or one or more designees of Glencore, as applicable;
      and (y) pay the fee set out in Section 2.8 of this Schedule 2 to Glencore
      or one or more of its designees.

	 	 
	5.2 	
      Electronic Closing. On or before the Rights
      Offering Closing Time, the Company will deliver to Ken Klassen at
      ken.klassen@glencore.com, with a copy to Adam Taylor at
      taylora@bennettjones.com, by electronic delivery of all documents and
      instruments to be executed and delivered by or on behalf of the Company
      other than the delivery at the Rights Offering Closing Time, as the case
      may be, the certificates representing the number of Shares that is equal
      to the number of Standby Shares to be purchased by Glencore, which
      certificates will be delivered by Computershare to Ken Klassen,
      Baarermatsrasse 3, PO Box 777, CH-6341, Baar, Switzerland and Glencore
      will deliver to Douglas J. Newby at dnewby@polymetmining.com, with a copy to Mitchell
      Gropper, Q.C. at mgropper@farris.com      by electronic delivery all documents and instruments to be executed
      and delivered by or on behalf of Glencore and will wire, in immediately
      available funds, the amounts to be paid by Glencore on the Rights Offering
      Closing Date to an account designated in writing by the Company at least
      two Business Days prior to the Rights Offering Closing Date for receipt by
      the Company at the Rights Offering Closing Time. All documents and
      instruments delivered to Ken Klassen on behalf of Glencore or Douglas
      Newby on behalf of the Company are to be held for delivery to the
      appropriate Party at the Rights Offering Closing Time if and when all such
      documents and instruments have been delivered and such certificates have
      been delivered as aforesaid and such funds have been
received.

2 - 8 

	5.3 	
      Mutual Conditions. The respective obligations of
      each of PolyMet and Glencore to complete the issuance by PolyMet and the
      subscription by Glencore for the Rights Offering Shares are subject to the
      following conditions being satisfied in full, provided that in the case of
      PolyMet, only if PolyMet has used its best efforts to comply with (or
      cause to be complied with) such conditions:

	 	 	 
		(a) 	
      There shall not be any order issued by a Governmental
      Entity pursuant to Laws, nor shall there be any determination or change of
      Law, in either case which suspends, ceases, restricts or suspends trading
      in the Rights or the Shares or operates to prevent or restrict the lawful
      sale or distribution of the Rights Offering Securities (which suspension,
      cessation, prevention or restriction, as the case may be, is
      continuing).

	 	 	 
		(b) 	
      The Rights shall be listed on the TSX and NYSE
  MKT.

	 	 	 
		(c) 	
      The TSX and NYSE MKT shall have approved the listing of
      the Rights Offering Shares, subject to the filing of customary documents
      with the TSX and NYSE MKT.

	 	 	 
	5.4 	
      Conditions in Favour of Glencore. The obligation
      of Glencore to complete the subscription of the Rights Offering Share is
      subject to the following conditions being satisfied in full, which
      conditions are for the exclusive benefit of Glencore, any of which may be
      waived, in whole or in part, by Glencore, in its sole and absolute
      discretion:

	 	 	 
		(a) 	
      The Parties shall have entered into the Corporate
      Governance Agreement.

	 	 	 
		(b) 	
      The Parties shall have entered into the Registration
      Rights Agreement.

	 	 	 
		(c) 	
      This Agreement shall not have been terminated in
      accordance with its terms.

	 	 	 
		(d) 	
      All actions required to be taken by or on behalf of
      PolyMet including the passing of all requisite resolutions of the
      directors of PolyMet and all requisite filings with any Governmental
      Entity will have occurred on or prior to the Rights Offering Closing Date,
      so as to validly authorize the execution and filing of the Preliminary
      Prospectus, the Final Prospectus, any Prospectus Amendment and
      Registration Statement and to create and issue the Rights Offering
      Securities, in each case having the attributes contemplated by the
      Prospectus and Registration Statement, and PolyMet will have taken all
      requisite actions, including the passing of all requisite resolutions of
      the directors of PolyMet, and have made and/or obtained all necessary
      filings, approvals, orders, rulings and consents of all relevant
      securities regulatory authorities and other Governmental Entities required
      in connection with the Rights Offering, the other transactions
      contemplated in the Agreement and the purchase of Standby Shares by
      Glencore as contemplated herein.

	 	 	 
		(e) 	
      Glencore shall have received a legal opinion as to
      matters of the laws of Canada dated as of the Rights Offering Closing Date
      from Farris, Vaughan Wills & Murphy LLP, Canadian counsel to PolyMet
      (who may rely, to the extent appropriate in the circumstances, as to
      matters of fact, on certificates of officers of PolyMet) substantially in
      the form of Exhibit 5.4(e).

	 	 	 
		(f) 	
      Glencore shall have received a legal opinion as to
      matters of the laws of the United States dated as of the Rights Offering
      Closing Date from Troutman Sanders LLP, United States counsel to the
      Company (who may rely, to the extent appropriate in the circumstances, as
      to matters of fact, on certificates of officers of PolyMet) substantially
      in the form of Exhibit 5.4(f).

	 	 	 
		(g) 	
      Glencore shall have received at the Rights Offering
      Closing Date, a certificate or certificates dated the Rights Offering
      Closing Date signed on behalf of PolyMet by the Chief Executive Officer
      and the Chief Financial Officer of PolyMet or such other
officers of PolyMet acceptable to Glencore, acting reasonably, in form and content satisfactory to Glencore, acting reasonably, addressed to Glencore certifying for and on behalf of PolyMet and not in their personal capacity after having made due enquiry, with respect to the following matters:

2 - 9 

	 	(i) 	
      its constating documents;

	 	 	 
	 	(ii) 	
      the resolutions of its board of directors relevant to the
      approval of the Preliminary Prospectus, the Final Prospectus and
      Registration Statement and the signing and filing thereof, the allotment
      and issue of the Rights Offering Securities and the authorization of the
      Agreement and the transactions contemplated therein; and

	 	 	 
	 	(iii) 	
      the incumbency and signatures of certain of its
      authorized signing officers.

	 	(h) 	
      PolyMet shall have performed or complied with, in all
      material respects, each of its covenants contained in the Agreement and
      each of its representations and warranties which are qualified as to
      materiality shall be true and correct, and all representations and
      warranties not so qualified shall be true and correct in all material
      respects, and Glencore shall have received at the Rights Offering Closing
      Date a certificate or certificates dated the Rights Offering Closing Date,
      and signed on behalf of PolyMet by the Chief Executive Officer and the
      Chief Financial Officer of PolyMet or such other officers of PolyMet
      acceptable to Glencore, acting reasonably, in form and content
      satisfactory to Glencore, acting reasonably, addressed to Glencore
      certifying for and on behalf of PolyMet and not in their personal capacity
      after having made due enquiry and after having carefully examined the
      Prospectus and Registration Statement, including all documents
      incorporated by reference that:

	 	 	 	 
	 		(i) 	
      since the respective dates as of which information is
      given in the Final Prospectus or Registration Statement, as amended or
      supplemented which has been filed and receipted, as required, there has
      been no requirement to file a Prospectus Amendment under Securities Laws
      or an amendment of the Registration Statement with the SEC;

	 	 	 	 
	 		(ii) 	
      no order, ruling, determination or change in Law, in any
      such case, having the effect of preventing, restricting or suspending the
      sale or distribution of the Rights suspending the sale or ceasing the
      trading of the Rights Offering Securities or any other securities of
      PolyMet or prohibiting the sale of the Rights Offering Securities has been
      issued by any regulatory authority and is continuing in effect and no
      proceedings for that purpose have been instituted or are pending or, to
      the knowledge of such officers, contemplated or threatened under
      Securities Laws or by any Governmental Entity;

	 	 	 	 
	 		(iii) 	
      all representations and warranties of PolyMet made in the
      Agreement which are qualified as to materiality shall be true and correct,
      and all representations and warranties not so qualified shall be true and
      correct in all material respects, as of the Rights Offering Closing Time,
      as though made on and as of the Rights Offering Closing Time;

	 	 	 	 
	 		(iv) 	
      all covenants of PolyMet in the Agreement to be performed
      on or before the Rights Offering Closing Time, shall have been duly
      performed by PolyMet in all material respects;

2 - 10 

	 	(v) 	
      neither the Rights nor any Shares will have been delisted
      or suspended or halted from trading for a period of greater than one
      Business Day at any time prior to the Rights Offering Closing
  Date;

	 	 	 
	 	(vi) 	
      no Material Adverse Effect will have occurred or have
      been disclosed (if previously undisclosed) at any time after the date
      hereof and prior to the Rights Offering Closing Date; and

	 	 	 
	 	(vii) 	
      the Rights Offering Closing Date will have occurred
      within 90 days after the date of this
Agreement.

	5.5 	
      Conditions in Favour of PolyMet. The obligation of
      PolyMet to issue the Standby Shares to Glencore is subject to the
      following conditions being satisfied in full which conditions are for the
      exclusive benefit of PolyMet, any of which may be waived, in whole or in
      part, by PolyMet, in its sole and absolute discretion:

	 	 	 	 
		(a) 	
      Glencore shall have performed or complied with, in all
      material respects, each of its covenants contained in the Agreement and
      each of its representations and warranties shall be true and correct and
      PolyMet shall have received at the Rights Offering Closing a certificate
      or certificates dated the Rights Offering Closing Date and signed on
      behalf of Glencore by such officers of Glencore acceptable to PolyMet,
      acting reasonably, addressed to PolyMet certifying for and on behalf of
      Glencore and not in their personal capacity after having made due enquiry
      that:

	 	 	 	 
			(i) 	
      all representations and warranties of Glencore made in
      the Agreement shall be true and correct as of the Rights Offering Closing
      Time, as though made on and as of the Rights Offering Closing Time;
    and

	 	 	 	 
			(ii) 	
      all covenants of Glencore in the Agreement to be
      performed on or before the Rights Offering Closing Time, shall have been
      duly performed by Glencore in all material
respects.

ARTICLE 6 
TERMINATION 

	6.1 	
      Termination by PolyMet or Glencore. Either PolyMet
      or Glencore may terminate the Agreement by giving written notice to the
      other Party, if the conditions set out in Section 5.3 of this Schedule 2
      are not satisfied on or before the Rights Offering Closing Date or such
      other date as may be agreed in writing by PolyMet and Glencore.

	 	 
	6.2 	
      Termination by PolyMet. PolyMet may terminate the
      Agreement by giving written notice to Glencore at any time if any of the
      conditions set out in Section 5.5 of this Schedule 2 are not satisfied on
      or before the Rights Offering Closing Date provided however that PolyMet
      will be entitled to make such election to terminate only if PolyMet has
      complied with its obligations under the Agreement.

	 	 
	6.3 	
      Termination by Glencore. Glencore may terminate
      the Agreement by giving written notice to PolyMet at any time
  if:

	 	(a) 	
      PolyMet fails to: (i) obtain final listing approval from
      the TSX or NYSE MKT for the Rights at least two days prior to the date
      named as the Record Date in the Final Prospectus; (ii) obtain conditional
      listing approval from the TSX and NYSE MKT in respect of the Shares
      issuable upon exercise of the Rights and the Standby Shares, prior to or
      on the Rights Offering Closing Date, subject to receipt of customary final
      documentation; and (iii) satisfy any of the conditions set out in Section 5.4 of this
  Schedule 2 on or before the Rights Offering Closing Date;

2 - 11 

	 	(b) 	
      the Shares are de-listed or suspended or halted for
      trading for a period greater than one Business Day for any reason by the
      TSX or NYSE MKT at any time; or

	 	 	 
	 	(c) 	
      if the Rights Offering is otherwise terminated or
      cancelled.

ARTICLE 7 
INDEMNIFICATION 

	7.1	
      PolyMet covenants and agrees to protect, indemnify and
      hold harmless Glencore for and on behalf of itself and for and on behalf
      of and in trust for each of its affiliates and its and their respective
      directors, officers, shareholders, partners, employees and agents
      (collectively, the "Glencore Indemnified Parties") from and against
      any and all direct and indirect losses, claims, damages, demands, costs,
      expenses and other liabilities of any kind, ("Losses") which any of
      them may be subject to or suffer or incur to any third party:

	 	 	 
		(a) 	
      by reason of or in any way arising, directly or
      indirectly, out of any Misrepresentation or alleged Misrepresentation in
      the Prospectus or Registration Statement (other than a Misrepresentation
      in the Prospectus or Registration Statement attributable to information
      provided by or on behalf of Glencore in respect of itself expressly for
      inclusion in the Prospectus or Registration Statement); and/or

	 	 	 
		(b) 	
      by reason of or in any way, directly or indirectly, out
      of any order made or any inquiry, investigation or proceeding instituted,
      threatened or announced by any Governmental Entity or by any other Person,
      based upon any Misrepresentation or alleged Misrepresentation in the
      Prospectus or Registration Statement (other than a Misrepresentation in
      the Prospectus or Registration Statement attributable to information
      provided by or on behalf of the Glencore Indemnified Parties in respect of
      themselves for inclusion in the Prospectus or Registration Statement);
      and/or

	 	 	 
		(c) 	
      the non- compliance or alleged non-compliance by PolyMet
      with any requirement of Securities Laws or any other Laws in connection
      with the Rights Offering; and/or

	 	 	 
		(d) 	
      by reason of, or in any way arising, directly or
      indirectly, out of any breach or default of or under any representation,
      warranty, covenant or agreement of PolyMet contained in the
    Agreement.

		
      Nothing in this Article 7 shall affect the ability of the
      Company to bring a claim against Glencore in respect of any breach of this
      Agreement by Glencore, and nothing in this Article 7 shall affect the
      ability of Glencore to bring a claim against the Company in respect of any
      breach of this Agreement by the Company.

	 	 
	7.2 	
      Glencore covenants and agrees to protect, indemnify and
      hold harmless PolyMet for and on behalf of itself and for and on behalf of
      and in trust for each of its directors, officers, employees and agents
      from and against any and all Losses caused or incurred to any third party
      by reason of, or in any way arising, directly or indirectly, out of (a)
      any breach or default of or under any representation, warranty, covenant
      or agreement of Glencore contained herein, or (b) any information relating
      solely to Glencore that Glencore provided to PolyMet in writing expressly
      for inclusion in the Prospectus or Registration Statement.

	 	 
	7.3 	
      The indemnification by PolyMet contained in Section 7.1
      of this Schedule 2 will not apply in respect of any Losses caused or
      incurred by reason of or arising out of any Misrepresentation, order,
      inquiry, investigation or other matter or thing referred to herein which
      is based upon or results directly from any information relating solely to
      Glencore that Glencore provided to PolyMet in writing expressly for
  inclusion in the Prospectus or Registration Statement.

2 - 12 

	7.4 	
      The indemnification in this Article 7 may not be used by
      Glencore to bring a claim against PolyMet in circumstances where Glencore
      has not suffered any Losses to a third party. The indemnification in this
      Article 7 may not be used by PolyMet to bring a claim against Glencore in
      circumstances where PolyMet has not suffered any Losses.

	 	 	 
	7.5 	
      In the event that any claim, action, suit or proceeding,
      including, without limitation, any inquiry or investigation (whether
      formal or informal), is brought or instituted against any of the Persons
      in respect of which indemnification is or might reasonably be considered
      to be provided for herein, such Person (an "Indemnified Party")
      shall promptly notify the Person from whom indemnification is being sought
      (being either PolyMet under Section 7.1 of this Schedule 2 or Glencore
      under Section 7.2 of this Schedule 2, as the case may be (the
      "Indemnifying Party")) and the Indemnifying Party shall promptly
      retain counsel who shall be reasonably satisfactory to the Indemnified
      Party to represent the Indemnified Party in such claim, action, suit or
      proceeding, and the Indemnifying Party shall pay all of the reasonable
      fees and disbursements of such counsel relating to such claim, action,
      suit or proceeding.

	 	 	 
	7.6 	
      In any such claim, action, suit or proceeding, the
      Indemnified Party shall have the right to retain other counsel to act on
      such Person’s behalf, provided that the fees and disbursements of such
      other counsel shall be paid by the Indemnified Party unless:

	 	 	 
		(a) 	
      the Indemnifying Party and the Indemnified Party shall
      have mutually agreed in writing to the retention of such other counsel;
      or

	 	 	 
		(b) 	
      the named parties to any such claim, action, suit or
      proceeding (including any added, third or impleaded parties) include both
      the Indemnifying Party and the Indemnified Party and representation of
      both parties by the same counsel would be inappropriate due to actual or
      potential differing interests between them (such as the availability of
      different defenses);

		
      provided, however, the Indemnifying Party shall not, in
      connection with any such claim, action, suit or proceeding in the same
      jurisdiction, be liable for the reasonable fees and expenses of more than
      one separate legal firm for all Persons or corporations in respect of
      which indemnification is or might reasonably be considered to be provided
      for herein and such firm shall be designated in writing by the Indemnified
      Party (on behalf of itself and its directors, officers, employees and
      agents).

	 	 
	7.7 	
      Notwithstanding anything herein contained, neither
      PolyMet nor Glencore shall agree to any settlement of any such claim,
      action, suit or proceeding unless the other has consented in writing
      thereto, and neither Party shall be liable for any settlement of any such
      claim, action, suit or proceeding unless it has consented in writing
      thereto.

	 	 
	7.8 	
      If the indemnification provided for in this Article 7 is
      held by a court of competent jurisdiction to be unavailable to an
      Indemnified Party with respect to any Losses referred to herein, the
      Indemnifying Party, in lieu of indemnifying such Indemnified Party
      thereunder, shall to the extent permitted by Law contribute to the amount
      paid or payable by such Indemnified Party as a result of such Loss in such
      proportion as is appropriate to reflect the relative fault of the
      Indemnifying Party on the one hand and of the Indemnified Party on the
      other in connection with the act or omission that resulted in such Loss,
      as well as any other relevant equitable considerations. The relative fault
      of the Indemnifying Party and of the Indemnified Party shall be determined
      by a court of law by reference to, among other things, whether the untrue
      or alleged untrue statement of material fact or the omission to state a
      material fact relates to information supplied by the Indemnifying Party or
      by the Indemnified Party and the parties&rsquo; relative intent,
      knowledge, access to information and opportunity to correct or prevent
      such statement or omission.

2 - 13 

	7.9 	
      The obligations of PolyMet and Glencore under this
      Article 7 shall survive completion of any offerings described herein and
      any termination of the Agreement. No Indemnifying Party, in the defense of
      any such claim or litigation, shall, except with the consent of the
      Indemnified Party, consent to entry of any judgment or enter into any
      settlement which does not include as an unconditional term thereof the
      giving by the claimant or plaintiff to such Indemnified Party of a release
      from all liability in respect to such claim or litigation.

	 	 
	7.10 	
      To the extent any indemnification by an Indemnifying
      Party is prohibited or limited by Law, the Indemnifying Party agrees to
      make the maximum contribution with respect to any amounts for which it
      would otherwise be liable under this Article 7 to the fullest extent
      permitted by Law; provided, however, that no Person guilty of fraudulent
      misrepresentation shall be entitled to contribution from any Person who
      was not guilty of such fraudulent
misrepresentation.

SCHEDULE 3 
FORM OF INITIAL PRESS ANNOUNCEMENT

(See attached) 

 

 

 

 

 

 

 

SCHEDULE 4 
FORM OF PRELIMINARY PROSPECTUS

(See attached) 

Information contained herein is subject
to completion or amendment. A registration statement relating to these
securities has been filed with the U.S. Securities and Exchange Commission.
These securities may not be sold nor may offers to buy be accepted prior to the
time the registration statement becomes effective. This preliminary short form
prospectus shall not constitute an offer to sell or the solicitation of an offer
to buy nor, shall there be any sale of these securities in any jurisdiction in
which such offer, solicitation or sale would be unlawful prior to registration
or qualification under the securities laws of any such jurisdiction.

A copy of this preliminary short form
prospectus has been filed with the securities regulatory authorities in each of
the provinces of British Columbia, Alberta and Ontario but has not yet become
final for the purpose of the sale of securities. Information contained in this
preliminary short form prospectus may not be complete and may have to be
amended. The securities may not be sold until a receipt for the short form
prospectus is obtained from the securities regulatory authorities.

This preliminary short form prospectus constitutes a public
offering of these securities only in those jurisdictions where they may be
lawfully offered for sale and therein only by persons permitted to sell such
securities. No securities regulatory authority has expressed an opinion about
these securities and it is an offence to claim otherwise. 

The enforcement by investors of civil liabilities under
United States federal securities laws may be affected adversely by the fact that
the issuer is organized under the laws of British Columbia, Canada, that many of
its directors and officers, and some or all of the experts named in this short
form prospectus, are residents of Canada or otherwise reside outside the United
States, and that a substantial portion of the assets of said persons are located
outside the United States. See “ENFORCEABILITY OF CIVIL
LIABILITIES”. 

THE SECURITIES OFFERED BY THIS PROSPECTUS HAVE NOT BEEN
APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION (THE
“SEC”) OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SEC OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENCE. 

This offering is made by a Canadian issuer that is
permitted, under a multijurisdictional disclosure system adopted by the United
States and Canada, to prepare this short form prospectus in accordance with the
disclosure requirements of Canada. You should be aware that those requirements
are different from those of the United States. Financial statements incorporated
by reference into this prospectus have been prepared in accordance with
International Financial Reporting Standards as issued by the International
Accounting Standards Board and may not be comparable to financial statements
prepared in accordance with United States generally accepted accounting
principles. 

Shareholders in the United States should be aware that the
ownership and disposition of the Rights and Common Shares issuable upon the
exercise of Rights by them as described herein may have tax consequences both in
the United States and Canada. Such shareholders are encouraged to consult their
tax advisors in that regard. 

Information has been incorporated by reference in this
prospectus from documents filed with securities commissions or similar
authorities in Canada. Copies of the documents incorporated herein by
reference may be obtained on request without charge from the Corporate Secretary
of PolyMet Mining Corp. at First Canadian Place, 100 King Street West, Toronto,
Suite 5900, Ontario, M5X 1C7, telephone (416) 915-4189 and are also available
electronically at www.sedar.com.

Preliminary Short Form Prospectus 

	Rights Offering 	April 10, 2013 

 

POLYMET MINING CORP. 
US$60,000,000

Offering of Rights to Subscribe for up to [•] Common
Shares
at a Price of US$[•] per Common Share 

PolyMet Mining Corp. (the “Corporation”) is distributing
to the holders of its outstanding common shares (the “Common Shares”) of
record (“Shareholders”) at 5:00 p.m. (Eastern time) on [•],
2013 (the “Record Date”) one right (the “Right”) for each Common
Share held which will entitle the Shareholders to subscribe for up to an
aggregate of [•] Common Shares for gross proceeds to the
Corporation of approximately US$60,000,000 (the “Rights
Offering”), assuming exercise of all Rights. 

- 2 - 

The Rights are evidenced by transferable certificates in
registered form (the “Rights Certificates”). Each Shareholder (other than
an Ineligible Holder as defined herein) is entitled to one Right for each Common
Share held on the Record Date. For each [•] Rights held, the
holder thereof (other than an Ineligible Holder) is entitled to purchase one
Common Share (the “Basic Subscription Privilege”) at a price of
US$[•] per Common Share (the “Subscription Price”) prior to
5:00 p.m. (Eastern time) (the “Expiry Time”) on [•], 2013
(the “Expiry Date”). No fractional Common Shares will be issued.
RIGHTS NOT EXERCISED BEFORE THE EXPIRY TIME WILL BE VOID AND OF NO VALUE.
Shareholders who exercise in full the Basic Subscription Privilege for their
Rights are also entitled to subscribe for additional Common Shares (the
“Additional Shares”), if available, pursuant to an additional
subscription privilege (the “Additional Subscription Privilege”). See
“DESCRIPTION OF OFFERED SECURITIES - Additional Subscription Privilege”. Any
subscription for Common Shares will be irrevocable once submitted. 

	  	Offering Price 	Proceeds to the
      Corporation(1) 
	Per Common Share 	US$[•] 	US$[•] 
	Total 	US$60,000,000 	US$[•]
  

__________________________________
Note: 

	 	(1) 	
      Before deducting the expenses of the Rights Offering,
      estimated to be approximately US$[•] and the Standby Fee (as
      defined herein) equal to 2.00% of the Maximum Investment (as defined
      herein), being US$1,061,263 pursuant to the Standby Commitment (as defined
      herein), which Standby Fee is payable in cash upon closing of the Rights
      Offering.

This prospectus qualifies the distribution of the Rights as
well as the Common Shares issuable upon exercise of the Rights and the Standby
Shares (as defined herein) (collectively, the “Offered Securities”) in
the provinces of British Columbia, Alberta and Ontario. This prospectus also
covers the offer and sale of the Offered Securities in the United States
(together with British Columbia, Alberta and Ontario, the “Eligible
Jurisdictions”) under the U.S. Securities Act of 1933, as amended (the
“U.S. Securities Act”). The Corporation intends to apply to list the
Rights distributed under this prospectus and the Common Shares issuable upon the
exercise of the Rights on the Toronto Stock Exchange (the “TSX”) and the
NYSE MKT LLC (“NYSE MKT”). The approval of such listings is subject to
the Corporation fulfilling all of the listing requirements of the TSX and NYSE
MKT. If approved for listing or admitted for trading, as applicable, it is
expected that the Rights will cease trading on the TSX at noon (Eastern time) on
the Expiry Date and on the NYSE MKT at the close of trading (Eastern time) on
the business day immediately preceding the Expiry Date. There is currently no
market through which the Rights may be sold and there can be no assurance
that an active trading market will develop in the Rights. Holders of Rights may
not be able to sell the Rights qualified by this prospectus. To the extent an
active trading market does not develop, the pricing of the Rights in the
secondary market, the transparency and availability of trading prices, the
liquidity of the securities and the extent of issuer regulation may be adversely
affected. See “RISK FACTORS”. The currently
outstanding Common Shares are listed and posted for trading on the TSX under the
symbol “POM” and on the NYSE MKT under the symbol “PLM”. On April 9, 2013, the
closing price for the Common Shares on the TSX was $1.19 per Common Share
and on the NYSE MKT US$1.18 per Common Share. 

Prospective investors should be aware that the acquisition
or disposition of the securities described in this Prospectus and the expiry of
an unexercised Right may have tax consequences in Canada, the United States,
or elsewhere, depending on each particular prospective investor’s
specific circumstances. Such consequences may not be described fully
herein. Prospective investors should consult their own tax advisors with respect
to such tax considerations.

Computershare Investor Services Inc. (the “Subscription
Agent”), at its principal office in the City of Toronto (the
“Subscription Office”), is the subscription agent for this Rights
Offering. See “DESCRIPTION OF OFFERED SECURITIES -- Subscription and Transfer
Agent”. 

For Common Shares held through a securities broker or dealer,
bank or trust company or other participant (a “Participant”) in the book
based system administered by CDS Clearing and Depository Services Inc.
(“CDS”) or in the book-based system administered by the Depository Trust
Company (“DTC”), a subscriber may subscribe for Common Shares by
instructing the Participant holding the subscriber’s Rights to exercise all or a
specified number of such Rights and forwarding the Subscription Price for each
Common Share subscribed for to such Participant in accordance with the terms of
this Rights Offering. A subscriber wishing to subscribe for Additional Shares
pursuant to the Additional Subscription Privilege must forward its request to
the Participant that holds the subscriber’s Rights prior to the Expiry Time on the Expiry Date, along with payment
for the number of Additional Shares requested. Any excess funds will be returned by mail or credited to the
subscriber’s account with its Participant without interest or deduction.
Subscriptions for Common Shares made through a Participant will be irrevocable
and subscribers will be unable to withdraw their subscriptions for Common Shares
once submitted. See “DESCRIPTION OF OFFERED SECURITIES -- Rights Certificate --
Common Shares Held Through CDS” and “Rights Certificate -- Common Shares Held
Through DTC”. We refer to Participants in CDS as “CDS Participants” and to
Participants in DTC as “DTC Participants”. 

- 3 - 

For Common Shares held in registered form, a Rights Certificate
evidencing the number of Rights to which a holder is entitled will be mailed
with a copy of this prospectus to each registered Shareholder as of 5:00 p.m.
(Eastern time) on the Record Date. In order to exercise the Rights represented
by the Rights Certificate, the holder of Rights must complete and deliver the
Rights Certificate to the Subscription Agent in the manner and upon the terms
set out in this prospectus. All exercises of Rights are irrevocable once
submitted. See “DESCRIPTION OF OFFERED SECURITIES — Rights Certificate -- Common
Shares Held in Registered Form”. 

If a Shareholder does not exercise, or sells or otherwise
transfers, its Rights, then such Shareholder’s current percentage
ownership in the Corporation will be diluted as a result of the exercise of
Rights by other Shareholders. 

This prospectus qualifies the distribution of the Offered
Securities in the Eligible Jurisdictions. The Offered Securities are not being
distributed or offered to Shareholders in any jurisdiction other than the
Eligible Jurisdictions (an “Ineligible Jurisdiction”) and, except under
the circumstances described herein, Rights may not be exercised by or on behalf
of a holder of Rights resident in an Ineligible Jurisdiction (an “Ineligible
Holder”). This prospectus is not, and under no circumstances is to be
construed as, an offering of any Rights or Common Shares for sale in any
Ineligible Jurisdiction or a solicitation therein of an offer to buy any
securities. Rights Certificates will not be sent to Shareholders with addresses
of record in any Ineligible Jurisdiction. Instead, such Ineligible Holders will
be sent a letter advising them that their Rights Certificates will be held by
the Subscription Agent, who will hold such Rights as agent for the benefit of
all such Ineligible Holders. See “DESCRIPTION OF OFFERED SECURITIES — Ineligible
Holders”. 

Under a standby purchase agreement dated April 10, 2013 (the
“Standby Purchase Agreement”), Glencore AG (the “Standby
Purchaser”), the Corporation’s largest shareholder, which owns approximately
25.6% of the outstanding Common Shares, has agreed, subject to certain terms,
conditions and limitations, to purchase at the Subscription Price, pursuant to
the Basic Subscription Privilege, the Additional Subscription Privilege and the
Standby Purchase Agreement, up to [•] Offered Securities
calculated by dividing US$53,063,160 (being 24.99% of the Corporation's Market
Capitalization as of the date of execution of the Standby Purchase Agreement
less (A) the Standby Fee and (B) the fair market value of all other transactions
contemplated by the Rights Offering, Standby Purchase Agreement and related
transactions in so far as they relate to Glencore (other than the Bridge Loan)
as determined by the Board acting reasonably), by the Subscription Price, as
fully paid and non-assessable Common Shares, such number of Common Shares (the
“Standby Shares”) subject to the Standby Purchaser's ultimate parent
entity (within the meaning of the U.S. Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the “HSR Act”)) holding (within the meaning of
the HSR Act) not more than 49.99% of the Corporation’s outstanding Common
Shares, following allocation of the Offered Securities to the holders of Rights
(collectively, the “Maximum Investment”). 

The Standby Purchase Agreement may be terminated by the Standby
Purchaser prior to the Expiry Time in certain circumstances. This prospectus
qualifies the distribution of the Standby Shares. In consideration of the
agreement of the Standby Purchaser to purchase the Standby Shares as provided
above, the Standby Purchaser will be entitled to a fee at the closing of the
Rights Offering equal to 2.00% of the Maximum Investment, being US$1,061,263
(the “Standby Fee”). The Standby Fee will be payable in cash in
immediately available funds by wire transfer to the account designated by the
Standby Purchaser. See “STANDBY COMMITMENT”. 

The Company and the Standby Purchaser have agreed to enter into
certain corporate governance arrangements in connection with any closing of the
Rights Offering under which, effective January 1, 2014, the Standby Purchaser
may appoint that number of the directors of the Company which is proportionate
to the Standby Purchaser's holdings of issued and outstanding common shares (on
a fully diluted basis) relative to all the issued and outstanding common shares
(on a fully diluted basis) subject to certain limitations including that the
Standby Purchaser may not appoint more than 49% (rounding down) of the Board of
Directors of the Corporation (the “Board”). 

- 4 - 

Certain legal matters relating to Canadian law in connection
with the Rights Offering will be passed upon on our behalf by Farris, Vaughan,
Wills & Murphy LLP, British Columbia, Canada and certain legal matters
relating to United States laws will be passed upon on our behalf by Troutman
Sanders LLP, New York, New York.

The Standby Purchaser is not engaged as an underwriter in
connection with the Rights Offering and has not been involved in the preparation
of, or performed any review of, this prospectus in the capacity of an
underwriter. No underwriter has been involved in the preparation of this
prospectus or performed any review of the contents of this prospectus. 

Investments in Rights and the Common Shares underlying such
Rights are subject to a number of risks. See “RISK
FACTORS” for a discussion of factors that should be considered by
prospective investors and their advisors in assessing the appropriateness of an
investment in the Rights or the Common Shares underlying such Rights. 

The Corporation's registered office is located at Suite 2500,
700 West Georgia Street, Vancouver, British Columbia, V7Y 1B3 and the
Corporation's head office is located at 444 Cedar Street, Suite 2060, Saint
Paul, Minnesota, 55101. 

Certain persons signing a certificate under Part 5 of National
Instrument 41-101- General Prospectus Requirements, reside outside of
Canada. Although these individuals, Messrs. Jonathan Cherry and Douglas Newby,
have appointed Farris, Vaughan, Wills & Murphy LLP as their agent for
service of process in British Columbia, it may not be possible for investors to
enforce judgments obtained in Canada against Messrs. Cherry and Newby. 

EXCHANGE RATE INFORMATION 

      
     The following table reflects the high and low
rates of exchange for one United States dollar, expressed in Canadian dollars,
during the periods noted, the rates of exchange at the end of such periods and
the average of such rates of exchange for each period, based on the Bank of
Canada noon spot rate of exchange. On April 9, 2013, the Bank of Canada noon
spot rate of exchange was US$1.00 equals C$1.0162. 

Annual Data 

	 	High 	Low 	End 	Average 
	Year Ended 	($) 	($) 	($) 	($) 
	October 31, 2012(1) 	1.0418 	0.9710 	0.9996 	1.0007 
	January 31, 2012 	1.0604 	0.9449 	1.0052 	0.9907 
	January 31, 2011 	1.0778 	0.9862 	1.0022 	1.0260 
	February 1, 2010 	1.3000 	1.0151 	1.0653 	1.1267 

__________________________________
Note: 

	(1) 	
      for 9 month period ended October 31,
  2012

TABLE OF CONTENTS 

	GENERAL
      MATTERS	1
	 	 
	WHERE
      YOU CAN FIND MORE INFORMATION	1
      
	 	 
	CAUTIONARY
      STATEMENT WITH REGARD TO FORWARD-LOOKING STATEMENTS 	1
      
	 	 
	ENFORCEABILITY
      OF CIVIL LIABILITIES	2
      
	 	 
	CAUTIONARY
      NOTE TO UNITED STATES INVESTORS	3
      
	 	 
	DOCUMENTS
      INCORPORATED BY REFERENCE	4
      
	 	 
	SUMMARY	5
      
	 	 
	THE
      CORPORATION	9
      
	 	 
	BACKGROUND
      TO THE RIGHTS OFFERING	12
      
	 	 
	USE
      OF PROCEEDS	14
      
	 	 
	CONSOLIDATED
      CAPITALIZATION	14
      
	 	 
	DESCRIPTION
      OF SHARE CAPITAL	15
      
	 	 
	INTENTION
      OF INSIDERS AND OTHERS TO EXERCISE RIGHTS	16
      
	 	 
	PRIOR
      SALES	16
      
	 	 
	PRICE
      RANGE AND TRADING VOLUME	17
      
	 	 
	DESCRIPTION
      OF OFFERED SECURITIES	17
      
	 	 
	PLAN
      OF DISTRIBUTION	24
      
	 	 
	STANDBY
      COMMITMENT	25
      
	 	 
	RISK
      FACTORS	27
      
	 	 
	CERTAIN
      CANADIAN FEDERAL INCOME TAX CONSIDERATIONS	29
      
	 	 
	CERTAIN
      UNITED STATES FEDERAL INCOME TAX CONSIDERATION	32
      
	 	 
	ELIGIBILITY
      FOR INVESTMENT	37
      
	 	 
	LEGAL
      MATTERS	38
      
	 	 
	INTERESTS
      OF EXPERTS	38
      
	 	 
	AUDITOR,
      REGISTRAR TRANSFER AGENT AND REGISTRAR AND SUBSCRIPTION AGENT 	38
      
	 	 
	CANADIAN
      PURCHASERS’ STATUTORY RIGHTS OF WITHDRAWAL AND RESCISSION 	39
      
	 	 
	DOCUMENTS
      FILED AS PART OF REGISTRATION STATEMENT	39
      
	 	 
	CERTIFICATE
      OF THE CORPORATION	C-1
      

GENERAL MATTERS 

            In
this prospectus, “PolyMet”, “we”, “us” and
“our” refer collectively to the Corporation and its consolidated
subsidiaries, unless the context otherwise requires. All references in this
prospectus to “dollars” or “$” are to Canadian dollars unless
otherwise noted. All references to “U.S. dollars” or
“US$” are to United States dollars. The Corporation’s financial
statements incorporated herein by reference have been prepared in accordance
with International Financial Reporting Standards as issued by the International
Accounting Standards Board. The Corporation prepares its financial statements in
Canadian dollars. 

            You
should rely only on the information contained in this prospectus. We have not
authorized anyone to provide you with information different from that contained
in this prospectus. 

WHERE YOU CAN FIND MORE INFORMATION 

            We
have filed with the SEC under the U.S. Securities Act a registration statement
on Form F-10 relating to the Offered Securities being offered hereunder and of
which this prospectus forms a part. This prospectus, which constitutes part of
the registration statement, does not contain all of the information set forth in
such registration statement, certain items of which are contained in the
exhibits to the registration statement as permitted or required by the rules and
regulations of the SEC. Items of information omitted from this prospectus but
contained in the registration statement will be available on the SEC’s website
at www.sec.gov.

            We
file with the securities commissions or similar authorities in each of the
provinces of British Columbia, Alberta and Ontario (the “Canadian Securities
Authorities”) material change reports, annual and quarterly reports and
other information. We are subject to the informational requirements of the U.S.
Securities Exchange Act of 1934, as amended (the “Exchange Act”), and, in
accordance with the Exchange Act, we also file certain reports with and furnish
other information to the SEC. You may read any document we file with or furnish
to the SEC at the SEC’s public reference room at Room 1580, 100 F Street N.E.,
Washington, D.C. 20549. You may also obtain copies of the same documents from
the public reference room of the SEC at 100 F Street, N.E., Washington, D.C.
20549 by paying a fee. Please call the SEC at 1-800-SEC-0330 or contact them at
www.sec.gov for further information on the public reference rooms. 

            You
may also access our disclosure documents and any reports, statements or other
information that we file with the Canadian Securities Authorities through the
Internet on the Canadian System for Electronic Document Analysis and Retrieval,
which is commonly known by the acronym SEDAR and which may be accessed at
www.sedar.com. SEDAR is the Canadian equivalent of the SEC’s Electronic
Document Gathering Analysis and Retrieval System, which is commonly known by the
acronym EDGAR and which may be accessed at www.sec.gov.

CAUTIONARY STATEMENT WITH REGARD TO FORWARD-LOOKING
STATEMENTS 

            Certain
statements contained in this prospectus and in the documents incorporated by
reference in this prospectus, constitute “forward-looking statements” within the
meaning of the “safe harbor” provisions of the United States Private Securities
Litigation Reform Act of 1995 and “forward-looking information” under the
provisions of Canadian provincial securities laws. Forward-looking statements
are frequently characterized by words such as “expects,” “anticipates,”
“believes,” “intends,” “estimates,” “potential,” “possible,” “projects,”
“plans,” and similar expressions, or statements that events, conditions or
results “will,” “may,” “could,” or “should” occur or be achieved or their
negatives or other comparable words. Such forward-looking statements involve
known and unknown risks, uncertainties and other factors which may cause our
actual results, performance or achievements to be materially different from any
future results, performance or achievements that may be expressed or implied by
such forward-looking statements. In making the forward-looking statements in
this prospectus, we have applied several material assumptions, including, but
not limited to, the assumption that: (1) market fundamentals will result in
copper, nickel and precious metals being sustained at sufficient levels to
enable the NorthMet Project (as defined herein), once completed, to be able to
sell its products and operate economically; (2) the operations of the NorthMet
Project, once completed, will be viable operationally; (3) the project
financing, equipment financing and any other financing that may be needed for
the NorthMet Project will be available on commercially reasonable terms; (4) the
Corporation will be able to pay back the Bridge Loan (as defined herein); (5)
the Standby Purchase Agreement will not be terminated; and (6) the Corporation
will be able to obtain the necessary permits. The statements, including the
statements contained in our Annual Report on Form 20-F under Item 3D “Risk
Factors,” Item 4B “Business Overview,” Item 5 “Operating and Financial Review and
Prospects,” and Item 11 “Quantitative and Qualitative Disclosures About Market
Risk,” are inherently subject to a variety of risks and uncertainties that could
cause actual results, performance or achievements to differ significantly.
Statements relating to “mineral reserves” or “mineral resources” are deemed to
be forward-looking statements, as they involve the implied assessment, based on
certain estimates and assumptions that the mineral reserves and mineral
resources described can be profitably produced in the future. Forward-looking
statements are based on the opinions and estimates of management at the date the
statements are made, and are subject to a variety of risks and uncertainties and
other factors that could cause actual events or results to differ materially
from those projected in the forward-looking statements. Forward-looking
statements include statements regarding the outlook for our future operations,
plans and timing for our exploration and development programs, statements about
future market conditions, supply and demand conditions, forecasts of future
costs and expenditures, the outcome of legal proceedings, and other
expectations, intentions and plans that are not historical fact. You are
cautioned that any such forward-looking statements are not guarantees and may
involve risks and uncertainties. Our actual results may differ materially from
those in the forward-looking statements due to risks facing us or due to actual
facts differing from the assumptions underlying our predictions. Some of these
risks and assumptions include:

- 2 - 

	
  completion of environmental review; 

  
	
  obtaining permits on a timely basis; 

  
	
  general economic and business conditions, including changes in interest
  rates and exchange rates; 

  
	
  prices of natural resources, costs associated with mineral exploration and
  development, and other economic conditions; 

  
	
  natural phenomena; 

  
	
  actions by government authorities, including changes in government
  regulation; 

  
	
  uncertainties associated with legal proceedings; 

  
	
  changes in the resources market; 

  
	
  future decisions by management in response to changing conditions; 

  
	
  our ability to execute prospective business plans; and 

  
	
  misjudgments in the course of preparing forward-looking statements.
  

            We
advise you that these cautionary remarks expressly qualify in their entirety all
forward-looking statements attributable to us or persons acting on our behalf.
Except as required by law, we are not under any obligation, and expressly
disclaim any obligation, to update or alter any forward-looking statements,
whether as a result of new information, future events or otherwise. You should
carefully review the cautionary statements and risk factors contained in this
prospectus and other documents that we file from time to time with the Canadian
Securities Authorities and the SEC and which are incorporated by reference
herein. 

            All
subsequent forward-looking statements attributable to us or any person acting on
our behalf are expressly qualified in their entirety by the cautionary
statements contained or referred to in this section and the “RISK FACTORS”
section of this prospectus. 

ENFORCEABILITY OF CIVIL LIABILITIES 

            The
Corporation is a corporation incorporated under the Business Corporations
Act (British Columbia) (“BCBCA”). Certain of the Corporation’s
directors, and some of the experts named in this prospectus, are residents of
Canada or otherwise reside outside the United States. Concurrent with the filing
of this prospectus, the Corporation has appointed an agent for service of
process in the United States (described below), but it may be difficult for Shareholders that reside in the United States to
effect service within the United States upon those directors and experts that
are not resident in the United States. It may also be difficult for Shareholders
that reside in the United States to realize in the United States upon judgments
of courts of the United States predicated upon the Corporation&rsquo;s civil
liability and the civil liability of its directors, officers and experts under
the U.S. federal securities laws. The Corporation has been advised by its
Canadian counsel, Farris, Vaughan, Wills & Murphy LLP (“Farris’),
that a judgment of a U.S. court predicated solely upon civil liability under
U.S. federal securities laws or the securities or “blue sky” laws of any state
within the United States, would probably be enforceable in Canada if the U.S.
court in which the judgment was obtained assumed jurisdiction on the same basis
that a court in Canada would assume jurisdiction. The Corporation has also been
advised by Farris, however, that there is substantial doubt whether an action
could be maintained in Canada in the first instance on the basis of liability
predicated solely upon U.S. federal securities laws. 

- 3 - 

            The
Corporation has filed with the SEC, concurrently with its registration statement
on Form F-10 of which this prospectus is a part, an appointment of agent for
service of process on Form F-X. Under the Form F-X, the Corporation has
appointed Douglas J. Newby as its agent for service of process in the United
States in connection with any investigation or administrative proceeding
conducted by the SEC, and any civil suit or action brought against or involving
the Corporation in a U.S. court arising out of or related to or concerning the
offering of the securities under this prospectus.

CAUTIONARY NOTE TO UNITED STATES INVESTORS 

            This
prospectus has been prepared in accordance with the requirements of Canadian
securities laws, which differ from the requirements of United States securities
laws. Unless otherwise indicated, all reserve and resource estimates included or
incorporated by reference in this prospectus have been prepared in accordance
with Canadian National Instrument 43-101 – Standards of Disclosure for
Mineral Projects (“NI 43-101”), and the Canadian Institute of Mining,
Metallurgy and Petroleum Definition Standards for Mineral Resources and Mineral
Reserves (“CIM Definition Standards”). NI 43-101 is a rule developed by
the Canadian Securities Administrators that establishes standards for public
disclosure an issuer makes of scientific and technical information concerning
mineral projects.

            Canadian
standards, including NI 43-101, differ significantly from the requirements of
the SEC, and reserve and resource information contained or incorporated by
reference in this prospectus may not be comparable to similar information
disclosed by U.S. companies. In particular, and without limiting the generality
of the foregoing, the term “resource” does not equate to the term “reserves”.
Under U.S. standards, mineralization may not be classified as a “reserve” unless
the determination has been made that the mineralization could be economically
and legally produced or extracted at the time the reserve determination is made.
The SEC’s disclosure standards normally do not permit the inclusion of
information concerning “measured mineral resources”, “indicated mineral
resources” or “inferred mineral resources” or other descriptions of the amount
of mineralization in mineral deposits that do not constitute “reserves” by U.S.
standards in documents filed with the SEC. U.S. investors should also understand
that “inferred mineral resources” have a great amount of uncertainty as to their
existence and great uncertainty as to their economic and legal feasibility. It
cannot be assumed that all or any part of an “inferred mineral resource” will
ever be upgraded to a higher category. Under Canadian rules, estimated “inferred
mineral resources” may not form the basis of feasibility or pre-feasibility
studies except in rare cases. Investors are cautioned not to assume that all or
any part of an “inferred mineral resource” exists or is economically or legally
mineable. Disclosure of “contained ounces” in a resource is permitted disclosure
under Canadian regulations; however, the SEC normally only permits issuers to
report mineralization that does not constitute “reserves” by SEC standards as
in-place tonnage and grade without reference to unit measures. The requirements
of NI 43-101 for identification of “reserves” are also not the same as those of
the SEC, and reserves reported by the Corporation in compliance with NI 43-101
may not qualify as “reserves” under SEC standards. Accordingly, information
concerning mineral deposits set forth herein and in the documents incorporated
herein by reference may not be comparable with information made public by
companies that report in accordance with U.S. standards. 

            See
page 22 of the Corporation’s annual information form filed on May 1, 2012 on
Form 20-F, for the year ended January 31, 2012 (the “2012 AIF”) and filed
on EDGAR at www.sec.gov, for a description of certain mining terms used
in this prospectus and the documents incorporated by reference herein. 

- 4 - 

DOCUMENTS INCORPORATED BY REFERENCE 

            Information
has been incorporated by reference in this prospectus from documents filed with
the Canadian Securities Administrators. Information that is incorporated by
reference is an important part of this prospectus. We incorporate by reference
the documents listed below, which were filed with the Canadian Securities
Authorities under applicable Canadian securities laws and, subject to certain
exceptions, with the SEC. 

            The
following documents of the Corporation are specifically incorporated by
reference into and form an integral part of this prospectus: 

	 	1. 	
      our 2012 AIF;

	 	 	 
		
      2. 
	
      our audited consolidated financial statements, filed on
      SEDAR on May 1, 2012, including notes thereto, as at January 31, 2012,
      January 31, 2011 and February 1, 2010 and for each of the years in the
      two-year period ended January 31, 2012, together with the auditors’ report
      thereon, and the management’s discussion and analysis relating thereto
      (the “Annual MD&A”) (collectively, the “Annual Financial
      Statements”);

	 	 	 
	 	3. 	
      our management information circular dated June 7, 2012 in
      connection with our annual and special meeting of shareholders held on
      July 10, 2012 (the “2012 Circular”);

	 	 	 
	 	4. 	
      our unaudited condensed interim consolidated financial
      statements, including notes thereto, for the three and nine month periods
      ended October 31, 2012 and 2011, and management’s discussion and analysis
      in respect of those statements (the “Interim MD&A”)
      (collectively, the “Interim Financial Statements”); and

	 	 	 
	 	5. 	
      our material change report dated October 15, 2012
      announcing that pursuant to a subscription agreement entered into November
      12, 2010, the Corporation and Glencore AG completed the final tranche of a
      three tranche distribution.

            Any
documents of the Corporation of the type described in section 11.1 of Form
44-101F1 – Short Form Prospectus filed by the Corporation with any
securities regulatory authorities after the date of this prospectus and prior to
the termination of this distribution will be deemed to be incorporated by
reference into this prospectus. In addition, to the extent that any document or
information incorporated by reference in this prospectus is included in any
report on Form 6-K, Form 40-F, Form 20-F, Form 10-K, Form 10-Q or Form 8-K (or
any respective successor form) that is filed with or furnished to the SEC after
the date of this prospectus, such document or information shall be deemed to be
incorporated by reference as an exhibit to the registration statement of which
this prospectus forms a part. In addition, we may incorporate by reference into
this prospectus information from documents that we file with or furnish to the
SEC pursuant to Section 13(a) or 15(d) of the Exchange Act. 

            Any
statement contained in this prospectus or in a document incorporated or deemed
to be incorporated by reference herein will be deemed to be modified or
superseded, for purposes of this prospectus, to the extent that a statement
contained in this prospectus or in any other subsequently filed document which
also is, or is deemed to be, incorporated by reference herein modifies or
supersedes such statement. The modifying or superseding statement need not state
that it has modified or superseded a prior statement or include any other
information set forth in the document that it modifies or supersedes. The making
of a modifying or superseding statement will not be deemed an admission for any
purposes that the modified or superseded statement, when made, constituted a
misrepresentation, an untrue statement of a material fact or an omission to
state a material fact that is required to be stated or that is necessary to make
a statement not misleading in light of the circumstances in which it was made.
Any statement so modified or superseded will not, except as so modified or
superseded, be deemed to constitute a part of this prospectus. 

- 5 -

SUMMARY 

            The
following is a summary of the principal features of the Rights Offering and
should be read together with, and is qualified in its entirety by, the more
detailed information and financial data and statements contained elsewhere or
incorporated by reference in this prospectus. Certain terms used in this summary
and in the prospectus are defined elsewhere herein. 

	Issuer: 	
      PolyMet Mining Corp. 

	  	     
	The Rights Offering: 	
      Rights to subscribe for up to an aggregate of [
      •] Common Shares. If additional Common Shares are issued prior
      to the Record Date pursuant to the exercise or exchange of outstanding
      warrants or options, additional Rights will be issued. Each Shareholder on
      the Record Date will receive one Right for each Common Share held.
  

	  	     
	Record Date: 	
      [ •], 2013. 

	  	     
	Commencement Date: 	
      [ •], 2013. 

	  	     
	Expiry Date: 	
      [ •], 2013. 

	  	     
	Expiry Time: 	
      5:00 p.m. (Eastern time) on the Expiry Date. Rights
      not exercised before the Expiry Time on the Expiry Date will be
      void and have no value and will no longer be exercisable for any
      Common Shares. 

	  	     
	Subscription Price: 	
      US$[•] per Common Share. 

	  	     
	Net Proceeds: 	
      Approximately US$[ •], after deducting the
      estimated expenses of the Rights Offering of approximately US$[
      •] and the Standby Fee equal to 2.00% of the Maximum
      Investment, being US$1,061,263 and assuming exercise in full of the
      Rights. 

	  	     
	Basic Subscription Privilege: 	
      Each [ •] Rights entitle the holder thereof
      (other than an Ineligible Holder as defined herein) to subscribe for one
      Common Share upon payment of the Subscription Price. Where the exercise of
      Rights would appear to entitle a holder of Rights to receive fractional
      Common Shares, the holder’s entitlement will be reduced to the next lowest
      whole number of Common Shares. The Corporation will not be required to
      issue fractional Common Shares or pay cash in lieu thereof. See
      “DESCRIPTION OF OFFERED SECURITIES — Basic Subscription Privilege”.
  

	  	     
	Additional Subscription Privilege: 	
      Holders of Rights who exercise in full the Basic
      Subscription Privilege for their Rights are also entitled to subscribe
      pro rata for additional Common Shares, if any, not otherwise
      purchased pursuant to the Basic Subscription Privilege. See “DESCRIPTION
      OF OFFERED SECURITIES — Additional Subscription Privilege”. 

	  	     
	Exercise of Rights: 	
      For all Shareholders whose Common Shares are held in
      registered form with an address of record in an Eligible Jurisdiction, a
      Rights Certificate representing the total number of Rights to which such
      Shareholder is entitled as at the Record Date will be mailed with a copy
      of this prospectus to each such Shareholder. In order to exercise the
      Rights represented by the Rights Certificate, such holder of Rights must
      complete and deliver the Rights Certificate in accordance with the
      instructions set out under “DESCRIPTION OF OFFERED SECURITIES – How to
      Complete the Rights Certificate”. For Common Shares held through a
      Participant in the book-based system administered by CDS or in the
      book-based system administered by DTC, a Shareholder in an Eligible
      Jurisdiction or a Qualified Holder may exercise the Rights issued in
      respect of such Common Shares (under either the Basic Subscription
      Privilege or the Additional Subscription Privilege) by: (a) instructing
the Participant holding such Rights to exercise all or a specified number of such Rights pursuant to the Basic Subscription Privilege, and if desired by such holder, pursuant to the Additional Subscription Privilege; and (b) forwarding to such Participant the Subscription Price for each Common Share that such holder wishes to subscribe for in accordance with the terms of this Rights Offering. 

- 6 - 

For Common Shares held through a
Participant in the book-based system administered by CDS or in the book-based
system administered by DTC, a Shareholder in an Eligible Jurisdiction or a
Qualified Holder may exercise the Rights issued in respect of such Common Shares
(under either the Basic Subscription Privilege or the Additional Subscription
Privilege) by: (a) instructing the Participant holding such Rights to exercise
all or a specified number of such Rights pursuant to the Basic Subscription
Privilege, and if desired by such holder, pursuant to the Additional
Subscription Privilege; and (b) forwarding to such Participant the Subscription
Price for each Common Share that such holder wishes to subscribe for in
accordance with the terms of this Rights Offering.

Holders that wish to exercise Rights
issued in respect of Common Shares held through a Participant should contact
such Participant to determine how Rights may be exercised. The entire
Subscription Price for any Common Shares purchased must be paid at the time of
subscription and must be received by the Subscription Agent at the Subscription
Office prior to the Expiry Time on the Expiry Date. Accordingly, subscribers
must provide the Participant holding their Rights with instructions and the
required payment sufficiently in advance of the Expiry Date to permit proper
exercise of their Rights. Participants will have an earlier deadline for receipt
of instructions and payment. See “DESCRIPTION OF OFFERED SECURITIES – Rights
Certificate -- Common Shares Held Through CDS”. 

If your Rights are held of record
through DTC, you may exercise your Basic Subscription Privilege or your
Additional Subscription Privilege through the DTC’s “PSOP” function by
instructing DTC to charge your applicable DTC account for the Subscription
Payment for the Common Shares and deliver such amount to the Subscription Agent.
The Subscription Agent must receive the required subscription documents and the
Subscription Payment for any Common Shares sufficiently in advance of the Expiry
Time on the Expiry Date to permit proper exercise of the Rights. See
“DESCRIPTION OF OFFERED SECURITIES – Rights Certificate -- Common Shares Held
Through DTC”. 

Subscriptions for Common Shares will
be irrevocable and subscribers will be unable to withdraw their subscriptions
for Common Shares once submitted. See “CANADIAN PURCHASER’S STATUTORY RIGHTS OF
WITHDRAWAL AND RESCISSION”.

If the delivered Subscription Payment
is greater than the amount you owe for your subscription, the Subscription Agent
will return the excess amount to you by mail, without interest or deduction,
promptly after the closing of the Offering, which is anticipated to occur on or
about [•], 2013. If the Rights Offering does not proceed, the
Subscription Payments made pursuant to the Basic Subscription Privilege and
Additional Subscription Privilege will be returned promptly to the Subscribers
by the Subscription Agent without interest or deduction. See “DESCRIPTION OF
OFFERED SECURITIES – Basic Subscription Privilege” and “– Additional
Subscription Privilege”. 

- 7 - 

	Shareholders in Ineligible Jurisdictions: 	
      This Rights Offering is made in all of the Eligible
      Jurisdictions. No subscription under the Basic Subscription Privilege nor
      under the Additional Subscription Privilege will be accepted from any
      person, or such person’s agent, who appears to be, or who the Corporation
      has reason to believe is, an Ineligible Holder, except that the
      Corporation may accept subscriptions in certain circumstances from persons
      in such jurisdictions if the Corporation determines that such offering to
      and subscription by such person or agent is lawful and in compliance with
      all securities and other laws applicable in the jurisdiction where such
      person or agent is resident (each, an “Approved Eligible
      Holder”). No Rights Certificates will be mailed to Ineligible Holders
      and Ineligible Holders will not be permitted to exercise their Rights.
      Holders of Common Shares who have not received Rights Certificates but are
      resident in an Eligible Jurisdiction or wish to be recognized as Approved
      Eligible Holders should contact the Subscription Agent at the earliest
      possible time. Rights of Ineligible Holders will be held by the
      Subscription Agent until 5:00 p.m. (Eastern time) on [•],
      2013 in order to provide the beneficial holders outside the Eligible
      Jurisdictions an opportunity to claim the Rights Certificate by satisfying
      the Corporation that the exercise of their Rights will not be in violation
      of the laws of the applicable jurisdiction. After such time, the
      Subscription Agent will attempt to sell the Rights of such registered
      Ineligible Holders on such date or dates and at such price or prices as
      the Subscription Agent will determine in its sole discretion. See
      “DESCRIPTION OF OFFERED SECURITIES — Ineligible Holders”. 

	  	     
	Standby Commitment: 	
      Under the Standby Purchase Agreement, the Standby
      Purchaser has agreed to purchase, at the Subscription Price, as principal
      and not with a view to resale or distribution, Standby Shares equal to the
      lesser of: (A) the number of Common Shares available under the Maximum
      Investment and (B) the results of (x) minus (y), where: (x) equals the
      number of Common Shares determined by dividing US$60,000,000 by the
      Subscription Price; and (y) equals the number of Common Shares subscribed
      for and taken up under the Rights Offering by holders of Rights, including
      the Standby Purchaser, pursuant to the Basic Subscription Privilege and
      Additional Subscription Privilege. The Standby Purchaser is not engaged as
      an underwriter in connection with the Rights Offering and has not been
      involved in the preparation of, or performed any review of, this
      prospectus in the capacity of an underwriter. The Standby Purchase
      Agreement may be terminated by the Standby Purchaser prior to the Expiry
      Time in certain circumstances. In consideration of the agreement of the
      Standby Purchaser to purchase the Standby Shares as provided in the
      Standby Purchase Agreement, the Standby Purchaser will be entitled to a
      fee equal to 2.00% of the Maximum Investment, being US$1,061,263, payable
      in cash in immediately available funds by wire transfer to the account
      designated by the Standby Purchaser, upon closing of the Rights Offering.
      See “STANDBY COMMITMENT”. The Company and the Standby Purchaser have
      agreed to enter into certain corporate governance arrangements in
      connection with any closing of the Rights Offering under which, effective
      January 1, 2014, the Standby Purchaser may appoint that number of the
      directors of the Company which is proportionate to the Standby Purchaser's
      holdings of issued and outstanding common shares (on a fully diluted
      basis) relative to all the issued and outstanding common shares (on a
      fully diluted basis) subject to certain limitations including that the
      Standby Purchaser may not appoint more than 49% (rounding down) of the
      directors to the Board. 

- 8 - 

	Use of Proceeds: 	
      The Corporation intends to use the net proceeds of this
      Rights Offering to repay the Bridge Loan (as defined herein) and for
      permitting and other costs associated with the development of the NorthMet
      Project in St. Louis County, Minnesota (the “NorthMet Project”),
      and general corporate purposes. 

	  	     
	Listing and Trading: 	
      The Corporation will apply to list the Rights, the Common
      Shares issuable upon the exercise of the Rights and the Standby Shares on
      the TSX and the NYSE MKT. The approval of such listing will be subject to
      the Corporation fulfilling all of the listing requirements of the TSX and
      the NYSE MKT. 

	  	     
	Risk Factors: 	
      The receipt of Rights and an investment in Common Shares
      are subject to a number of risk factors. See “RISK FACTORS”.
  

- 9 - 

THE CORPORATION 

            PolyMet
was incorporated under the predecessor to the BCBCA on March 4, 1981 under the
name Fleck Resources Ltd., which we changed to PolyMet Mining Corp. on June 10,
1998. The Corporation is a development stage company engaged in the exploration
and development of natural resource properties. Currently our sole mineral
property is the NorthMet Project. 

Our Business 

            In
the fiscal years ended January 31, 2012, 2011, and 2010 and to date, the
Corporation conducted exploration, development and acquisition activities only
and did not conduct any operations that generated revenues. Thus, we rely
principally on equity or debt convertible into equity financings to fund our
projects and expenditures. 

            Since
2003, the Corporation has focused on commencing commercial production on our
NorthMet Project. We have focused our efforts on four main areas:

            Acquisition
of the Erie Plant. The Erie Plant is a large processing facility and
associated infrastructure located approximately six miles west of our NorthMet
ore body. On November 15, 2005 and December 20, 2006, the Corporation entered
into a total of three Contracts for Deed with Cliffs Erie LLC, a subsidiary of
Cliffs Natural Resources Inc. (formerly Cleveland Cliffs, Inc.)
(“Cliffs”), under which the Corporation now owns a 100,000 ton-per-day
crushing and milling facility, a railroad and railroad access rights connecting
the Erie Plant to the NorthMet ore body, tailings facilities, 120 railcars,
locomotive fueling and maintenance facilities, water rights and pipelines, large
administrative offices on site and approximately 6,000 acres to the east and
west of and contiguous to the existing tailing facilities. As part of the
consideration, the Corporation indemnified Cliffs for the liability related to
final reclamation and closure of the acquired property. 

            Environmental
review and permitting. To commence commercial production at our NorthMet
Project, various regulatory approvals are needed. In October 2005, the Minnesota
Department of Natural Resources (“MDNR”) published its Environmental
Assessment Worksheet Decision Document establishing the MDNR as the lead state
agency and the United States Army Corps of Engineers (“USACE”) as the
lead federal agency (together, the “Lead Agencies”) for preparation of an
Environmental Impact Statement (“EIS”) for our NorthMet Project. 

            In
November 2009, the Lead Agencies published the PolyMet draft EIS, which marked
the start of a period for public review and comment that ended on February 3,
2010. During this period, the Lead Agencies held two public meetings and
received more than 3,700 submissions containing approximately 22,000 separate
comments, including an extensive comment letter from the United States
Environmental Protection Agency (“EPA”) in its role as reviewer of
projects that could impact the environment.

            On
June 25, 2010, the Lead Agencies announced that they intended to complete the
EIS process by preparing a supplemental draft EIS that incorporates a proposed
land exchange with the United States Forest Service (“USFS”) and expands
government agency cooperation. The USFS joined the USACE as a federal co-lead
agency through the completion of the EIS process. In addition, the EPA has
joined the effort as a cooperating agency. The MDNR remains the state co-lead
agency.

            On
October 13, 2010, the USACE and the USFS published a Notice of Intent to
complete the supplemental draft EIS, which will:

	
  Supplement and supersede the draft EIS and respond to concerns identified
  by the EPA and other comments on the draft EIS, and 

  
	
  Incorporate potential effects from the proposed land exchange between the
  USFS and us. 

           
PolyMet has undertaken an extensive review of all aspects of the NorthMet
Project which has resulted in numerous improvements and reduced environmental
impacts.

            The
Corporation partnered with GE Water & Process Technologies (“GE”) and
Barr Engineering to design and operate a pilot water treatment plant using
reverse osmosis membrane technology developed by GE. The reverse osmosis pilot plant has successfully treated
approximately two million gallons of water, demonstrating the technical and
regulatory viability that will enable PolyMet to meet state and federal water
quality standards. The Corporation has completed engineering control designs as
well as the design of and inputs to groundwater, surface water and air
dispersion models to assess potential environmental impacts from the NorthMet
Project. Following extensive quality assurance/quality control review by Foth
Infrastructure & Environment and Barr Engineering, PolyMet delivered these
results to the state regulatory agencies and the EIS contractor for review,
which is largely complete. 

- 10 - 

            The
results are being incorporated into the preliminary supplemental draft EIS which
will then be reviewed by the EPA and other governmental and cooperating agencies
prior to publication of the supplemental draft EIS for public review. We expect
the public review period to commence before the summer of 2013. 

            Completion
of the final EIS, incorporating appropriate responses to public comments, and a
subsequent adequacy decision by the MDNR and Record of Decision by the federal
agencies are necessary before the land exchange can occur and various permits
required to construct and operate the NorthMet Project can be issued.

            Prior
to receipt of these permits, we intend to secure production debt financing that
would be available upon receipt of key permits, with construction slated to
start upon receipt of permits and availability of construction finance. 

            Engineering
and feasibility. The Corporation retained Bateman Engineering Pty. of
Brisbane, Australia (“Bateman”) as the coordinating consultant to prepare
a Definitive Feasibility Study (the “DFS”). In September 2006 we reported
that the DFS confirmed the economic and technical viability of our NorthMet
Project. 

            Bateman
was responsible for completing the process design and detail engineering and
cost estimates for the plant and infrastructure. This work was supported by
other firms that provided geo-statistical reviews of the ore body, mine planning
and scheduling of ore and waste, and assessment of the market for the metals and
intermediate products planned to be produced. 

            Since
September 2006, we have completed additional drilling and expanded the reserves.
In May 2008 we completed an internal update of the DFS (the “DFS Update”)
which contemplates an initial stage in which we would sell concentrate during
completion of construction and commissioning of the hydrometallurgical plant
that was contemplated in the DFS. This approach has the advantage of staging
capital costs so that the hydrometallurgical plant can be funded in part from
cash flow from sales of concentrate, and it reduces our reliance on delivery of
long lead-time equipment before we start commercial production. 

            In
February 2011, we announced that we plan to build the NorthMet Project in two
phases, the first to produce and market concentrates containing copper, nickel,
cobalt and precious metals, and the second to process the nickel concentrate
through a single autoclave, resulting in production and sale of high grade
copper concentrate, value added nickel-cobalt hydroxide, and precious metals
precipitate products. 

            The
results of the 2007 drill program, the DFS Update and the February 2011
revisions are described in the technical report under NI 43-101 filed on SEDAR
on January 23, 2013 (the “Technical Report”). 

            In
February 2013, we announced improvements to the NorthMet Project and further
progress in the environmental review that will reduce the NorthMet Project’s
environmental impacts. The reduced environmental impacts include: reductions in
sulfur dioxide, mercury and greenhouse gas emissions at the plant site, capture
of groundwater and surface seepage with the construction of an in ground
containment system to the north and west of the existing tailings basin, and all
contact water discharged from the NorthMet Project will be treated through
reverse osmosis plants. 

            Financing
and corporate development. Since 2003, the Corporation raised approximately
$155 million from equity private placement financings and the exercise of
warrants issued as part of those financings. We have also issued $25 million
initial principal debentures and have a loan of $4 million secured by land
acquired with proceeds from the loan. 

            Since
October 31, 2008, the Corporation and Glencore have entered into a series of
financing agreements and a marketing agreement whereby Glencore committed to
purchase all of the Corporation’s production of concentrates, metal, or intermediate products on market terms
at the time of delivery, for at least the first five years of production.
PolyMet agreed to propose to shareholders the election of Stephen Rowland, a
senior executive of Glencore, as a director and also appointed a senior member
of Glencore's technical team to PolyMet's Technical Steering Committee. As a
result of the series of financing transactions and the purchase by Glencore of
PolyMet common shares previously owned by Cliffs, Glencore's current and
potential ownership of PolyMet comprises: 

- 11 - 

	
  46,967,842 Common Shares representing 25.6% of PolyMet's issued and
  outstanding Common Shares. 

  
	
  $25,000,000 initial principal floating rate secured debentures due
  September 30, 2014. Including capitalized interest as at March 31, 2013, these
  debentures are exchangeable at $1.50 per Common Share, subject to conventional
  anti-dilution provisions, into 20,500,756 Common Shares. Upon PolyMet giving
  Glencore notice that it has received permits necessary to start construction
  of the NorthMet Project and availability of senior construction financing in a
  form reasonably acceptable to Glencore, Glencore will be required to exchange
  the debentures for Common Shares. The debentures bear interest at 12-month US
  dollar LIBOR plus 4%, compounded quarterly. Interest is payable in cash or by
  increasing the principal amount of the debentures at Glencore’s option. At
  March 31, 2013, $5,751,134 of interest had been added to the principal amount
  of the debentures since inception. The Corporation has provided security on
  the debentures covering all of the assets of PolyMet and Poly
Met Mining,
  Inc., including a pledge of PolyMet’s 100% shareholding in Poly Met Mining,
  Inc. The debentures contain certain customary affirmative and negative
  covenants, including, among other things, with respect to the incurrence of
  debt and the grant of guarantees by the Corporation and its subsidiaries. 

  
	
  Glencore holds warrants to purchase 5,600,000 Common Shares at $1.50 per
  Common Share, subject to conventional anti-dilution provisions, at any time
  until December 31, 2015, subject to mandatory exercise if the 20-day volume
  weighted average price of PolyMet common shares is equal to or greater than
  150% the exercise price and PolyMet provides notice to Glencore that it has
  received permits necessary to start construction of the North Met Project and
  availability of senior construction finance, in a form reasonably acceptable
  to Glencore. 

            If
Glencore were to exercise all of its rights and obligations under these
agreements, it would own 73,068,598 Common Shares of PolyMet, representing 34.9%
on a partially diluted basis. Each of these agreements contain customary
anti-dilution provisions that are triggered upon the occurrence of certain
financing events, including the Rights Offering. The debentures will become
exchangeable following the Rights Offering at US$[•] per Common
Share into [•] Common Shares, and the purchase warrants will
become exchangeable at US$[•] per Common Share into [•]
Common Shares.

            Glencore
was previously granted a right of first refusal to provide material financings
other than certain forms of equity financing, subject to regulatory approval, as
long as it owns 10% or more of the issued and outstanding Common Shares of
PolyMet. As long as Glencore owns more than 5% of the issued and outstanding
Common Shares of PolyMet, it has the right to participate pro rata in any
equity-related financing by the Corporation to maintain its ownership interest
on a fully diluted basis (currently [•]% on a fully diluted
basis). Glencore has waived its right of first refusal with respect to the
Rights Offering and the issuance of the Rights Offering securities subject to
revocation upon termination of the Standby Purchase Agreement and material
breach by the Corporation under the Standby Purchase Agreement. 

            On
April 10, 2013, Poly Met Mining, Inc. (“PMI”), a wholly-owned U.S.
subsidiary of the Corporation, and the Standby Purchaser entered into an
amendment to that certain purchase agreement dated as of October 31, 2008, as
further amended, whereby the Standby Purchaser agreed to provide subject to
certain conditions (including receiving a receipt for the preliminary prospectus
relating to the Rights Offering) a US$20,000,000 bridge loan (the “Bridge
Loan”) to PMI. The obligations of PMI under the Bridge Loan are guaranteed
by the Corporation, and the Corporation will use a portion of the proceeds from
the Rights Offering to repay the Bridge Loan in full. 

            The
Bridge Loan will be made available to PMI pursuant to the issuance to the
Standby Purchaser of a fifth debenture, the amended Tranche E Debenture. The
amended Tranche E Debenture will mature on the earlier to occur of: (a) the
completion of the Rights Offering, and (b) May 1, 2014. Interest will be payable
on the amended Tranche E Debenture at a fixed rate of LIBOR plus 4%. A portion
of the proceeds from the Rights Offering will be used to repay the Bridge Loan.

- 12 - 

            Among
other things, if the Rights Offering is not completed within 90 days of the
execution of the Standby Purchase Agreement, the Standby Purchaser has the right
to declare all of the then outstanding principal and interest under the Bridge
Loan and all other debentures held by the Standby Purchaser to be due and
payable. 

            On
April 9, 2013, the Corporation and the Standby Purchaser entered into the
Standby Purchase Agreement whereby the Standby Purchaser has agreed, subject to
certain terms, conditions and limitations, to purchase, at the Subscription
Price, as fully paid and non-assessable Common Shares, the Standby Shares. 

            Our
registered and records office is located at our legal counsel’s offices situated
at 2500 – 700 West Georgia Street, Vancouver, B.C. V7Y 1B3, Canada. Our
executive headquarters are located at Poly Met Mining, Inc., 444 Cedar Street,
Suite 2060, St Paul, Minnesota 55101. Our principal office is situated at First
Canadian Place, 100 King Street West, Suite 5700, Toronto, Ontario Canada M5X
1C7. Our phone number is (416) 915-4149. 

BACKGROUND TO THE RIGHTS OFFERING 

            The
Rights Offering is the result of discussions and negotiations among
representatives of the Corporation, an independent committee of the Board of the
Corporation and the Standby Purchaser, and their respective advisors. The
following is a summary of the principal events leading up to the Corporation’s
announcement of the Rights Offering on April 9, 2013.

            At
a Board meeting in early November 2012, management presented to the Board a
range of expenditure alternatives through anticipated completion of the NorthMet
Project environmental review and permitting process, including discretionary
expenditure on additional engineering and design and down payments to secure
deliverability of long lead time equipment in order to meet the Corporation's
plan to construct the NorthMet Project in 15 months from the official start of
construction once necessary permits have been received. 

            The
Board considered possible financing alternatives taking into account market
conditions at the time, the Corporation's financing needs and timing of those
needs, and expected progress on the environmental review process between then
and filing of the January 31, 2013 financial statements due no later than May 1,
2013. 

            The
Standby Purchaser indicated to the Board of the Corporation in mid-January, 2013
that it intended to exercise its right of first refusal on any material
financing, other than equity-related financings, and that it suggested the
Corporation consider conducting a rights offering backstopped exclusively by the
Standby Purchaser with a Bridge Loan to address the Corporation’s liquidity
requirements while a rights offering was being completed. 

            As
part of the Corporation’s ongoing review of various alternatives to enhance its
liquidity, including a refinancing or repayment of debt and issuance of new debt
and equity, and in light of the Standby Purchaser’s intentions mentioned above,
the Board established an ad hoc committee of independent directors (the
“Special Committee”) on February 8, 2013 comprised of four independent
directors, Messrs. Ian Forrest, Al Hodnik, William Murray and Frank Sims (as
chair), each of whom was determined to not have any direct or indirect material
relationship with the Standby Purchaser. The mandate of the Special Committee
was to consider, review and evaluate the terms of any financing involving the
Standby Purchaser and any transactions for the financing of the Corporation
without the involvement of the Standby Purchaser, and to consider, review and
evaluate the Corporation’s liquidity and capital structure alternatives in light
of the Corporation’s timely needs for capital resources due to the stage of
development of the NorthMet Project.

            On
February 18, 2013, the Special Committee met for the first time to discuss a
range of alternatives with the Standby Purchaser in respect of the Corporation’s
overall liquidity and its capital structure including a review of the proposal
presented by the Standby Purchaser at such time. The Special Committee
considered potential independent financial advisors to assist in considering the
proposal.

            On
February 22, 2013, the Special Committee met to review in detail the existing
right of first refusal and pre-emptive right that the Standby Purchaser
currently has and to review the proposed term sheet that the Corporation
intended to present to the Standby Purchaser which included the terms of the
Bridge Loan. The Special Committee determined that the Board of the Corporation
should approve the counter-proposal approved by the Special Committee in the revised term sheet and present such
counter-proposal to the Standby Purchaser and to invite the Standby Purchaser to
indicate what support it would be willing to provide in respect of the various
potential alternatives being considered. The Special Committee met a number of
times following its formation and reported the results of its discussions and
considerations to the Board. 

- 13 - 

            Members
of the Special Committee, along with its legal advisors, also engaged in a
number of discussions and negotiations with representatives of the Standby
Purchaser and the Corporation’s management to obtain additional information
required by the Special Committee in its consideration of the proposal. 

            During
meetings of the full Board held in Toronto on March 6 and March 7, 2013, the
Special Committee held separate meetings at which it was briefed on the state of
the financing markets for mining companies in general and reviewed the
Corporation's anticipated financing needs through completion of permitting for
the NorthMet Project, and the likely timeline and reportable milestones to
completion of permitting. As part of these discussions, the Board considered the
progress made in completing the technical review of the NorthMet Project within
the environmental review process and the degree of confidence that the
supplemental draft EIS will be issued for public review before the summer of
2013. As a result, the Special Committee recommended to the Board that the
Corporation negotiate with the Standby Purchaser regarding the terms of the
proposed Rights Offering.

            Between
March 25, 2013 and April 8, 2013, the Corporation and the Standby Purchaser and
their respective legal advisors prepared and circulated documentation with
respect to the Bridge Loan as well as the Standby Purchase Agreement. 

            On
April 5, 2013, members of the Special Committee met to review and consider that,
under Multilateral Instrument 61-101 – Protection of Minority Security
Holders in Special Transactions (“MI 61-101”), the transactions
contemplated pursuant to the Standby Purchase Agreement and the Bridge Loan are
“related party transactions” insofar as the Standby Purchaser is, by reason of
the securities currently held in the Corporation (being greater than 10% of the
voting rights of the securities of the Corporation), a related party of the
Corporation. Pursuant to MI 61-101, related party transactions are, with certain
limited exceptions, subject to formal valuation and minority shareholder
approval requirements unless an exemption is available from those
requirements.

            The
Special Committee concluded that the commitments under the Standby Purchase
Agreement, including the Standby Fee, and Bridge Loan, were not subject to the
formal valuation requirement and were exempt from the minority approval
requirement of MI 61-101 for the following reasons: (a) the Standby Fee will
only be payable in cash, no securities will be issuable in lieu, (b) the Standby
Commitment contemplated by the Standby Purchase Agreement, as the maximum amount
of the commitment by the Standby Purchaser and all other transactions
contemplated under the Standby Purchase Agreement (other than the Bridge Loan),
is not to exceed 24.99% of the “market capitalization” (as defined in MI 61-101)
of the Corporation, and (c) the terms and conditions of the Bridge Loan are
reasonable commercial terms that are not less advantageous to the Corporation
than if the Bridge Loan was obtained from a person dealing at arm’s length with
the Corporation and is not convertible directly or indirectly into equity or
voting securities of the Corporation or a subsidiary of the Corporation or
otherwise participating in nature or repayable as to principal or interest,
directly or indirectly, in equity or voting securities of the Corporation or a
subsidiary of the Corporation. 

            The
Special Committee further deliberated upon the advantages and disadvantages to
the Corporation of the transactions contemplated by the Standby Purchase
Agreement and Bridge Loan and concluded that entering into the Standby Purchase
Agreement and Bridge Loan was in the best interests of the Corporation. 

            On
April 8, 2013, the Special Committee met to consider the final terms of the
Bridge Loan, the preliminary prospectus, the Standby Purchase Agreement and the
waiver of the Shareholder Rights Plan of the Corporation dated December 4, 2003,
as amended and restated on May 25, 2007 and January 16, 2008 (the “Rights
Plan”) in connection with (i) all transactions contemplated by the Standby
Purchase Agreement including the Standby Purchaser's acquisition and beneficial
ownership of the Standby Shares; (ii) the acquisition and beneficial ownership
by the Standby Purchaser of the additional Common Shares issuable upon the
anti-dilution provisions being triggered in connection with the Rights Offering
under the terms of the convertible securities; and (iii) for greater certainty,
the issuance of the Rights to the Standby Purchaser and the Standby Purchaser’s
acquisition and beneficial ownership of the Common Shares issuable upon exercise
of the Rights and all transactions contemplated in connection with the Rights
Offering, and the issue of the Rights and the Common Shares issuable upon
exercise of the Rights to the Standby Purchaser and the final draft of a press
release announcing the Rights Offering. After a detailed review of the terms of the Bridge Loan and the Standby
Purchase Agreement, the Special Committee unanimously recommended that the Board
of Directors approve the Bridge Loan, the Standby Purchase Agreement and the
Rights Offering. 

- 14 - 

            Following
the meeting of the Special Committee, the Board met to review the draft Bridge
Loan documents, the draft preliminary prospectus, the Standby Purchase
Agreement, the waiver of the Rights Plan and the draft press release announcing
the Rights Offering and to receive the report and recommendation of the Special
Committee. The Board, having received the unanimous recommendation of the
Special Committee, unanimously approved the Bridge Loan, the Rights Offering,
the Standby Purchase Agreement and the press release announcing the Rights
Offering and related material change report. 

USE OF PROCEEDS 

            The
net proceeds (assuming full exercise of the Rights) to be received by the
Corporation from the Rights Offering are estimated to be approximately
US$[•], after deducting the estimated expenses of the Rights
Offering of approximately US$[•] and the Standby Fee equal to
2.00% of the Maximum Investment, being US$1,061,263. On April 9, 2013,
the Corporation entered into a Bridge Loan Agreement with Glencore whereby
Glencore will lend to PMI US$20,000,000 to be repaid from the proceeds of the
Rights Offering on the closing of the Rights Offering or May 1, 2014. The Bridge
Loan will provide funding for the Corporation's ongoing expenses until the
Rights Offering is completed, if necessary. 

            If
the Rights Offering is completed by the end of June 2013, the Corporation
expects that it will have used up to US$5,000,000 from the proceeds of the
Bridge Loan and will have more than US$15,000,000 cash on hand reflecting cash
on hand prior to the drawdown of the Bridge Loan plus the unused proceeds from
the Bridge Loan. 

            The
Corporation intends to use the net proceeds of US$[•] from this
Rights Offering together with the cash on hand of approximately US$16,000,000 at
closing of the Rights Offering as follows: 

	Repayment of Bridge Loan (principal): 	US$20,000,000
  
	 	 
	Environmental Review & Permitting: 	US$17,000,000
  
	 	 
	Maintaining existing infrastructure: 	US$5,000,000
  
	 	 
	Engineering and procurement: 	US$20,000,000
  
	 	 
	General corporate purposes: 	US$[•] 

            The
budget for environmental review and permitting includes anticipated payments to
compensate the MDNR for the cost of staff time and external consultants as well
as the Corporation's own engineering, legal and public relations team.
Maintenance of existing infrastructure includes the Erie Plant facilities and
continuing environmental compliance measures. Engineering and procurement
includes completion of front end engineering and design work, updated
construction budget, down payments against the start of equipment fabrication
and deposits on long lead time equipment. 

CONSOLIDATED CAPITALIZATION 

            The
following table sets forth the consolidated capitalization of the Corporation as
at October 31, 2012, before and after giving effect to this Rights Offering,
assuming net proceeds to the Corporation of US$[•] assuming
exercise of all of the Rights. This table should be read in conjunction with the
Corporation’s audited consolidated financial statements as at and for the year
ended January 31, 2012, the unaudited interim consolidated financial report as
at and for the three and nine month periods ended October 31, 2012, as well as
the Annual MD&A and the Interim MD&A, all of which are incorporated
herein by reference. 

	  	 	As at January 	 	 	As at 	 	 	As at 	 
	In millions of Canadian dollars 	 	31, 2012 	 	 	October 31, 2012 	 	 	October 31, 2012 	 
	Cash 	 	(Actual) 	 	 	(Actual) 	 	 	(As Adjusted) 	 
	     
       Cash and cash equivalents 	 	17,478 	 	 	11,058 	 	 	[ •] 	 
	       Short-term
      investments 	 	30
	 	 	14
	 	 	[
      •] 	 
	Total cash 	 	17,508 	 	 	11,072 	 	 	[ •] 	 
	  	 	  	 	 	  	 	 	  	 
	Indebtedness, principal value 	 	  	 	 	  	 	 	  	 
	       Senior Unsecured Notes 	 	-0- 	 	 	-0- 	 	 	[ •] 	 
	       Senior Secured
      Term Loan 	 	32,690 	 	 	34,006 	 	 	[ •] 	 
	       New Debt Financing 	 	-0- 	 	 	-0- 	 	 	[ •] 	 
	       Other 	 	-0- 	 	 	-0- 	 	 	[ •] 	 
	Total Indebtedness, principal value 	 	32,690 	 	 	34,006 	 	 	[ •] 	 
	  	 	  	 	 	  	 	 	  	 
	Shareholders’ Equity 	 	  	 	 	  	 	 	  	 
	       Capital Stock
	 	170,566 	 	 	184,197 	 	 	[ •] 	 
	       Contributed Surplus 	 	43,590 	 	 	46,923 	 	 	[ •] 	 
	       Deficit 	 	(81,790	) 	 	(86,275	) 	 	[ •] 	 
	Total Shareholders’ Equity 	 	132,366 	 	 	144,845 	 	 	[ •] 	 
	  	 	  	 	 	  	 	 	  	 
	Total Capitalization 	 	165,056 	 	 	178,851 	 	 	[ •] 	 

- 15 - 

DESCRIPTION OF SHARE CAPITAL 

            The
authorized capital of the Corporation consists of an unlimited number of common
shares without par value. On the date of this prospectus, 183,250,082 Common
Shares were outstanding, including 709,882 restricted shares. In addition, as of
April 5, 2013, there were options outstanding to acquire 15,120,000 Common
Shares and restricted stock units to acquire 76,000 Common Shares pursuant to
the Corporation’s 2007 Omnibus Share Compensation Plan, as amended and restated
(the “Omnibus Plan”). In addition, as of April 5, 2013, there were bonus
shares to acquire 3,640,000 Common Shares issuable pursuant to the Corporation’s
bonus share incentive plan for certain directors, key employees and consultants,
and warrants to acquire 27,584,089 Common Shares. For further details regarding
the authorized capital of the Corporation, see the 2012 AIF, which is
incorporated herein by reference. 

Common Shares 

            Shareholders
are entitled to one vote per Common Share at all meetings of Shareholders except
meetings at which only holders of another specified class or series of shares of
the Corporation are entitled to vote separately as a class or series. The
holders of Common Shares are entitled to receive dividends as and when declared
by the Board of Directors, and to receive a pro rata share of the remaining
property and assets of the Corporation in the event of liquidation, dissolution
or winding up of the Corporation. The Common Shares carry no pre-emptive,
redemption, purchase or conversion rights. Pursuant to the terms of prior
financings, the Standby Purchaser has certain anti-dilution rights that permit
it to acquire additional securities so as to maintain its proportional equity
interest in the Corporation. Neither the BCBCA nor the constating documents of
the Corporation impose restrictions on the transfer of Common Shares on the
register of the Corporation, provided that the Corporation receives the
certificate representing the Common Shares to be transferred together with a
duly endorsed instrument of transfer and payment of any fees and taxes which may
be prescribed by the Board of Directors from time to time. There are no sinking
fund provisions in relation to the Common Shares and they are not liable to
further calls or to assessment by the Corporation. The BCBCA provides that the
rights and provisions attached to any class of shares may not be modified,
amended or varied unless consented to by special resolution passed by a majority
of not less than two-thirds of the votes cast in person or by proxy by holders
of shares of that class. 

Options to Purchase Common Shares 

            The
Rights Offering is a corporate transaction that will affect the Corporation’s
issued share capital and its outstanding equity securities that are convertible
into, exchangeable for or exercisable to acquire unissued share capital
(“Convertible Securities”). Some, but not all, of the Corporation’s
outstanding Convertible Securities contain certain anti-dilution adjustment
provisions that are intended to ensure that a holder of Convertible Securities
is entitled to acquire equivalent share capital after the occurrence of a
relevant corporate transaction, such as the Rights Offering. The outstanding
warrants held by Glencore are subject to certain specific anti-dilution
adjustment provisions that are intended to ensure that a holder is entitled to
acquire equivalent share capital after the occurrence of a relevant corporate
transaction, such as the Rights Offering. Currently granted incentive stock
options (“Stock Options”), restricted stock units and restricted stock
(collectively, “RSUs”) issued under the Omnibus Plan are not subject to
specific anti-dilution adjustment provisions. Instead, the Omnibus Plan
authorizes the Board of Directors to make appropriate adjustments to the terms
of outstanding Stock Options and RSUs to reflect changes to the Common Shares
resulting from corporate transactions such as the Rights Offering. Subject to
the prior approval of the TSX, the Corporation may adjust the terms of its
outstanding Stock Options and RSU’s on a basis equivalent to the adjustments to
be made, in accordance with their terms, to the Warrants. Information provided
elsewhere in this prospectus with respect to the number of Convertible
Securities issued and outstanding is given without giving effect to any
anti-dilution adjustment provisions described above.

- 16 - 

            Assuming
that the Rights Offering is fully subscribed, the number of Common Shares
issuable upon the exercise of all outstanding Warrants will increase from
[•] Common Shares to [•] Common Shares. There are
currently Stock Options outstanding exercisable to purchase up to
[•] Common Shares in the aggregate at exercise prices ranging from
C$[•] to C$[•] per Common Share. Assuming that the
Rights Offering is fully subscribed and the terms of the Stock Options are
adjusted on a basis equivalent to the adjustments to be made to the Warrants,
the outstanding Stock Options, as so adjusted, would be exercisable to purchase
up to [•] Common Shares in the aggregate and the number of Common
Shares issuable pursuant to the anti-dilution subscription right would increase
from [•] Common Shares to [•] Common Shares.
Assuming that the Rights Offering is fully subscribed and the terms of the RSUs
are adjusted on a basis equivalent to the adjustments to be made to the
Warrants, the outstanding RSUs, as so adjusted, would be exercisable to purchase
up to [•] Common Shares in the aggregate and the number of Common
Shares issuable would increase from [•] Common Shares to
[•] Common Shares. 

INTENTION OF INSIDERS AND OTHERS TO EXERCISE RIGHTS 

            Pursuant
to the Standby Purchase Agreement, the Standby Purchaser has agreed to exercise
its Basic Subscription Privilege in full and intends to fully exercise its
Additional Subscription Privilege, subject to the Maximum Investment. 

            The
Corporation, after reasonable inquiry, believes that certain insiders and
others, other than the Standby Purchaser, intend to exercise or cause to be
exercised Rights to purchase approximately 5,537,400 Common Shares,
representing 3.022% of the Rights Offering. 

            The
information as to the intentions of our insiders is not within our knowledge and
has been furnished by the respective insiders. No assurance can be given by us
that the respective insiders will subscribe for Common Shares in the amounts set
out above or at all. 

PRIOR SALES 

            During
the 12-month period prior to the date of this prospectus, the Corporation issued
Common Shares or securities convertible into Common Shares as follows:

	
Date 	Number and Type of 
Security Issued 	
Issue/Exercise Price 	
Type of Issuance 
	January 21, 2013 	27,174 Common Shares 	US$0.92 per Common Share 	Extension of option agreement
      for land purchase(1) 
	January 8, 2013 	182,706 Common Shares 	US$0.88 per Common Share 	Restricted Stock Awards 
	January 7, 2013 	268,176 Common Shares 	US$0.92 per Common Share 	Restricted Stock Awards

	October 15, 2012 	5,000,000 Common Shares 	US$2.00 per Common Share 	Private Placement(2) 
	October 1, 2012 	20,000 Common Shares 	US$1.14 per Common Share 	Extension of option agreement
      for land purchase(1) 
	July 4, 2012 	20,000 Common Shares 	US$0.83 per Common Share 	Extension of option agreement for land
      purchase(1) 
	April 25, 2012 	135,000 Common Shares 	$0.85 per Common Share 	Exercise of stock options
  
	April 2, 2012 	20,000 Common Shares 	US$1.16 per Common Share 	Extension of option agreement for land
      purchase(1) 

Notes: 

- 17 - 

	(1) 	
      Through its wholly-owned U.S. subsidiary, PMI, PolyMet
      entered into agreements with Burns Enterprise, LLC (“Burns”) and
      Leonard Land Company, LLC (“Leonard”) for the extension of the
      option to purchase certain land in Minnesota, U.S.A. and as further
      consideration for the extension, granted to Burns a maximum of $25,000 in
      Common Shares every three months, pending the extension of the option.
      Through its wholly-owned U.S. subsidiary, PMI, PolyMet entered into an
      agreement with AG for Waterfowl, LLP to acquire control of land that is
      planned to be converted into wetlands.

	 	 
	(2) 	
      The Common Shares were issued pursuant to a subscription
      agreement entered into November 12, 2010 between the Corporation and
      Glencore, which was the final tranche of a three tranche
    distribution.

PRICE RANGE AND TRADING VOLUME 

            The
Common Shares are listed for trading on the TSX under the symbol “POM” and on
the NYSE MKT under the symbol “PLM”. The following table sets forth the market
price range and trading volumes of the Common Shares on the TSX and the NYSE MKT
for the periods indicated.

	
Month 
Ended
      
	Toronto Stock Exchange 	  NYSE MKT 
	High 	Low 	Total Volume 	High 	Low 	Total Volume 
	(CDN$) 	(CDN$) 	(#) 	(US$) 	(US$) 	(#) 
	April 1 - 9, 2013 	1.20 	1.15 	75,912 	1.19 	1.13 	832,700 
	March 31, 2013 	1.26 	1.16 	601,100 	1.23 	1.13 	2,699,100 
	February 28, 2013 	1.27 	1.07 	1,058,600 	1.25 	1.07 	4,623,800 
	January 31, 2013 	1.12 	0.77 	2,331,800 	1.13 	0.90 	4,545,800 
	December 31, 2012 	0.92 	0.84 	370,500 	0.96 	0.85 	3,181,800 
	November 30, 2012 	1.11 	0.90 	476,900 	1.14 	0.90 	2,979,100 
	October 31, 2012 	1.15 	0.99 	1,586,100 	1.17 	0.99 	3,201,700 
	September 30, 2012 	1.16 	1.05 	504,900 	1.20 	1.07 	2,322,200 
	August 31, 2012 	1.20 	1.00 	339,800 	1.21 	0.99 	3,079,000 
	July 31, 2012 	1.15 	0.82 	314,300 	1.17 	0.79 	3,360,100 
	June 30, 2012 	0.98 	0.72 	882,400 	0.98 	0.68 	4,126,800 
	May 31, 2012 	1.09 	0.70 	751,900 	1.10 	0.68 	4,651,300 
	April 30, 2012 	1.16 	1.00 	621,900 	1.20 	1.01 	3,467,000

DESCRIPTION OF OFFERED SECURITIES

Issue of Rights and Record Date 

            Shareholders
of record at 5:00 p.m. (Eastern time) on the Record Date will receive Rights on
the basis of one Right for each Common Share held at that time. The Rights
permit the holders thereof (provided that such holders are in an Eligible
Jurisdiction or are Approved Eligible Holders) to subscribe for and purchase
from the Corporation up to an aggregate of [•] Common Shares,
assuming exercise in full of the Rights issued hereunder. The Rights are
transferable in Canada and in the United States by the holders thereof. See
“Sale or Transfer of Rights”. 

            The
Rights will be represented by the Rights Certificates that will be issued in
registered form. For Shareholders who hold their Common Shares in registered
form, a Rights Certificate evidencing the number of Rights to which a holder is
entitled as at the Record Date and the number of Common Shares which may be
obtained on exercise of those Rights will be mailed with a copy of this
prospectus to each Shareholder as of 5:00 p.m. (Eastern time) on the Record
Date. See “Rights Certificate - Common Shares Held in Registered Form”. 

            Shareholders
that hold their Common Shares through a CDS Participant or DTC Participant will
not receive physical certificates evidencing their ownership of Rights. On the
Record Date, a global certificate representing such Rights will be issued electronically to, and in the name
of, CDS and will be issued in certificated form to DTC, or its nominee. See
“Rights Certificate - Common Shares Held Through CDS” and “Rights Certificates –
Common Shares Held Through DTC”. 

- 18 - 

Subscription Basis 

            For
every [•] Rights held, the holder thereof (other than an
Ineligible Holder) is entitled to subscribe for one Common Share at the
Subscription Price of $[•] per Common Share. This Subscription
Price was determined by the Corporation in accordance with the rules of the TSX.
Subject to statutory rescission rights, any exercise of Rights for Common Shares
will be irrevocable once submitted. 

            Where
the exercise of Rights would appear to entitle a holder of Rights to receive
fractional Common Shares, the holder’s entitlement will be reduced to the next
lowest whole number of Common Shares. The Corporation will not be required to
issue fractional Common Shares or pay cash in lieu thereof. CDS Participants or
DTC Participants that hold Rights for more than one beneficial holder may, upon
providing evidence satisfactory to the Corporation, exercise Rights on behalf of
its accounts on the same basis as if the beneficial owners of Common Shares were
holders of record on the Record Date. 

Commencement Date and Expiry Date 

            The
Rights will be eligible for exercise following [•], 2013 (the
“Commencement Date”). The Rights will expire at the Expiry Time on the
Expiry Date. Shareholders who exercise the Rights will become holders of Common
Shares issued through the exercise of the Rights on the completion of the Rights
Offering, which is expected to occur on or before the second business day
following the Expiry Date. RIGHTS NOT EXERCISED PRIOR TO THE EXPIRY TIME ON
THE EXPIRY DATE WILL BE VOID AND OF NO VALUE. 

Basic Subscription Privilege 

            Each
Shareholder at 5:00 p.m. (Eastern time) on the Record Date is entitled to
receive one Right for each Common Share held. For every [•] Rights
held, the holder (other than an Ineligible Holder) is entitled to acquire one
Common Share under the Basic Subscription Privilege at the Subscription Price by
subscribing and making payment in the manner described herein prior to the
Expiry Time on the Expiry Date. A holder of Rights that subscribes for some, but
not all, of the Common Shares pursuant to the Basic Subscription Privilege will
be deemed to have elected to waive the unexercised balance of such Rights and
such unexercised balance of Rights will be void and of no value unless the
Subscription Agent is otherwise specifically advised by such holder at the time
the Rights Certificate is surrendered that the Rights are to be transferred to a
third party or are to be retained by the holder. Holders of Rights who exercise
in full the Basic Subscription Privilege for their Rights are also entitled to
subscribe for the Additional Shares, if any, that are not otherwise subscribed
for under the Rights Offering on a pro rata basis, prior to the Expiry
Time on the Expiry Date pursuant to the Additional Subscription Privilege. See
“Additional Subscription Privilege”. Where the exercise of Rights would appear
to entitle a holder of Rights to receive fractional common shares, the holder’s
entitlement will be reduced to the next lowest whole number of Common Shares.
The Corporation will not be required to issue fractional Common Shares or pay
cash in lieu thereof. CDS Participants or DTC Participants that hold Rights for
more than one beneficial Shareholder as at the Record Date may, upon providing
evidence satisfactory to the Corporation and the Subscription Agent, exercise
Rights on behalf of their accounts on the same basis as if the beneficial owners
of Common Shares were holders of record on the Record Date. 

            For
Rights held in registered form, in order to exercise the Rights represented by a
Rights Certificate, the holder of Rights must complete and deliver the Rights
Certificate to the Subscription Agent in accordance with the terms of this
Rights Offering in the manner and upon the terms set out in this prospectus and
pay the aggregate Subscription Price. Any exercises of Rights for Common Shares
are irrevocable once submitted. 

            For
Rights held through a CDS Participant, a holder may subscribe for Common Shares
by instructing the CDS Participant holding the subscriber’s Rights to exercise
all or a specified number of such Rights and forwarding the Subscription Price
for each Common Share subscribed for in accordance with the terms of this Rights
Offering to such CDS Participant. Any exercise of Rights for Common Shares made
in connection with the Rights Offering through a CDS Participant will be
irrevocable and subscribers will be unable to withdraw their subscriptions for
Common Shares once submitted. 

- 19 - 

            For
Rights held through a DTC Participant, a holder may subscribe for Common Shares
by instructing the DTC Participant holding the subscriber’s Rights to exercise
all or a specified number of such Rights and forwarding the Subscription Price
for each Common Share subscribed for in accordance with the terms of this Rights
Offering to such DTC Participant. Any exercise of Rights for Common Shares made
in connection with the Rights Offering through a DTC Participant will be
irrevocable and subscribers will be unable to withdraw their subscriptions for
Common Shares once submitted. 

            The
Subscription Price is payable in U.S. funds by certified cheque, bank draft or
money order drawn to the order of the Subscription Agent. In the case of
subscription through a CDS Participant or DTC Participant, the Subscription
Price is payable by certified cheque, bank draft or money order drawn to the
order of such CDS Participant or DTC Participant, by direct debit from the
subscriber’s brokerage account or by electronic funds transfer or other similar
payment mechanism. The entire Subscription Price for Common Shares subscribed
for must be paid at the time of subscription and must be received by the
Subscription Agent at the Subscription Office prior to the Expiry Time on the
Expiry Date. Accordingly, a subscriber subscribing through a CDS Participant or
DTC Participant must deliver its payment and instructions sufficiently in
advance of the Expiry Date to allow the CDS Participant or DTC Participant to
properly exercise the Rights on its behalf. 

            Payment
of the Subscription Price will constitute a representation to the Corporation
and, if applicable, to the CDS Participant or DTC Participant, by the subscriber
(including by its agents) that: (a) either the subscriber is not a citizen or
resident of an Ineligible Jurisdiction or the subscriber is an Approved Eligible
Holder; and (b) the subscriber is not purchasing the Common Shares for resale to
any person who is a citizen or resident of an Ineligible Jurisdiction. 

Additional Subscription Privilege 

            Each
holder of Rights who has exercised in full the Basic Subscription Privilege for
its Rights may subscribe for Additional Shares, if available, at a price equal
to the Subscription Price for each Additional Share. The number of Additional
Shares will be the difference, if any, between the total number of Common Shares
issuable upon exercise of Rights and the total number of Common Shares
subscribed and paid for pursuant to the Basic Subscription Privilege at the
Expiry Time on the Expiry Date. Subscriptions for Additional Shares will be
received subject to allotment only and the number of Additional Shares, if any,
that may be allotted to each subscriber will be equal to the lesser of: (a) the
number of Additional Shares that such subscriber has subscribed for; and (b) the
product (disregarding fractions) obtained by multiplying the number of
Additional Shares available to be issued by a fraction, the numerator of which
is the number of Rights previously exercised by the subscriber and the
denominator of which is the aggregate number of Rights previously exercised
under the Rights Offering by all holders of Rights that have subscribed for
Additional Shares. If any holder of Rights has subscribed for fewer Additional
Shares than such holder’s pro rata allotment of Additional Shares, the
excess Additional Shares will be allotted in a similar manner among the holders
who were allotted fewer Additional Shares than they subscribed for. 

            To
apply for Additional Shares under the Additional Subscription Privilege, each
holder of Rights must forward their request to the Subscription Agent at the
Subscription Office or their CDS Participant or DTC Participant, as applicable,
prior to the Expiry Time on the Expiry Date. Payment for Additional Shares, in
the same manner as required upon exercise of the Basic Subscription Privilege,
must accompany the request when it is delivered to the Subscription Agent or a
CDS Participant or a DTC Participant, as applicable. Any excess funds will be
returned by mail by the Subscription Agent or credited to a subscriber’s account
with its CDS Participant or DTC Participant, as applicable, without interest or
deduction. Payment of such price must be received by the Subscription Agent
prior to the Expiry Time on the Expiry Date, failing which the subscriber’s
entitlement to such Additional Shares will terminate. Accordingly, a subscriber
subscribing through a CDS Participant or a DTC Participant must deliver its
payment and instructions to its CDS Participant or DTC Participant sufficiently
in advance of the Expiry Time on the Expiry Date to allow the CDS Participant or
DTC Participant to properly exercise the Additional Subscription Privilege on
its behalf. 

Subscription and Transfer Agent 

            The
Subscription Agent has been appointed the agent of the Corporation to receive
subscriptions and payments from holders of Rights Certificates, to act as
registrar and transfer agent for the Common Shares and to perform certain
services relating to the exercise and transfer of Rights. The Corporation will
pay for the services of the Subscription Agent. Subscriptions and payments under the
Rights Offering should be sent to the Subscription Agent at: 

- 20 - 

	By Registered
      Mail, Hand or Courier 	 	By
      Mail 
	  	 	  
	Computershare Investor Services Inc. 	 	Computershare Investor Services Inc. 
	9th Floor 	 	P.O. Box 7021 
	100 University Avenue 	 	31 Adelaide Street East 
	Toronto, Ontario M5J 2Y1 	 	Toronto, Ontario M5C 3H2 
	  	 	  
	Attention: Corporate Actions 	 	Attention: Corporation Actions

            Enquiries
relating to the Rights Offering should be addressed to the Subscription Agent by
telephone at 1-800-564-6253. 

Rights Certificate - Common Shares Held in Registered Form

            For
all Shareholders with an address of record in an Eligible Jurisdiction whose
Common Shares are held in registered form, a Rights Certificate representing the
total number of Rights to which each such Shareholder is entitled as at the
Record Date and the number of Common Shares which may be obtained on exercise of
those Rights will be mailed with a copy of this prospectus to each such
Shareholder. In order to exercise the Rights represented by the Rights
Certificate, such holder of Rights must complete and deliver the Rights
Certificate in accordance with the instructions set out under “How to Complete
the Rights Certificate”. Rights not exercised by the Expiry Time on the Expiry
Date will be void and of no value. 

Rights Certificate - Common Shares Held Through CDS 

            For
all Shareholders who hold their Common Shares through a securities broker or
dealer, bank or trust company or other CDS Participant with an address of record
in an Eligible Jurisdiction in the book based system administered by CDS, a
global certificate representing the total number of Rights to which all such
Shareholders as at the Record Date are entitled will be issued in registered
form to CDS and will be deposited with CDS on the Commencement Date. The
Corporation expects that each beneficial Shareholder will receive a confirmation
of the number of Rights issued to it from its CDS Participant in accordance with
the practices and procedures of that CDS Participant. CDS will be responsible
for establishing and maintaining book-entry accounts for CDS Participants
holding Rights. 

           Neither
the Corporation nor the Subscription Agent will have any liability for: (a) the
records maintained by CDS or CDS Participants relating to the Rights or the
book-entry accounts maintained by them; (b) maintaining, supervising or
reviewing any records relating to such Rights; or (c) any advice or
representations made or given by CDS or CDS Participants with respect to the
rules and regulations of CDS or any action to be taken by CDS or CDS
Participants. 

           The
ability of a person having an interest in Rights held through a CDS Participant
to pledge such interest or otherwise take action with respect to such interest
(other than through a CDS Participant) may be limited due to the lack of a
physical certificate. 

            Shareholders
who hold their Common Shares through a CDS Participant must arrange purchases or
transfers of Rights through their CDS Participant. It is anticipated by the
Corporation that each such purchaser of a Common Share or Right will receive a
customer confirmation of issuance or purchase, as applicable, from the CDS
Participant through which such Right is issued or such Common Share is purchased
in accordance with the practices and policies of such CDS Participant. 

Rights Certificate - Common Shares Held Through DTC 

            For
all Shareholders who hold their Common Shares through a securities broker or
dealer, bank or trust company or other DTC Participant with an address of record
in an Eligible Jurisdiction in the book based system administered by DTC, a
global certificate representing the total number of Rights to which all such
Shareholders as at the Record Date are entitled will be issued in registered
form to DTC and will be deposited with DTC on the Commencement Date. The
Corporation expects that each beneficial Shareholder will receive a confirmation
of the number of Rights issued to it from its DTC Participant in
accordance with the practices and procedures of that DTC Participant. DTC will
be responsible for establishing and maintaining book-entry accounts for DTC
Participants holding Rights. 

- 21 - 

            Neither
the Corporation nor the Subscription Agent will have any liability for: (a) the
records maintained by DTC or DTC Participants relating to the Rights or the
book-entry accounts maintained by them; (b) maintaining, supervising or
reviewing any records relating to such Rights; or (c) any advice or
representations made or given by DTC or DTC Participants with respect to the
rules and regulations of DTC or any action to be taken by DTC or DTC
Participants. 

            The
ability of a person having an interest in Rights held through a DTC Participant
to pledge such interest or otherwise take action with respect to such interest
(other than through a DTC Participant) may be limited due to the lack of a
physical certificate. 

            Shareholders
who hold their Common Shares through a DTC Participant must arrange purchases or
transfers of Rights through their DTC Participant. It is anticipated by the
Corporation that each such purchaser of a Common Share or Right will receive a
customer confirmation of issuance or purchase, as applicable, from the DTC
Participant through which such Right is issued or such Common Share is purchased
in accordance with the practices and policies of such DTC Participant. 

How to Complete the Rights Certificate 

	1. 	
      Form 1 — Basic Subscription Privilege.
      The maximum number of Rights that may be exercised pursuant to the
      Basic Subscription Privilege is shown in the box on the upper right hand
      corner of the face of the Rights Certificate. Form 1 must be completed and
      signed to exercise all or some of the Rights represented by the Rights
      Certificate pursuant to the Basic Subscription Privilege. If Form 1 is
      completed so as to exercise some but not all of the Rights represented by
      the Rights Certificate, the holder of the Rights Certificate will be
      deemed to have waived the unexercised balance of such Rights, unless the
      Subscription Agent is otherwise specifically advised by such holder at the
      time the Rights Certificate is surrendered that the Rights are to be
      transferred to a third party or are to be retained by the
holder.

	 	 
	2. 	
      Form 2 — Additional Subscription
      Privilege. Complete and sign Form 2 on the Rights Certificate only if
      you also wish to participate in the Additional Subscription Privilege. See
      “Additional Subscription Privilege”.

	 	 
	3. 	
      Form 3 — Transfer of Rights.
      Complete and sign Form 3 on the Rights Certificate only if you wish to
      transfer the Rights. Your signature must be guaranteed by a Schedule I
      bank, a major trust company in Canada, or a member of an acceptable
      Medallion Signature Guarantee Program, including STAMP, SEMP, and MSP.
      Members of STAMP are usually members of a recognized stock exchange in
      Canada or members of the Investment Industry Regulatory Organization of
      Canada. The guarantor must affix a stamp bearing the actual words
      “Signature Guaranteed”. It is not necessary for a transferee to obtain a
      new Rights Certificate to exercise the Rights, but the signatures of the
      transferee on Forms 1 and 2 must correspond in every particular with the
      name of the transferee (or the bearer if no transferee is specified) as
      the absolute owner of the Rights Certificate for all purposes. If Form 3
      is completed, the Subscription Agent will treat the transferee as the
      absolute owner of the Rights Certificate for all purposes and will not be
      affected by notice to the contrary.

	 	 
	4. 	
      Form 4 — Dividing or Combining.
      Complete and sign Form 4 on the Rights Certificate only if you wish to
      divide or combine the Rights Certificate, and surrender it to the
      Subscription Agent at the Subscription Office. Rights Certificates need
      not be endorsed if the new Rights Certificate(s) are issued in the same
      name. The Subscription Agent will then issue a new Rights Certificate in
      such denominations (totalling the same number of Rights as represented by
      the Right(s) Certificates being divided or combined) as are required by
      the Rights Certificate holder. Rights Certificates must be surrendered for
      division or combination in sufficient time prior to the Expiry Time to
      permit the new Rights Certificates to be issued to and used by the Rights
      Certificate holder.

- 22 - 

	5. 	
      Payment. Enclose payment in U.S. funds by
      certified cheque, bank draft or money order payable to the order of
      “Computershare Investor Services Inc.”. The amount of payment will be $[•]
      per Common Share. Payment must also be included for any Additional Shares
      subscribed for under the Additional Subscription Privilege.

	 	 
	6. 	
      Deposit. Deliver or mail the completed Rights
      Certificate and payment in the enclosed return envelope addressed to the
      Subscription Agent so that it is received by the Subscription Office
      listed above before the Expiry Time on the Expiry Date. If mailing,
      registered mail is recommended. Please allow sufficient time to avoid late
      delivery. The signature of the Rights Certificate holder must correspond
      in every particular with the name that appears on the face of the Rights
      Certificate.

            Signatures
by a trustee, executor, administrator, guardian, attorney, officer of a
corporation or any person acting in a fiduciary or representative capacity
should be accompanied by evidence of authority satisfactory to the Subscription
Agent. All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of any subscription will be determined by the
Corporation in its sole discretion, and any determination by the Corporation
will be final and binding on the Corporation and its security holders. Upon
delivery or mailing of the completed Rights Certificate to the Subscription
Agent, the exercise of the Rights and the subscription for Common Shares is
irrevocable. The Corporation reserves the right to reject any subscription if it
is not in proper form or if the acceptance thereof or the issuance of Common
Shares pursuant thereto could be unlawful. The Corporation also reserves the
right to waive any defect in respect of any particular subscription. Neither the
Corporation nor the Subscription Agent is under any duty to give any notice of
any defect or irregularity in any subscription, nor will they be liable for the
failure to give any such notice. Any holder of Rights that fails to complete
their subscription in accordance with the foregoing instructions prior to the
Expiry Time on the Expiry Date will forfeit their Rights under the Basic
Subscription Privilege and the Additional Subscription Privilege attaching to
those Rights. 

Undeliverable Rights 

            Rights
Certificates returned to the Subscription Agent as undeliverable will not be
sold by the Subscription Agent and no proceeds of sale will be credited to such
holders. 

Sale or Transfer of Rights 

            Holders
of Rights in registered form in Canada or the United States may, instead of
exercising their Rights to subscribe for Common Shares, sell or transfer their
Rights to any person that is not an Ineligible Holder by completing Form 3 on
the Rights Certificate and delivering the Rights Certificate to the transferee.
See “- How to Complete the Rights Certificate - 3. Form 3 - Transfer of
Rights”. A permitted transferee of the Rights of a registered holder of a
Rights Certificate may exercise the Rights transferred to such permitted
transferee without obtaining a new Rights Certificate. If a Rights Certificate
is transferred in blank, the Corporation and the Subscription Agent may
thereafter treat the bearer as the absolute owner of the Rights Certificate for
all purposes and neither the Corporation nor the Subscription Agent will be
affected by any notice to the contrary. 

            An
application will be submitted to the TSX to approve the listing of the Rights,
the Common Shares issuable upon the exercise of the Rights, and the Standby
Shares. Similar applications will be made with NYSE MKT to admit the Rights for
trading and list the Common Shares issuable upon the exercise of the Rights and
the Standby Shares. Listing or admittance for trading of the Rights on the TSX
and NYSE MKT is subject to the Corporation obtaining conditional listing
approval or a comparable approval of the listing for the Rights, the Common
Shares issuable upon exercise of the Rights, and the Standby Shares from, and
fulfilling all of the listing requirements of each of the TSX and NYSE MKT,
respectively. Provided the Corporation obtains each such approval and fulfills
all such requirements, the Rights will be listed or admitted for trading, as
applicable, on each of the TSX and NYSE MKT on [•], 2013. Holders that do
not wish to exercise their Rights may sell or transfer their Rights through
usual investment channels, such as investment dealers and brokers, at the
holder’s own expense. If approved for listing or admitted for trading, as
applicable, it is expected that the Rights will cease trading on the TSX at noon
(Eastern time) on the Expiry Date, and on the NYSE MKT at the close of trading
(Eastern time) on the day immediately preceding the Expiry Date. The Corporation
has filed with the SEC a registration statement on Form F-10 under the U.S.
Securities Act, and expects to make other certain filings with the SEC and the
NYSE MKT so that the Rights and the Common Shares issuable upon the exercise of
the Rights issued to Shareholders that are U.S. residents and are not affiliates of the Corporation
will not be subject to transfer restrictions under U.S. securities law. 

- 23 - 

            Holders
of Rights through CDS or DTC Participants in Canada who wish to sell or transfer
their Rights must do so in the same manner in which they sell or transfer Common
Shares. See “- Rights Certificate - Common Shares Held Through CDS” and “Rights
Certificate – Common Shares Held Through DTC”. 

Dividing or Combining Rights Certificates 

            A
Rights Certificate may be divided, exchanged or combined. See “— How to Complete
the Rights Certificate - 4. Form 4 - Dividing or Combining”. 

Reservation of Common Shares 

            The
Corporation will, at all times, reserve sufficient unissued Common Shares as
will permit the exchange of all the outstanding Rights for Common Shares during
the period beginning on the Commencement Date and ending on the Expiry Date at
the Expiry Time. 

Dilution to Existing Shareholders 

           
If a Shareholder does not exercise all of its Rights pursuant to the Basic
Subscription Privilege, the Shareholder’s current percentage ownership in the
Corporation will be diluted by the issuance of Common Shares upon the exercise
of Rights by other Shareholders, as well as the purchase of Standby Shares by
the Standby Purchaser and the triggering of the anti-dilution adjustments of the
Corporation’s outstanding exchange warrants issued in connection with the
debentures to Glencore. Shareholders should be aware that the Standby Purchaser
has agreed, subject to certain terms, conditions and limitations, to exercise
its Rights under the Basic Subscription Privilege in full pursuant to the
Standby Purchase Agreement and to purchase the Standby Shares. See “STANDBY
COMMITMENT”. 

Ineligible Holders 

            This
Rights Offering is made only in the Eligible Jurisdictions. Accordingly, neither
a subscription under the Basic Subscription Privilege nor under the Additional
Subscription Privilege will be accepted from any person, or such person’s agent,
who appears to be, or who the Corporation has reason to believe is an Ineligible
Holder, except that the Corporation may accept subscriptions in certain
circumstances from an Approved Eligible Holder. 

            Rights
Certificates will not be issued and forwarded by the Corporation to Ineligible
Holders who are not Approved Eligible Holders. Ineligible Holders will be
presumed to be resident in the place of their registered address unless the
contrary is shown to the satisfaction of the Corporation. Ineligible Holders
will be sent a letter advising them that their Rights Certificates will be
issued to and held on their behalf by the Subscription Agent. The letter will
also set out the conditions required to be met, and procedures that must be
followed, by Ineligible Holders wishing to participate in the Rights Offering.
Rights Certificates in respect of Rights issued to Ineligible Holders will be
issued to and held by the Subscription Agent as agent for the benefit of
Ineligible Holders. The Subscription Agent will hold the Rights until 5:00 p.m.
(Eastern time) on [•], 2013 in order to provide Ineligible Holders
an opportunity to claim a Rights Certificate by satisfying the Corporation that
the issue of Common Shares pursuant to the exercise of Rights will not be in
violation of the laws of the applicable jurisdiction. Following such date, the
Subscription Agent, for the account of registered Ineligible Holders (including
Ineligible Holders with an address of record in the United States), will, prior
to the Expiry Time on the Expiry Date, attempt to sell the Rights of such
registered Ineligible Holders represented by Rights Certificates in the
possession of the Subscription Agent on such date or dates and at such price or
prices as the Subscription Agent determines in its sole discretion. 

            Beneficial
owners of Common Shares registered in the name of a resident of an Ineligible
Jurisdiction, who are not themselves resident in an Ineligible Jurisdiction, who
wish to be recognized as an Approved Eligible Holder and who believe that their
Rights Certificates may have been delivered to the Subscription Agent, should
advise their broker if they wish to subscribe and the broker may contact the
Subscription Agent at the earliest opportunity and in any case in advance of
5:00 p.m. (Eastern time) on [•], 2013 to request to have their
Rights Certificates mailed to them. 

- 24 - 

            The
Rights and the Common Shares issuable on the exercise of the Rights and the
Standby Shares have not been qualified for distribution in any Ineligible
Jurisdiction and, accordingly, may only be offered, sold, acquired, exercised or
transferred in transactions not prohibited by applicable laws in Ineligible
Jurisdictions. Notwithstanding the foregoing, persons located in such Ineligible
Jurisdictions may be able to exercise the Rights and purchase Common Shares
provided that they furnish an investor letter satisfactory to the Corporation on
or before [•], 2013. The form of investor letter will be available
from the Corporation or the Subscription Agent upon request. A holder of Rights
in an Ineligible Jurisdiction holding on behalf of a person resident in an
Eligible Jurisdiction may be able to exercise the Rights provided the holder
certifies in the investor letter that the beneficial purchaser is resident in an
Eligible Jurisdiction and satisfies the Corporation that such subscription is
lawful and in compliance with all securities and other applicable laws. 

            No
charge will be made for the sale of Rights by the Subscription Agent except for
a proportionate share of any brokerage commissions incurred by the Subscription
Agent and the costs of or incurred by the Subscription Agent in connection with
the sale of the Rights. Registered Ineligible Holders will not be entitled to
instruct the Subscription Agent in respect of the price or the time at which the
Rights are to be sold. The Subscription Agent will endeavour to effect sales of
Rights on the open market and any proceeds received by the Subscription Agent
with respect to the sale of Rights net of brokerage fees and costs incurred and,
if applicable, the Canadian tax required to be withheld, will be divided on a
pro rata basis among such registered Ineligible Holders and delivered by mailing
cheques (in Canadian funds) of the Subscription Agent therefor as soon as
practicable to such registered Ineligible Holders at their addresses recorded on
the books of the Corporation. Amounts of less than $10.00 will not be remitted.
The Subscription Agent will act in its capacity as agent of the registered
Ineligible Holders on a best efforts basis only and the Corporation and the
Subscription Agent do not accept responsibility for the price obtained on the
sale of, or the inability to sell, the Rights on behalf of any registered
Ineligible Holder. Neither the Corporation nor the Subscription Agent will be
subject to any liability for the failure to sell any Rights of registered
Ineligible Holders or as a result of the sale of any Rights at a particular
price or on a particular day. There is a risk that the proceeds received from
the sale of Rights will not exceed the costs of or incurred by the Subscription
Agent in connection with the sale of such Rights and, if applicable, the
Canadian tax required to be withheld. In such event, no proceeds will be
remitted. 

            Holders
of Rights who are not resident in Canada or the United States should be aware
that the acquisition and disposition of Rights or Common Shares may have tax
consequences in the jurisdiction where they reside, which are not described
herein. Accordingly, such holders should consult their own tax advisors about
the specific tax consequences in the jurisdiction where they reside of
acquiring, holding and disposing of Rights or Common Shares. 

PLAN OF DISTRIBUTION 

           
Each Shareholder on the Record Date will receive one Right for each Common Share
held. 

            This
prospectus qualifies the distribution of the Rights as well as the Common Shares
issuable upon exercise of the Rights and the Standby Shares in each of the
Eligible Jurisdictions. The Rights as well as the Common Shares issuable upon
the exercise of the Rights and the Standby Shares are not qualified under the
securities laws of, or being distributed or offered in, any Ineligible
Jurisdiction and, except under the circumstances described herein, Rights may
not be exercised by or on behalf of an Ineligible Holder. This prospectus is
not, and under no circumstances is to be construed as, an offering of any Rights
or Common Shares for sale in any Ineligible Jurisdiction or a solicitation
therein of an offer to buy any securities. Rights Certificates will not be sent
to Shareholders with addresses of record in any Ineligible Jurisdiction.
Instead, such Ineligible Holders will be sent a letter advising them that their
Rights Certificates will be held by the Subscription Agent, who will hold such
Rights as agent for the benefit of all such Ineligible Holders. See “DESCRIPTION
OF OFFERED SECURITIES - Ineligible Holders”. 

            No
action has been or will be taken in any jurisdiction other than in the Eligible
Jurisdictions, where action for that purpose is required, which would permit a
public offering of the Offered Securities or the possession, circulation or
distribution of this prospectus or any material relating to this Rights Offering
except as set forth herein. Accordingly, the Offered Securities may not be
offered, sold or delivered, directly or indirectly, and neither this prospectus
nor any other offering material or advertisements in connection with this Rights
Offering may be distributed or published, in or from any country or
jurisdiction, except under circumstances that will result in compliance with any
applicable rules and regulations of any such country or jurisdiction. 

- 25 - 

European Economic Area 

            In
relation to each Member State of the European Economic Area which has
implemented the Prospectus Directive (defined below) (each, a “Relevant
Member State”) with effect from and including the date on which the
Prospectus Directive is implemented in that Relevant Member State (the
“Relevant Implementation Date”) no offer of rights may be made to the
public in that Relevant Member State other than: 

	 	(a) 	
      to any legal entity which is a qualified investor as
      defined in the Prospectus Directive;

	 	 	 
	 	(b) 	
      to fewer than 100 or, if the Relevant Member State has
      implemented the relevant provision of the 2010 PD Amending Directive, 150,
      natural or legal persons (other than qualified investors as defined in the
      Prospectus Directive) as permitted under the Prospectus Directive;
    or

	 	 	 
	 	(c) 	
      in any other circumstances falling within Article 3(2) of
      the Prospectus Directive,

provided that no such offer of Rights shall require the
Corporation to publish a prospectus pursuant to Article 3 of the Prospectus
Directive or supplement a prospectus pursuant to Article 16 of the Prospectus
Directive. 

            For
the purposes of this provision, the expression an “offer to the public” in
relation to any Offered Securities in any Relevant Member State means the
communication in any form and by any means of sufficient information on the
terms of the Rights Offering and any Rights to be offered so as to enable an
investor to decide to purchase any Rights, as the same may be varied in that
Member State by any measure implementing the Prospectus Directive in that Member
State, and the expression “Prospectus Directive” means Directive
2003/71/EC (including the 2010 PD Amending Directive, to the extent implemented
in the Relevant Member State) and includes any relevant implementing measure in
each Relevant Member State. The expression 2010 PD Amending Directive means
Directive 2010/73/EU.

           The
Corporation has not authorized, nor does it authorize, the making of any offer
of Rights through any financial intermediary on its behalf. Accordingly, no
purchaser of Rights is authorized to make any further offer of the Rights on
behalf of the Corporation. 

            The
European Economic Area selling restriction is in addition to any other selling
restrictions set out in this prospectus. 

Stock Exchange Approvals 

            An
application will be submitted to the TSX to approve the listing of the Rights,
the Common Shares issuable upon the exercise of the Rights, and the Standby
Shares. Similar applications will be made with NYSE MKT to admit the Rights for
trading and list the Common Shares issuable upon the exercise of Rights and the
Standby Shares. Listing of the Rights on the TSX and NYSE MKT is subject to
obtaining conditional listing approval for the Rights, the Common Shares
underlying the Rights, and the Standby Shares from the TSX and NYSE MKT and the
Corporation fulfilling all of the listing requirements of the TSX and NYSE MKT,
respectively. Provided the Corporation obtains each such approval and fulfills
all such requirements, the Rights will be listed for trading on the TSX and
admitted for trading on the NYSE MKT on [•], 2013. If approved for
listing or admitted for trading, as applicable, it is expected that the Rights
will cease trading on the TSX at noon (Eastern time) on the Expiry Date, and on
the NYSE MKT at the close of trading (Eastern time) on the day immediately
preceding the Expiry Date. 

STANDBY COMMITMENT 

            Under
the Standby Purchase Agreement, the Standby Purchaser has agreed, subject to
certain terms, conditions and limitations, to purchase at the Subscription
Price, pursuant to the Basic Subscription Privilege, the Additional Subscription
Privilege and the Standby Purchase Agreement, up to [•] Offered
Securities calculated by dividing US$53,063,160 (being 24.99% of the
Corporation's Market Capitalization as of the date of execution of the Standby
Purchase Agreement less (A) the Standby Fee and (B) the fair market value of all
other transactions contemplated by the Rights Offering, the Standby Purchase
Agreement and the Standby Purchase Agreement and related transactions in so far
as they relate to Glencore (other than the Bridge Loan) as determined by the
Board acting reasonably), by the Subscription Price, as fully paid and
non-assessable Common Shares, such number of Standby Shares subject to the Standby Purchaser's ultimate
parent entity (within the meaning of the HSR Act) holding (within the meaning of
the HSR Act) not more than 49.99% of the Corporation’s outstanding Common
Shares, following allocation of the Offered Securities to the holders of Rights. 

- 26 - 

            The
Standby Purchaser is not required or permitted to subscribe for any Rights
Offering Shares and/or Standby Shares pursuant to its Basic Subscription
Privilege, Additional Subscription Privilege and/or Standby Commitment if the
subscription for such Common Shares would exceed the Maximum Investment.

            In
consideration for the Standby Commitment, the Standby Purchaser will be entitled
to the Standby Fee upon the successful completion of the Rights Offering in the
amount equal to 2.00% of the Maximum Investment, being US$1,061,263. The Standby
Fee will be payable in cash without set off against any amount payable by the
Standby Purchaser on account of the Common Shares in immediately available funds
by wire transfer to the account designated by the Standby Purchaser. 

           The
obligations of the Standby Purchaser to complete the subscription under the
Rights Offering is subject to the following conditions, among others, being
satisfied in full: (i) the Company and the Standby Purchaser shall have entered
into certain corporate governance arrangements under which, effective January 1,
2014, the Standby Purchaser may appoint that number of the directors of the
Company which is proportionate to the Standby Purchaser's holdings of issued and
outstanding common shares (on a fully diluted basis) relative to all the issued
and outstanding common shares (on a fully diluted basis) subject to certain
limitations including that the Standby Purchaser may not appoint more than 49%
(rounding down) of the directors to the Board; (ii) the Corporation and the
Standby Purchaser having entered into a registration rights agreement; (iii) the
closing of the Rights Offering having occurred within 90 days from the date of
the Standby Purchase Agreement; and (iv) certain other customary closing
conditions.

            The
Corporation has provided certain representations, warranties and covenants under
the Standby Purchase Agreement including corporate authority, authorized
capitalization, no undisclosed material changes, tax and tax filings, use and
title to owned and leased real property, proper permits, pension plans,
environmental and mineral rights, intellectual property, financial reporting,
and securities law matters, amongst others.

            The
Standby Purchaser has provided certain representations, warranties and covenants
under the Standby Purchase Agreement including corporate authority, amongst
others. 

            The
obligations of the Standby Purchaser under the Standby Purchase Agreement may be
terminated at the discretion of the Standby Purchaser in certain circumstances,
including, without limitation: 

	 	(a) 	
      by giving written notice to the Corporation at any time
      prior to, but not after, the date on which the final prospectus and
      registration statement is mailed to the holders in the Eligible
      Jurisdictions if:

	 	 	 	 
	 		(i) 	
      the Corporation has committed a material breach of the
      Standby Purchase Agreement (which shall include, for the avoidance of
      doubt, any material breach of any representations or warranties set out in
      the Standby Purchase Agreement) and, if capable of cure, has not cured it
      within a reasonable time; or

	 	 	 	 
	 		(ii) 	
      an Event of Default (as defined in the Debentures (as
      defined in the Standby Purchase Agreement) has occurred and is continuing
      under the Debentures; or

	 	 	 	 
	 		(iii) 	
      the Corporation has committed a material breach of any
      other material agreement between the Corporation and/or its Affiliates (as
      defined in the Standby Purchase Agreement) on the one hand and the Standby
      Purchaser and/or its Affiliates (as defined in the Standby Purchase
      Agreement) on the other hand and if capable of cure, has not been cured in
      the time permitted under the applicable agreement.

	 	 	 	 
	 	(b) 	
      the Corporation fails to:

	 	 	 	 
	 		(i) 	
      obtain final listing approval from the TSX and the NYSE
      MKT for the Rights at least two days prior to the date named as the Record
      Date in the final prospectus;

- 27 - 

	 	(ii) 	
      obtain conditional listing approval from the TSX and NYSE
      MKT in respect of the Common Shares issuable upon exercise of the Rights
      and the Standby Shares, prior to or on the completion of the Rights
      Offering, subject to receipt of customary final documentation;
  and

	 	 	 
	 	(iii) 	
      satisfy any of the applicable conditions set out in the
      Standby Purchase Agreement on or before the completion of the Rights
      Offering, including that the Rights Offering closing occurs within 90 days
      of the execution of the Standby Purchase
Agreement;

	 	(c) 	
      the Common Shares are de-listed or suspended or halted
      for trading for a period greater than one business day for any reason by
      the TSX or NYSE MKT at any time; or

	 	 	 
	 	(d) 	
      if the Rights Offering is otherwise terminated or
      cancelled.

            The
Corporation has agreed to indemnify the Standby Purchaser for certain matters
including any and all, direct or indirect losses, claims, damages, demands,
costs, and expenses and other liabilities of any kind caused or incurred by
reason of any misrepresentations or alleged misrepresentations in the prospectus
or registration statement, any order made or any inquiry, investigation or
proceeding instituted, threatened or announced based upon a misrepresentation in
the prospectus or registration statement, noncompliance or alleged
non-compliance with securities laws by the Corporation and any breach or default
of the Corporation under the Standby Purchase Agreement. 

            The
Standby Purchaser, together with its affiliates, currently owns 46,967,842
Common Shares, representing approximately 25.6% of the outstanding Common
Shares. If no Rights are exercised by persons other than the Standby Purchaser,
and the Standby Purchaser exercises all of its Rights and its Standby
Commitment, following the closing of the Rights Offering, the Standby Purchaser,
together with its affiliates, could own up to [•] Common Shares,
representing up to approximately [•]% of the issued and
outstanding Common Shares. 

            The
Standby Purchaser is not engaged as an underwriter in connection with the Rights
Offering and has not been involved in the preparation of, or performed any
review of, this prospectus in the capacity of an underwriter. No underwriter has
been involved in the preparation of this prospectus or performed any review of
the contents of this prospectus. 

RISK FACTORS 

            The
receipt of Rights and an investment in the Common Shares is subject to a number
of risks. A prospective purchaser of such securities should carefully consider
the information and risks faced by the Corporation described in this prospectus
and the documents incorporated by reference including, without limitation, the
risk factors set out under the heading “Risks Factors” in the 2012 AIF and
“Risks and Uncertainties” in each of the Annual MD&A and the Interim
MD&A. 

Dilution 

           
If a Shareholder does not exercise all of its Rights pursuant to the Basic
Subscription Privilege, the Shareholder’s current percentage ownership in the
Corporation will be diluted by the issuance of Common Shares upon the exercise
of Rights by other Shareholders, as well as the purchase of Standby Shares by
the Standby Purchaser, and the triggering of the anti-dilution adjustments of
the Corporation’s outstanding exchange warrants issued in connection with the
debentures to Glencore. 

Trading market for Rights 

            Although
the Corporation expects that the Rights will be listed on the TSX and admitted
for trading on the NYSE MKT, the Corporation cannot provide any assurance that
an active or any trading market in the Rights will develop or that Rights can be
sold on the TSX or NYSE MKT at any time. To the extent an active trading market
does not develop, the pricing of the Rights in the secondary market, the
transparency and availability of trading prices and liquidity of the Rights,
would be adversely affected which may have a material impact on the Corporation
and its share price. 

- 28 - 

Market price of securities of the Corporation may be subject
to significant fluctuations which may be based on factors unrelated to its
financial performance or prospects 

            The
trading price of the securities of the Corporation have been and may continue to
be subject to significant fluctuations which may be based on factors unrelated
to its financial performance or prospects. These factors include macroeconomic
developments in North America and globally, and market perceptions of the
attractiveness of particular industries. 

Standby Purchase Agreement may be terminated under certain
circumstances 

            Under
the terms of the Standby Purchase Agreement, the Standby Purchaser has the right
to terminate the Standby Commitment in certain circumstances, as set out under
the heading “Standby Commitment”. If the Standby Purchaser becomes entitled to
terminate its Standby Commitment and therefore does so, the application for the
Rights Offering Securities shall be withdrawn and the Corporation shall procure
that the listing does not become effective (except to the effect such listing
has already become effective), the Standby Purchase Agreement shall terminate
and the parties obligations under the Standby Purchase Agreement shall cease
immediately and neither party will have any claim against any other party
except, provided however that such limitation will not apply in the event of
fraud or a material breach of the Standby Purchase Agreement and the anticipated
proceeds of the Rights Offering will not be realized. If the Standby Commitment
is terminated, the Corporation may need to seek other alternate sources of
financing for the NorthMet Project. The failure to complete the Rights
Offering and to receive the anticipated US$60,000,000 gross proceeds (assuming
full exercise of the Rights) will have a material adverse effect on the
Corporation as it does not currently have sufficient cash or alternate sources
of financing available. 

Future sales may affect the market price of the Common
Shares 

            In
order to finance future operations, the Corporation may raise funds through the
issuance of Common Shares or the issuance of debt instruments or other
securities convertible into Common Shares. The Corporation cannot predict the
size of future issuances of Common Shares or the issuance of debt instruments or
other securities convertible into shares or the effect, if any, that future
issuances and sales of the Corporation’s securities will have on the market
price of the Common Shares. 

Exercises of Rights may not be revoked 

            Subject
to certain statutory withdrawal and rescission rights available to Canadian
subscribers, if the Common Share trading price declines below the Subscription
Price for the Common Shares, resulting in a loss of some or all of the
Shareholder’s Subscription Price, the Shareholders may not revoke or change the
exercise of Rights after they send in their subscription forms and payment.

A large number of Common Shares may be issued and
subsequently sold upon the exercise of Rights 

            To
the extent that Shareholders who exercise Rights sell the Common Shares
underlying such Rights, the market price of the Corporation’s Common Shares may
decrease due to the additional selling pressure in the market. The risk of
dilution from issuances of Common Shares underlying the Rights may cause
Shareholders to sell their Common Shares, which may have a material adverse
impact on the Corporation and its share price. 

The sale of Common Shares issued upon exercise of the Rights
could encourage short sales by third parties which could depress the price of
the Common Shares 

            Any
downward pressure on the price of Common Shares caused by the sale of Common
Shares underlying the Rights could encourage short sales by third parties. In a
short sale, a prospective seller borrows Common Shares from a Shareholder or
broker and sells the borrowed Common Shares. The prospective seller hopes that
the Common Share price will decline, at which time the seller can purchase
Common Shares at a lower price for delivery back to the lender. The seller
profits when the Common Share price declines because it is purchasing Common
Shares at a price lower than the sale price of the borrowed Common Shares. Such
sales could place downward pressure on the price of the Corporation’s Common
Shares by increasing the number of Common Shares being sold, which may have a
material adverse impact on the Corporation and its share price. 

- 29 - 

The Subscription Price is not necessarily an indication of
value 

            The
Subscription Price was determined by the Corporation in accordance with the
rules of the TSX. The Corporation’s objective in determining the Subscription
Price is to encourage holders of Rights to exercise their Rights. The
Subscription Price does not necessarily bear any relationship to the book value
of the Corporation’s assets, past operations, cash flows, losses, financial
condition or any other established criteria for value. Holders of Rights
should not consider the Subscription Price to be an indication of the
Corporation’s value and the Common Shares may trade at prices above or below the
Subscription Price. 

Subscribers outside of the United States are subject to
exchange rate risk 

            The
Subscription Price is payable in United States dollars. Accordingly, any
Subscriber outside of the United States is subject to adverse movements in their
local currency against the United States dollar. 

            Because
we believe that we will be classified as a passive foreign investment company (a
“PFIC”) for U.S. federal income tax purposes, “U.S. Holders” (as defined
in “CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS”) of our Common
Shares may be subject to U.S. 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 our
Common Shares even if the shares were held as a capital asset. See “CERTAIN
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS.”

CERTAIN CANADIAN FEDERAL INCOME TAX CONSIDERATIONS 

            In
the opinion of Farris, Vaughan, Wills & Murphy LLP, Canadian tax counsel to
the Corporation, the following is, as of the date of this prospectus, a summary
of the principal Canadian federal income tax considerations under the Income
Tax Act (Canada) and the regulations thereunder (collectively, the “Tax
Act”) generally applicable to a holder of Rights acquired pursuant to the
Rights Offering and of Common Shares acquired on the exercise of such Rights
that, for the purposes of the Tax Act and at all relevant times, holds such
Rights and Common Shares as capital property, is not affiliated with the
Corporation, and deals with the Corporation at arm’s length (a “Holder”).
A Right or Common Share generally will be capital property to a Holder unless it
is held in the course of carrying on a business of trading in or dealing in
securities, or it has been acquired in a transaction or transactions considered
to be an adventure or concern in the nature of trade. 

            This
summary is based on the current provisions of the Tax Act, all specific
proposals to amend the Tax Act publicly announced by or on behalf of the
Minister of Finance (Canada) (“Tax Proposals”) before the date of this
Prospectus, and the current published administrative policies and assessing
practices of the Canada Revenue Agency (“CRA”). No assurance can be given
that the Tax Proposals will be enacted in the form proposed or at all. This
summary is not exhaustive of all possible Canadian federal income tax
considerations and, except as mentioned above, does not take into account or
anticipate any changes in law, whether by legislative, administrative or
judicial decision or action, nor does it take into account provincial,
territorial or foreign income tax legislation or considerations, which may
differ significantly from the Canadian federal income tax considerations
discussed herein. 

            This
summary is of a general nature only and is not intended to be, nor should it be
construed to be, legal or tax advice to any particular Holder. Accordingly,
Holders should consult their own tax advisors about the specific tax
consequences to them of acquiring, holding and disposing of Rights or Common
Shares. 

            Generally,
for purposes of the Tax Act, all amounts relating to the acquisition, holding or
disposition of Rights and Common Shares must be expressed in Canadian dollars
(including adjusted cost base, proceeds of disposition and dividends). For
purposes of the Tax Act, amounts denominated in a foreign currency generally
must be converted into Canadian dollars using the rate of exchange quoted by the
Bank of Canada at noon on the date such amounts arose, or such other rate of
exchange as is acceptable to the CRA. 

Residents of Canada 

            The
following portion of the summary is generally applicable to a Holder that, at
all relevant times for purposes of the Tax Act, is or is deemed to be resident
in Canada (a “Resident Holder”). Certain Resident Holders that might not
otherwise be considered to hold their Common Shares as capital property may, in
certain circumstances, be entitled to have their Common Shares and all
other “Canadian securities” (as defined in the Tax Act) owned in the taxation
year of the election and all subsequent taxation years deemed to be capital
property by making the irrevocable election permitted by subsection 39(4) of the
Tax Act. Rights are not “Canadian securities” for these purposes; accordingly,
the characterization of Rights as capital property is unaffected by a Resident
Holder’s making an election pursuant to subsection 39(4) of the Tax Act. 

- 30 - 

            The
following portion of the summary does not apply to a Resident Holder: (i) that
is a “financial institution” for purposes of section 142.2 of the Tax Act, (ii)
that is a “specified financial institution” as defined for purposes of the Tax
Act, (iii) that is a corporation that is, or becomes as part of a transaction or
event or series of transactions or events that includes the acquisition of the
Rights or Common Shares, controlled by a non-resident corporation for the
purposes of the rules in proposed section 212.3 of the Tax Act, (iv) to which
the “functional currency” reporting rules in section 261 of the Tax Act apply,
or (v) an interest in which is a “tax shelter investment” for purposes of the
Tax Act. Such Holders should consult their own tax advisors. 

Acquisition of Rights 

            A
Resident Holder that receives a Right pursuant to the Rights Offering will not
be required to include the value of such Right in computing the Resident
Holder’s income for purposes of the Tax Act. Rights received by a Resident
Holder pursuant to this Rights Offering will have an adjusted cost base of nil.
The cost of Rights acquired by a Resident Holder otherwise than pursuant to this
Rights Offering will be averaged with the adjusted cost base of all other Rights
held by that Resident Holder as capital property immediately prior to such
acquisition for the purposes of determining the adjusted cost base to that
Resident Holder of each Right so held. 

Exercise of Rights 

            The
exercise of a Right will not constitute a disposition of that Right for purposes
of the Tax Act and, accordingly, a Resident Holder will not realize a gain or
loss on such exercise. The aggregate cost to a Resident Holder of the Common
Shares acquired on the exercise of a Right will be equal to the aggregate amount
of the Subscription Price paid on exercise and the Resident Holder’s adjusted
cost base of the Right, if any, immediately before the exercise. The adjusted
cost base to a Resident Holder at any time of Common Shares received on an
exercise of Rights will be determined by averaging the cost of such Common
Shares with the adjusted cost base of any other Common Shares owned by the
Resident Holder as capital property at that time. 

Disposition of Rights 

            A
Resident Holder that disposes of or is deemed to dispose of a Right (otherwise
than by exercise of the Right) generally will realize a capital gain (or a
capital loss) equal to the amount by which the proceeds of disposition of the
Right exceed (or are exceeded by) the aggregate of the Resident Holder’s
adjusted cost base thereof and any reasonable costs of disposition. The tax
treatment of any capital gain (or capital loss) realized on the disposition of a
Right (otherwise than by the exercise of the Right) is described below under the
heading “Treatment of Capital Gains and Capital Losses”. 

Expiry of Rights 

            The
expiry or termination of an unexercised Right will result in a capital loss to a
Resident Holder equal to the adjusted cost base, if any, of the Right
immediately before its expiry or termination. Any such capital loss will be
subject to the treatment described below under the heading “Treatment of
Capital Gains and Capital Losses”. 

Receipt of Dividends on Common Shares 

            Dividends
received or deemed to be received on Common Shares by a Resident Holder that is
an individual (other than certain trusts) will be included in computing the
individual’s income and will be subject to the gross-up and dividend tax credit
rules normally applicable to taxable dividends received by an individual from a
taxable Canadian corporation. Taxable dividends received or deemed to be
received by such individual which are designated by the Corporation as “eligible
dividends” in accordance with the Tax Act will be subject to enhanced gross-up
and dividend tax credit rules under the Tax Act. 

            Taxable
dividends received by an individual (including certain trusts) may give rise to
a liability for alternative minimum tax as calculated under the detailed rules
set out in the Tax Act. 

- 31 - 

            Dividends
received or deemed to be received on Common Shares by a Resident Holder that is
a corporation will be included in computing the corporation’s income and
generally will be deductible in computing the taxable income of the corporation.
A Resident Holder that is a “private corporation” or a “subject
corporation” for purposes of the Tax Act may be liable to pay a refundable
tax of 33 1/3%% on dividends received or deemed to be received to the extent
such dividends are deductible in computing such Resident Holder’s taxable
income. 

Disposition of Common Shares 

            On
a disposition or a deemed disposition of a Common Share (other than to the
Corporation, unless purchased by the Corporation on the open market in the
manner in which shares are normally purchased by any member of the public in the
open market), a Resident Holder generally will realize a capital gain (or a
capital loss) equal to the amount by which the proceeds of disposition of the
Common Share exceed (or are exceeded by) the aggregate of the Resident Holder’s
adjusted cost base thereof and any reasonable costs of disposition. The tax
treatment of any such capital gain (or capital loss) is described under the
heading “Treatment of Capital Gains and Capital Loses”. 

Treatment of Capital Gains and Capital Losses 

           
Generally, one-half of the amount of any capital gain (a “taxable capital
gain”) realized by a Resident Holder in a taxation year must be included in
computing the Resident Holder’s income in that year, and one-half of the amount
of any capital loss (an “allowable capital loss”) realized by a Resident
Holder in a taxation year generally must be deducted from taxable capital gains
realized by the Resident Holder in that year. Allowable capital losses in excess
of taxable capital gains realized in a taxation year generally may be carried
back and deducted in any of the three preceding taxation years or carried
forward and deducted in any following taxation year against taxable capital
gains realized in such years to the extent and under the circumstances described
in the Tax Act. 

            The
amount of any capital loss realized on the disposition or deemed disposition of
a Common Share by a Resident Holder that is a corporation may be reduced by the
amount of dividends received or deemed to have been received by it on the Common
Share (or on a share for which such Common Share has been substituted) to the
extent and in the circumstances prescribed by the Tax Act. Similar rules may
apply where a corporation is a member of a partnership or a beneficiary of a
trust that owns Common Shares, directly, or indirectly through a partnership or
a trust. Resident Holders to which these rules may be relevant should consult
their own tax advisors. 

            A
Resident Holder that is a “Canadian-controlled private corporation” (as defined
in the Tax Act) may be liable for a refundable tax of 6 2/3%% on its “aggregate
investment income”, which is defined in the Tax Act to include taxable capital
gains. 

            Capital
gains realized by an individual (including certain trusts) may give rise to a
liability for alternative minimum tax as calculated under the detailed rules set
out in the Tax Act. 

Non-Residents of Canada 

            The
following portion of the summary is generally applicable to a Holder that, at
all relevant times for purposes of the Tax Act, is neither resident nor deemed
to be resident in Canada (including as a consequence of an applicable income tax
treaty or convention) and does not use or hold, and is not deemed to use or hold
Rights or Common Shares in connection with carrying on a business in Canada (a
“Non-Resident Holder”). Special rules which are not discussed in this
summary, may apply to a non-resident insurer carrying on business in Canada and
elsewhere. Such holders should consult their own tax advisors. 

Acquisition of Rights 

            The
issuance of Rights to a Non-Resident Holder pursuant to the Rights Offering will
not be subject to Canadian withholding tax and no other tax will be payable
under the Tax Act by a Non-Resident Holder in respect of the receipt of Rights
pursuant to the Rights Offering. 

- 32 - 

Exercise of Rights 

            The
exercise of Rights by a Non-Resident Holder will not constitute a disposition of
Rights for purposes of the Tax Act and, consequently, no gain or loss
will be realized by the Non-Resident Holder upon the exercise of the Rights.

Expiry of Rights 

            A
Non-Resident Holder will not be subject to tax under the Tax Act in respect of
the expiry or termination of an unexercised Right. 

Dispositions of the Rights or Common Shares 

            A
Non-Resident Holder will not be subject to tax under the Tax Act in respect of
any capital gain realized on a disposition of Rights or Common Shares (including
a disposition made on behalf of Ineligible Holders) unless the Rights or Common
Shares disposed of constitute “taxable Canadian property” of the Non-Resident
Holder and the Non-Resident Holder is not entitled to relief under an applicable
income tax treaty or convention. 

            The
Rights will only be “taxable Canadian property” of a Non-Resident Holder if the
Common Shares to be issued upon the exercise of the Rights would be “taxable
Canadian property” of the Non-Resident Holder. 

            Generally,
a Common Share will not be “taxable Canadian property” (within the meaning of
the Tax Act) of a Non-Resident Holder at a particular time provided the Common
Share is listed on a “designated stock exchange” (which currently includes the
TSX) unless, at any time during the 60-month period preceding the particular
time, (a) the Common Share derived more than 50% of its fair market value
directly or indirectly from one or any combination of: (i) real or immovable
properties situated in Canada, (ii) Canadian resource properties, (iii) timber
resource properties (as such terms are defined in the Tax Act), and (iv) options
in respect of, or interests in, or for civil law rights in, property described
in (i) to (iii), whether or not the property exists; and (b) the Non-Resident
Holder, persons not dealing at arm’s length with such Non-Resident Holder or the
Non- Resident Holder together with all such persons, owned 25% or more of the
issued shares of any class or series of shares of the capital stock of the
Corporation. 

            Notwithstanding
the foregoing, in certain circumstances the Rights would constitute taxable
Canadian property by virtue of certain deeming rules in the Tax Act.
Non-Resident Holders for which the Rights or Common Shares may constitute
“taxable Canadian property” should consult their own tax advisors for advice
having regard to their particular circumstances. 

Receipt of Dividends on Common Shares 

            Dividends
on Common Shares paid or credited, or deemed to be paid or credited to a
Non-Resident Holder will be subject to a non-resident withholding tax under the
Tax Act at a rate of 25%, subject to reduction under the provisions of an
applicable income tax treaty or convention. 

CERTAIN UNITED STATES FEDERAL INCOME TAX
CONSIDERATION 

            The
following summary describes certain material U.S. federal income tax
consequences to a “U.S. Holder” (as defined below) of the receipt and exercise
(or expiration) of the Rights acquired through this Offering, and of owning and
disposing of the Common Shares received upon the exercise of the Rights.

            This
discussion is based upon the provisions of the U.S. Internal Revenue Code of
1986, as amended (the “Code”), Treasury regulations promulgated
thereunder, administrative rulings and judicial decisions, in each case as of
the date hereof. These authorities are subject to differing interpretations and
may be changed, perhaps retroactively, resulting in U.S. federal income tax
consequences different from those discussed below. We have not sought any ruling
from the U.S. Internal Revenue Service (“IRS”) with respect to the
statements made and the conclusions reached in this discussion, and there can be
no assurance that the IRS will agree with such statements and conclusions.

            For
purposes of this discussion, a “U.S. Holder” means a holder of Rights or
Common Shares that is (i) a citizen or an individual resident of the U.S., (ii)
a corporation, or other entity treated as a corporation for U.S. federal income tax purposes, created or organized in or under the laws
of the U.S., any state thereof or the District of Columbia, (iii) an estate the
income of which is subject to U.S. federal income taxation regardless of its
source, or (iv) a trust if it (1) is subject to the primary supervision of a
court within the U.S. and one or more “U.S. persons,” as defined in the Code,
have the authority to control all substantial decisions of the trust or (2) has
a valid election in effect under applicable Treasury regulations to be treated
as a U.S. person. This summary does not apply to you if you are not a U.S.
Holder.

- 33 - 

            This
summary applies to you only if you are a U.S. Holder (i) that receives your
Rights pursuant to this Offering, and you hold your Rights or Common Shares
issued to you upon exercise of the Rights as capital assets for tax purposes,
and (ii) (a) that is a resident of the United States for purposes of the current
Convention between the United States and Canada signed on September 26, 1980 (as
amended by the Protocols, the “Treaty”), (b) whose Rights and Common
Shares are not, for purposes of the Treaty, effectively connected with a
permanent establishment in Canada and (c) that otherwise qualifies for the full
benefits of the Treaty.

            In
addition, this discussion does not address any U.S. federal alternative minimum
tax, U.S. federal estate, gift, or other non-income tax; or state, local or
non-U.S. tax consequences of the acquisition, ownership and disposition of a
Right or Common Share. In addition, this discussion does not address the U.S.
federal income tax consequences to certain categories of U.S. Holders subject to
special rules, including U.S. Holders that are (i) banks, financial institutions
or insurance companies; (ii) regulated investment companies or real estate
investment trusts; (iii) brokers or dealers in securities or currencies or
traders in securities that elect to use a mark-to-market method of accounting;
(iv) tax-exempt organizations, qualified retirement plans, individual retirement
accounts or other tax-deferred accounts; (v) holders that hold a Right or Common
Share as part of a hedge, straddle, conversion transaction or a synthetic
security or other integrated transaction; (vi) holders that have a “functional
currency” other than the United States dollar; (vii) holders that own directly,
indirectly or constructively 10 percent or more of the voting power of the
Corporation; and (viii) United States expatriates.

           If
a partnership (or any other entity treated as a partnership for U.S. federal
income tax purposes) holds Rights or Common Shares, the tax treatment of a
partner in such partnership will generally depend on the status of the partner
and the activities of the partnership. Such a partner should consult its own tax
advisors as to the U.S. federal income tax consequences of being a partner in a
partnership that holds or disposes of Rights or Common Shares. 

            This
discussion addresses only certain aspects of U.S. federal income taxation to
U.S. Holders. U.S. Holders should consult their own tax advisors regarding the
U.S. federal, state, local, non-U.S. and other tax consequences of the ownership
and disposition of Rights or Common Shares.

            ACCORDINGLY,
EACH RECIPIENT OF RIGHTS IN THE OFFERING SHOULD CONSULT THEIR OWN TAX ADVISOR
WITH RESPECT TO THE TAX CONSEQUENCES OF THE OFFERING AND THE RELATED COMMON
SHARE ISSUANCES THAT MAY RESULT FROM SUCH RECIPIENT’S PARTICULAR
CIRCUMSTANCES. 

Taxation of Rights

Receipt of Rights

            Your
receipt of the Rights pursuant to the Offering will not be treated as a taxable
distribution with respect to your existing Common Shares for U.S. federal income
tax purposes. Under Section 305 of the Code, a shareholder who receives a right
to acquire shares will, in certain circumstances, be treated as having received
a taxable dividend in an amount equal to the value of such right. A common
shareholder who receives a right to acquire common shares generally will be
treated as having received a taxable dividend if such shareholder’s
proportionate interest in the earnings and profits or assets of the corporation
is increased and any other shareholder receives a distribution of cash or other
property. A common shareholder who receives a right to acquire common shares
will be treated as having received a taxable dividend if the distribution is
treated as part of a “disproportionate distribution.” A disproportionate
distribution of share or share rights occurs when a distribution (or series of
distributions) from a corporation results in (a) an increase in the
shareholder’s proportionate interest in the earnings and profits or assets of
the corporation and (b) the receipt by other stockholders of cash or other
property. For purposes of the above, “shareholder” includes holders of warrants,
options and convertible securities. Under the above principals, however, we do not believe that a
disproportionate distribution will occur and, therefore, the receipt of the
Rights will not be taxable to a U.S. Holder.

- 34 - 

Tax Basis in Rights

            If
the fair market value of the Rights you receive is less than 15% of the fair
market value of your existing Common Shares on the date you receive the Rights,
the Rights will be allocated a zero basis for U.S. federal income tax purposes,
unless you elect to allocate your basis in your existing Common Shares between
your existing Common Shares and the Rights in proportion to the relative fair
market values of the existing Common Shares and the Rights determined on the
date of receipt of the Rights. If you choose to allocate basis between your
existing Common Shares and the Rights, you must make this election on a
statement included with your tax return for the taxable year in which you
receive the Rights. Such an election is irrevocable.

            However,
if the fair market value of the Rights you receive is 15% or more of the fair
market value of your existing Common Shares on the date you receive the Rights,
then you must allocate your basis in your existing Common Shares between your
existing Common Shares and the Rights you receive in proportion to their fair
market values determined on the date you receive the Rights. The fair market
value of the Rights on the date the Rights will be distributed is uncertain. In
determining the fair market value of the Rights, you should consider all
relevant facts and circumstances, including the trading price thereof.

Exercise of Rights

            You
will not recognize gain or loss on the exercise of a Right. Your tax basis in a
new Common Share acquired when you exercise a Right will be equal to your
adjusted tax basis in the Right, if any, plus the Subscription Price. The
holding period of a Common Share acquired when you exercise your Rights will
begin on the date of exercise.

Disposition of Rights

            A
U.S. Holder will recognize gain or loss on the sale or other taxable disposition
of a Right in an amount equal to the difference, if any, between (a) the amount
of cash plus the fair market value of any property received and (b) such U.S.
Holder’s tax basis, if any, in the Right sold or otherwise disposed of. Subject
to the discussion under “Taxation of Common Shares Acquired upon Exercise of
Rights - Passive Foreign Investment Company” below, any such gain or loss
generally will be capital gain or loss, and will be short-term or long-term
depending on whether the Rights are treated as having been held for more than
one year. Long-term capital gains of a non-corporate taxpayer are generally
subject to taxation at preferential rates. The deductibility of capital losses
is subject to various limitations. 

Expiration of Rights

            If
you allow Rights to expire, you will not recognize any gain or loss for U.S.
federal income tax purposes, and you will re-allocate any portion of the tax
basis in your existing Common Shares previously allocated to the Rights that
have expired to the existing Common Shares.

Taxation of Common Shares Acquired upon Exercise of
Rights

Distributions on Our Common Shares 

            Subject
to the discussion below under “Passive Foreign Investment Company,” U.S.
Holders receiving dividend distributions (including constructive dividends) with
respect to our Common Shares generally are required to include in gross income
for U.S. federal income tax purposes the gross amount of such distributions
(without reduction for any Canadian income or other tax withheld from such
distributions), equal to the U.S. dollar value of such distributions on the date
of receipt (based on the exchange rate on such date), to the extent that we have
current or accumulated earnings and profits (as determined for U.S. federal
income tax purposes). To the extent that the amount of the distribution exceeds
our current and accumulated earnings and profits, it will be treated as a return
of capital to the extent of a U.S. Holder’s adjusted tax basis in our Common
Shares and thereafter as capital gain from the sale or exchange of such Common
Shares. We do not intend to calculate our earnings and profits under U.S.
federal income tax principles. Therefore, a U.S. Holder should expect that the
full amount of a distribution with respect to the Common Shares will be treated,
and reported by us, as a dividend.

- 35 - 

            Dividends
received by U.S. Holders that are individuals, estates or trusts from a
“qualified foreign corporation,” as defined in the Code, generally are taxed at
the same preferential tax rates applicable to long-term capital gains. A
corporation that is a “passive foreign investment company”, as defined below
under “Passive Foreign Investment Company,” for its taxable year during
which it pays a dividend, or for its immediately preceding taxable year,
however, is not a “qualified foreign corporation.” Since we believe we will meet
the definition of a PFIC, dividends received by U.S. Holders that are
individuals, estates or trusts generally will be subject to U.S. federal income
tax at ordinary income tax rates (and not at the preferential tax rates
applicable to long-term capital gains). Dividends paid on our Common Shares will
not be eligible for the dividends received deduction provided to corporations
receiving dividends from certain U.S. corporations. 

            In
the case of foreign currency (such as Canadian dollars) received as a dividend
that is not converted by the recipient into U.S. dollars on the date of receipt,
a U.S. Holder will have a tax basis in the foreign currency equal to its U.S.
dollar value on the date of receipt. Generally any gain or loss recognized upon
a subsequent sale or other disposition of the foreign currency, including the
exchange for U.S. dollars, will be ordinary income or loss. 

           
The maximum rate of withholding tax on dividends paid to you pursuant to the
Treaty is 15 percent. You may be required to properly demonstrate to the company
and the Canadian tax authorities your entitlement to the reduced rate of
withholding under the Treaty.

Disposition of Our Common Shares 

            Subject
to the discussion below under “Passive Foreign Investment Company,” U.S.
Holders will recognize gain or loss upon the sale of our Common Shares equal to
the difference, if any, between (i) the amount of cash plus the fair market
value of any property received, and (ii) the U.S. Holder’s tax basis in our
Common Shares. Any gain or loss on disposition of our Common Shares generally
will be U.S. source gain or loss and will be capital gain or loss. If, at the
time of the disposition, a U.S. Holder is treated as holding the Common Shares
for more than one year, such gain or loss will be a long-term capital gain or
loss. Long-term capital gain recognized by a non-corporate U.S. Holder is
currently subject to taxation at a reduced rate. The deductibility of capital
losses is subject to limitations.

Passive Foreign Investment Company 

            We
believe that we will meet the definition of “passive foreign investment company”
under Section 1297 of the Code. A U.S. holder that holds shares in a non-U.S.
corporation during any year in which such corporation is a PFIC is subject to
numerous special U.S. federal income tax rules. A non-U.S. corporation is
considered to be a PFIC for any taxable year if either: at least 75% of its
gross income is passive income (the “income test”), or at least 50% of
the value of its assets (based on an average of the quarterly values of the
assets during a taxable year) is attributable to assets that produce or are held
for the production of passive income (the “asset test”).

            For
purposes of the income test and the asset test, respectively, we will be treated
as earning our proportionate share of the income and owning our proportionate
share of the assets of any other corporation in which we own, directly or
indirectly, 25% or more (by value) of the shares. In addition, for purposes of
the income test, passive income does not include any interest, dividends, rents,
or royalties received or accrued by us from certain related persons, to the
extent such items are properly allocable to income of such related person that
is not passive.

            We
must make a separate determination each year as to whether or not we are a PFIC.
As a result, our PFIC status may change. In particular, because the total value
of our assets for purposes of the asset test will be calculated using the market
price of our Common Shares (assuming that we continue to be a publicly traded
corporation for purposes of the PFIC rules), our PFIC status will depend in
large part on the market price of our Common Shares. Accordingly, fluctuations
in the market price of our Common Shares may result in our being a PFIC for any
year. If we are a PFIC for any year during which a U.S. Holder holds our Rights
or Common Shares, we generally will continue to be treated as a PFIC for all
succeeding years during which such U.S. Holder holds the Rights or Common
Shares, absent a special election. For instance, if we cease to be a PFIC, a
U.S. Holder may avoid some of the adverse effects of the PFIC regime by making a
deemed sale election with respect to its Common Shares pursuant to which such
U.S. Holder recognizes gain (which will be taxed under the default PFIC tax
rules discussed below) as if such Common Shares had been sold on the last day of
the last taxable year for which we were a PFIC. If a non-U.S. corporation is a
PFIC for any taxable year and any of its non-U.S. subsidiaries is also a PFIC, a
U.S. holder would be treated as owning a proportionate amount (by
value) of the shares of the lower-tier PFIC for purposes of the application of
these rules.

- 36 - 

            If
we are a PFIC for any taxable year during which a U.S. Holder holds our Rights
or Common Shares, such U.S. Holder will be subject to special tax rules with
respect to any “excess distribution” that it receives and any gain it realizes
from a sale or other disposition (including a pledge) of the Rights or Common
Shares, unless the U.S. Holder makes a “mark-to-market” election, as discussed
below. Distributions received by a U.S. Holder in a taxable year that are
greater than 125% of the average annual distributions such U.S. Holder received
during the shorter of the three preceding taxable years and its holding period
for the Rights or Common Shares will be treated as an excess distribution. Under
these special tax rules, (a) the excess distribution or gain will be allocated
ratably over the U.S. Holder’s holding period, (b) the amount allocated to the
current taxable year and any taxable year prior to the first taxable year in
which we became a PFIC will be treated as ordinary income, and (c) the amount
allocated to each other taxable year will be subject to the highest tax rate in
effect for that year and the interest charge generally applicable to
underpayments of tax will be imposed on the resulting tax attributable to each
such year. You will be required to file IRS Form 8621 if you hold our Rights or
Common Shares in any year in which we are classified as a PFIC.

            The
tax liability for amounts allocated to taxable years prior to the year of
disposition or “excess distribution” cannot be offset by any net operating
losses for such years, and gains (but not losses) realized on the disposition of
the Rights or Common Shares cannot be treated as capital. 

            Alternatively,
a U.S. Holder of “marketable stock” (as defined below) in a PFIC may make a
mark-to-market election with respect to shares of a PFIC to elect out of the tax
treatment discussed above. If a U.S. Holder makes a valid mark-to-market
election for the Common Shares, the U.S. Holder will include in income each year
an amount equal to the excess, if any, of the fair market value of the Common
Shares as of the close of its taxable year over its adjusted basis in such
Common Shares. The U.S. Holder is allowed a deduction for the excess, if any, of
the adjusted basis of the Common Shares over their fair market value as of the
close of the taxable year. However, deductions are allowable only to the extent
of any net mark-to-market gains on the Common Shares included in the U.S.
Holder’s income for prior taxable years. Amounts included in a U.S. Holder’s
income under a mark-to-market election, as well as gain on the actual sale or
other disposition of the Common Shares, are treated as ordinary income. Ordinary
loss treatment also applies to the deductible portion of any mark-to-market loss
on the Common Shares, as well as to any loss realized on the actual sale or
disposition of the Common Shares, to the extent that the amount of such loss
does not exceed the net mark-to-market gains previously included for such Common
Shares. A U.S. Holder’s basis in the Common Shares will be adjusted to reflect
any such income or loss amounts. If a U.S. Holder makes such an election, the
tax rules that ordinarily apply to distributions by corporations that are not
PFICs would apply to distributions by us, except that the preferential tax rates
applicable to long-term capital gains on dividends received from a “qualified
foreign corporation” discussed above under “Distributions on Our Common Shares”
would not apply. The mark-to-market election is available only for “marketable
stock,” which is stock that is traded in other than de minimis quantities on at
least 15 days during each calendar quarter on a “qualified exchange,” including
the TSX and the NYSE MKT, or other market, as defined in applicable U.S.
Treasury regulations. As provided under “Plan of Distribution—Stock Exchange
Approvals”, we cannot provide any assurances that the Rights or Common Shares
will be listed on each of the TSX and the NYSE MKT on at least 15 days during
each calendar quarter and traded in other than de minimis quantities. You are
urged to consult your own tax advisor concerning the availability of the
mark-to-market election.

            If
a non-U.S. corporation is a PFIC, a holder of shares in that corporation can
avoid taxation under the rules described above by making a “qualified electing
fund” election to include the holder’s share of the corporation’s income on a
current basis in gross income. However, a U.S. Holder can make a qualified
electing fund election with respect to its Common Shares only if we furnish the
U.S. Holder annually with certain tax information, and we do not intend to
prepare or provide such information.

            U.S.
Holders should note that neither the qualified electing fund nor the
mark-to-market election is available with respect to the Rights.

            You
are urged to consult your own tax advisors concerning the U.S. federal income
tax consequences of holding Common Shares if we are considered a PFIC in any
taxable year. 

- 37 - 

Foreign Tax Credits 

            Subject
to certain conditions and limitations, including potential limitations under the
Treaty, Canadian taxes paid on or withheld from distributions from us and not
refundable to a U.S. Holder may be, at the election of such U.S. Holder, either
credited against such U.S. Holder’s U.S. federal income tax liability or
deducted from such U.S. Holder’s taxable income. Generally, a credit will reduce
a U.S. Holder’s U.S. federal income tax liability on a dollar-for-dollar basis,
whereas a deduction will reduce a U.S. Holder’ s income subject to U.S. federal
income tax. This election is made on a year-by-year basis and applies to all
foreign taxes paid by or withheld from a U.S. Holder that year. Complex
limitations apply to the foreign tax credit, including the general limitation
that the credit cannot exceed the proportionate share of a U.S. Holder’s U.S.
federal income tax liability that such U.S. Holder’s “foreign source” taxable
income bears to such U.S. Holder’s worldwide taxable income. In applying this
limitation, a U.S. Holder’s various items of income and deduction must be
classified, under complex rules, as either “foreign source” or “U.S. source.” In
addition, this limitation is calculated separately with respect to specific
categories of income. Dividends paid by us generally will constitute “foreign
source” income and generally will be categorized as “passive category income.”
Because the rules governing foreign tax credits are complex, U.S. Holders should
consult their own tax advisors regarding the availability of foreign tax credits
in their particular circumstances.

Health Care and Reconciliation Act of 2010

            On
March 30, 2010, President Obama signed into law the Health Care and
Reconciliation Act of 2010, which requires certain U.S. shareholders that are
individuals, estates or trusts to pay a 3.8% tax on, among other things,
dividends on and capital gains from the sale or other disposition of stock for
taxable years beginning after December 31, 2012. U.S. Holders should consult
their own tax advisors regarding the effect, if any, of this legislation on
their ownership and disposition of the Rights and Common Shares.

Information Reporting; Backup Withholding 

            Certain
U.S. Holders are required to report information relating to their investment in,
or involvement in, a foreign corporation, by attaching a complete IRS Form 8938,
Statement of Specified Foreign Financial Assets, with their applicable tax
return. Such information reporting may apply to the Rights and/or Common Shares.
U.S. Holders should consult their own tax advisors regarding any such
information reporting requirements. 

            In
general, payments made in the U.S. or through certain U.S. related financial
intermediaries with respect to the ownership and disposition of the Rights and
Common Shares will be required to be reported to the IRS unless the U.S. Holder
is a corporation or other exempt recipient and, when required, demonstrates this
fact. In addition, a U.S. Holder may be subject to a backup withholding
(currently at a rate of 28%) on such payments unless the U.S. Holder (i) is a
corporation or other exempt recipient and when required, demonstrates this fact
or (ii) provides a taxpayer identification number and otherwise timely complies
with applicable certification requirements. U.S. Holders should consult their
own tax advisors regarding their qualification for an exemption from backup
withholding and the procedures for obtaining such an exemption, if applicable.
Backup withholding is not an additional tax. Amounts withheld as backup
withholding may be credited against a U.S. Holder’s U.S. federal income tax
liability and such U.S. Holder may obtain a refund of any excess amounts
withheld by filing the appropriate claim for refund with the IRS and furnishing
any required information in a timely manner. 

            THE
U.S. FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS FOR GENERAL INFORMATION
PURPOSES ONLY, DOES NOT PURPORT TO BE A COMPLETE DESCRIPTION OF THE POTENTIAL
TAX CONSIDERATIONS RELATING TO THE RIGHTS AND COMMON SHARES AND IS NOT TAX
ADVICE. U.S. HOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS REGARDING THE
SPECIFIC TAX CONSEQUENCES TO THEM OF THE OWNERSHIP AND DISPOSITION OF THE RIGHTS
AND COMMON SHARES. 

ELIGIBILITY FOR INVESTMENT 

            In
the opinion of Farris, counsel to the Corporation, provided that the Rights and
Common Shares are listed on a designated stock exchange under the Tax Act (which
includes the TSX), the Rights and the Common Shares issuable on the exercise of
Rights, if issued on the date hereof, would be qualified investments under the
Tax Act for a trust governed by a registered retirement savings plan (an
“RRSP”), registered retirement income fund (an “RRIF”), registered education savings plan, registered
disability savings plan, deferred profit sharing plan and a tax-free savings
account (a “TFSA”). 

- 38 - 

            Notwithstanding
that the Rights and Common Shares may be qualified investments for a trust
governed by a TFSA, RRSP or RRIF, the holder of a TFSA or the annuitant of an
RRSP or RRIF, as the case may be, will be subject to a penalty tax in respect of
the Rights and Common Shares, if such Rights and Common Shares are a “prohibited
investment” (as defined in the Tax Act) for the TFSA, RRSP or RRIF. The Rights
and Common Shares will not be a “prohibited investment” for a trust governed by
a TFSA, RRSP or RRIF provided that the holder of the TFSA or the annuitant of an
RRSP or RRIF, as the case may be, deals at arm’s length with the Corporation for
purposes of the Tax Act and does not have a “significant interest” (within the
meaning of the Tax Act) in the Corporation or in any person or partnership with
which the Corporation does not deal at arm’s length for purposes of the Tax Act.

LEGAL MATTERS 

            Certain
legal matters in connection with the Rights Offering and to the Rights to be
distributed pursuant to this prospectus will be reviewed on behalf of the
Corporation by Farris. Certain legal matters relating to United States federal
laws will be passed upon by Troutman Sanders LLP, New York, New York. As of
April 10, 2013, the partners and associates of Farris and Troutman Sanders LLP,
as a group, beneficially owned, directly or indirectly, less than 1% of the
outstanding Common Shares. 

INTERESTS OF EXPERTS 

            PricewaterhouseCoopers
LLP has advised the Corporation that it is independent in accordance with the
Rules of Professional Conduct of the Institute of Chartered Accounts of British
Columbia. 

            None
of the following companies, partnerships or persons, each being persons or
companies who have prepared or supervised the preparation of reports relating to
the Corporation’s mineral properties and whose profession or business gives
authority to such reports, or any director, officer, employee or partner
thereof, as applicable, received or has received a direct or indirect interest
in the property of the Corporation or of any associate or affiliate of the
Corporation. As of the date hereof, the aforementioned persons and persons at
the companies specified above who participated in the preparation of such
reports, as a group, beneficially own, directly or indirectly, less than 1 % of
our outstanding securities of any class and less than 1% of the outstanding
securities of any class of our associates or affiliates: 

	1. 	
      Pierre Desautels, P. Eng., of AGP Mining Consultants
      Inc.;

	 	 
	2. 	
      Gordon Zurowski, P.Eng., of AGP Mining Consultants
      Inc.;

	 	 
	3. 	
      David Dreisinger;

	 	 
	4. 	
      William Murray; and

	 	 
	5. 	
      Karl Everett.

            None
of such persons, or any director, officer or employee, as applicable of any such
companies or partnerships, is currently expected to be elected, appointed or
employed as a director, officer or employee of the Corporation or any of our
associates or affiliates, except for David Dreisinger and William Murray, who
are both directors of the Corporation. 

AUDITOR, REGISTRAR TRANSFER AGENT AND REGISTRAR AND
SUBSCRIPTION AGENT 

           
PricewaterhouseCoopers LLP of Vancouver, British Columbia is the Corporation’s
auditor. 

            Computershare
Investor Services Inc. is the Corporation’s registrar and transfer agent at its
principal offices in Vancouver, British Columbia. Computershare Investor
Services Inc., with its principal office in Toronto, is acting as the
Subscription Agent for this Rights Offering and as registrar and transfer agent
with respect to any Common Shares issued upon the exercise of Rights or pursuant to
any Standby Shares issued pursuant to the Standby Commitment. 

- 39 - 

CANADIAN PURCHASERS’ STATUTORY RIGHTS OF
WITHDRAWAL AND RESCISSION 

            Securities
legislation in certain provinces of Canada provides purchasers with the right to
withdraw from an agreement to purchase securities. This right may be exercised
within two business days after receipt or deemed receipt of a prospectus and any
amendment. In several of the provinces, the securities legislation further
provides a purchaser with remedies for rescission or, in some jurisdictions,
revisions of the price or damages if the prospectus and any amendment contains a
misrepresentation or is not delivered to the purchaser, provided that the
remedies for rescission, revisions of the price or damages are exercised by the
purchaser within the time limit prescribed by the securities legislation of the
purchaser’s province. You should refer to applicable provisions of the
securities legislation of the purchaser’s province for the particulars of these
rights or consult with a legal advisor. 

DOCUMENTS FILED AS PART OF REGISTRATION STATEMENT 

            The
following documents have been or will be filed with the SEC as part of the
registration statement of which this prospectus forms a part: (i) the 2012 AIF;
(ii) the Annual Financial Statements; (iii) the Interim Financial Statements;
(iv) the material change report dated October 15, 2012; (v) the 2012 Circular;
(vi) the Technical Report; (vii) Consent of PricewaterhouseCoopers LLP; (viii)
Consent of Farris; (ix) Consent of AGP Mining Consultants Inc.; (x) Consent of
Pierre Desaultels; (xi) Consent of Gordon Zurowski; (xii) Consent of David
Dreisinger; (xiii) Consent William Murray; (xiv) Consent of Karl Everett; and
(xv) Powers of Attorney. 

C- 1 

CERTIFICATE OF THE CORPORATION 

April 10, 2013 

This short form prospectus, together with the documents
incorporated by reference, constitutes full, true and plain disclosure of all
material facts relating to the securities offered by this short form prospectus
as required by the securities legislation of each of the provinces of British
Columbia, Alberta and Ontario. 

 

POLYMET MINING
CORP. 

 

	By: (Signed) JONATHAN CHERRY 	By: (Signed) DOUGLAS NEWBY 
	President and Chief Executive Officer 	Chief Financial Officer 

 

ON BEHALF OF THE BOARD OF
DIRECTORS 

 

	By: (Signed) WILLIAM MURRAY 	By: (Signed) DAVID DREISINGER 
	Director 	Director 

SCHEDULE 4.3.3 
FORM OF CORPORATE GOVERNANCE
AGREEMENT 

CORPORATE GOVERNANCE AGREEMENT 

DATED the ___ day of _____________, 2013. 

WHEREAS: 

	 	A. 	
      PolyMet Mining Corp. ("PolyMet" or the
      "Company") and Glencore AG ("Glencore") are party to a
      standby purchase agreement dated April 10, 2013 (the "Standby Purchase
      Agreement").

	 	 	 
	 	B. 	
      Pursuant to the Standby Purchase Agreement, Glencore has
      agreed to provide a partial standby commitment in respect of an offering
      by the Company of rights (the "Rights Offering") to holders of the
      Company's common shares.

	 	 	 
	 	C. 	
      PolyMet has granted to Glencore certain rights in respect
      of the ongoing corporate governance of the Company, including rights to
      nominate directors of the Company.

	 	 	 
	 	D. 	
      Pursuant to Section 4.3.3 of the Standby Purchase
      Agreement, the Parties have agreed to enter into this Corporate Governance
      Agreement to set out the terms and conditions of the ongoing corporate
      governance arrangements between Glencore and the
Company.

NOW THEREFORE in consideration of the foregoing, and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties agree as follows. 

	1. 	
      All capitalized terms used but not otherwise defined
      herein shall have the meanings given thereto in the Standby Purchase
      Agreement.

	 	 	 	 
	2. 	
      The Company hereby covenants and agrees:

	 	 	 	 
		(a) 	
      at the relevant time, as long as the number of issued and
      outstanding Shares held by Glencore (on a fully diluted basis) relative to
      all the issued and outstanding Shares (on a fully diluted basis) is at
      least 10%, Glencore shall have the right but not the obligation to
      designate that number of Glencore Nominees that is the greater
  of:

	 	 	 	 
			(i) 	
      one; and

	 	 	 	 
			(ii) 	
      the number of the directors of the Company out of the
      total number of directors of the Company which is proportionate to
      Glencore's holdings of issued and outstanding Shares (on a fully diluted
      basis) relative to all the issued and outstanding Shares (on a fully
      diluted basis), provided that if the foregoing calculation does not result
      in a whole number, the number of Glencore Nominees which Glencore is
      entitled to designate will be rounded down to the nearest whole
    number;

	 	 	 	 
		(b) 	
      to take all such actions to appoint the Glencore Nominees
      to the Board as soon as reasonably practicable following notice of
      Glencore’s request to appoint the Glencore Nominees, which, for the
      avoidance of doubt, such actions may include increasing the number of
      directors on the Board or procuring the resignation of members of the
      Board at the time of appointing the Glencore Nominees.

	 	 	 	 
		(c) 	
      to mail to Shareholders in accordance with applicable
      corporate and Securities Laws, a management proxy circular in which the
      Board will:

4.3.3 - 2 

	 	(i) 	
      nominate all of the Glencore Nominees for election at the
      Company’s annual general meetings held after the completion of the
      transactions contemplated by the Standby Purchase Agreement where
      directors are elected (and every such Company meeting thereafter)
      following the Rights Offering Closing Date ("Company AGM");
    and

	 	 	 
	 	(ii) 	
      make a written recommendation to Shareholders in favour
      of the election of all of the Glencore
Nominees;

	 	(d) 	
      to solicit proxies for the Company AGM in favour of
      Shareholder approval of the election of all of the Glencore
    Nominees;

	 	 	 
	 	(e) 	
      to notify Glencore in advance of any meeting of
      shareholders of PolyMet to be called by PolyMet after the completion of
      the transactions contemplated by this Agreement, of the intention of
      PolyMet to include the election of directors of PolyMet as business to be
      conducted at such meeting in sufficient time for Glencore to designate the
      Glencore Nominees to be included in the proxy circular for such meeting
      and the Company agrees to include such individuals so designated by
      Glencore among managements nominees as directors of the Company at such
      meeting; and

	 	 	 
	 	(f) 	
      that if any individual nominated or designated by
      Glencore as aforesaid as a director of PolyMet and elected or appointed as
      a director of PolyMet should resign, other than at an annual general
      meeting of shareholders of PolyMet, then Glencore shall be entitled to
      designate another individual as a director of PolyMet in place of the
      individual who so resigned;

	3. 	
      Glencore hereby covenants and agrees:

	 	 	 
		(a) 	
      to nominate or designate as a director of PolyMet only
      individuals who are qualified to serve as a director of PolyMet under
      applicable Law (notwithstanding that such individual may not be
      "independent" under Securities Laws);

	 	 	 
		(b) 	
      that notwithstanding anything in this Corporate
      Governance Agreement, Glencore shall not be entitled to nominate greater
      than 49% (rounding down) of the directors to the Board; and

	 	 	 
		(c) 	
      that it does not intend to exercise its rights under this
      Agreement any earlier than January 1, 2014.

	 	 	 
	4. 	
      Subject to Section 3(b) of this Corporate Governance
      Agreement, all rights previously granted by PolyMet to Glencore to appoint
      directors to the Board remain in full force and effect unamended by this
      Agreement.

	 	 	 
	5. 	
      This agreement shall be governed and construed in
      accordance with the laws of the Province of British Columbia and the laws
      of Canada applicable therein. Each of the parties hereto hereby attorn to
      the jurisdiction of the courts of the Province of British
  Columbia.

	 	 	 
	6. 	
      No supplement, modification, amendment, waiver, discharge
      or termination of this agreement is binding unless it is executed in
      writing by each of the parties to this agreement. No waiver of, failure to
      exercise or delay in exercising any provision of this agreement
      constitutes a waiver of any other provision (whether or not similar) nor
      does such waiver constitute a continuing waiver unless otherwise expressly
      provided.

	 	 	 
	7. 	
      This agreement may be executed in counterparts, all of
      which will be considered one and the same agreement, and will become
      effective when one or more counterparts will have been signed by
each party and delivered to the other party. Delivery of an executed counterpart of this agreement by facsimile or transmitted electronically shall be equally effective as delivery of a manually executed counterpart of this Agreement. 

4.3.3 - 3 

[Signature page follows] 

4.3.3 - 4 

          IN
WITNESS WHEREOF the parties hereto have executed this Corporate Governance
Agreement as of the date first above written. 

POLYMET MINING CORP. 

By:
__________________________________
Name: 
Title: 

 

GLENCORE AG 

By:
__________________________________
Name: 
Title:

SCHEDULE 5 
REPRESENTATIONS AND WARRANTIES OF
POLYMET 

PolyMet represents and warrants to Glencore as at the date of
the Agreement, the Rights Issue Date and the Rights Offering Closing Date (by
reference to the circumstances subsisting on each respective date), that: 

	 	(a) 	
      The Company is a corporation duly incorporated, validly
      existing and in good standing under the laws of the jurisdiction of its
      incorporation and has the corporate power and authority to own its
      properties and to carry on its business as now being conducted. The
      Company is duly qualified to do business as a foreign corporation and is
      in good standing in each jurisdiction in which the nature of the business
      conducted or property owned or leased by it makes such qualification
      necessary. The only Subsidiary of the Company is PMI, which is
      incorporated under the laws of the State of Minnesota and which is wholly-
      owned by the Company. Except as set out in Schedule 5(A), the Company does
      not own or hold any shares of, or any other interest in, directly or
      indirectly, any Person other than PolyMet Mining.

	 	 	 
	 	(b) 	
      The Company has full corporate power and authority and
      has taken all requisite action on its part necessary for (i) the
      authorization, execution and delivery of the Agreement, (ii) authorization
      of the performance of all of its obligations hereunder and thereunder,
      and, (iii) in respect of the Company, the authorization, issuance (or
      reservation for issuance) and delivery of the Rights Offering
      Securities.

	 	 	 
	 	(c) 	
      The Agreement has been duly executed and delivered by the
      Company and the Agreement constitutes a legal, valid and binding
      obligation of the Company, enforceable against the Company in accordance
      with its terms, except as such enforceability may be limited by (i)
      applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
      moratorium, liquidation or similar Laws relating to, or affecting
      generally the enforcement of, creditors’ rights and remedies or (ii)
      equitable principles relating to the availability of specific performance,
      injunctive relief and other equitable remedies.

	 	 	 
	 	(d) 	
      There has been no voluntary or involuntary action taken
      either by or against the Company for any such Person’s winding-up,
      dissolution, liquidation, bankruptcy, receivership, administration or
      similar or analogous events in respect of such Person or all or any part
      of its assets or revenues.

	 	 	 
	 	(e) 	
      Set forth on Schedule 5(E) hereto is, in each case as of
      the date hereof, (a) a description of the authorized capital stock of the
      Company; (b) the number of Shares of capital stock of the Company issued
      and outstanding; (c) the number of Shares of capital stock of the Company
      issuable pursuant to the Company’s equity compensation plans (including
      those issuable subject to approval by the Company’s shareholders); and (d)
      the number of Shares of capital stock of the Company issuable and reserved
      for issuance pursuant to securities exercisable for, or convertible into
      or exchangeable for any Shares of capital stock of the Company. All of the
      issued and outstanding Shares of the Company’s capital stock have been
      duly authorized and validly issued and are fully paid and non- assessable.
      Except as set forth on Schedule 5(E), no Person is entitled to preemptive
      or similar statutory or contractual rights with respect to any securities
      of the Company. Except as set forth on Schedule 5(E), there are no
      outstanding warrants, options, convertible securities or other rights,
      agreements or arrangements of any character under which the Company is or
      may be obligated to issue any equity securities of any kind, and except as
      contemplated by this Agreement, the Company’s equity compensation plans
      (including those issuable subject to approval by the Company’s
      shareholders), the Company is not currently in negotiations for the
      issuance of any equity securities of any kind. Except as set forth on
      Schedule 5(E), the Company has no knowledge of any
voting agreements, buy-sell agreements, option or right of first
      purchase agreements or other agreements of any kind among any of the
      securityholders of the Company relating to the securities of the Company
      held by them. Except as set forth on Schedule 5(E), the Company has not
      granted any Person the right to require the Company to register any
      securities of the Company under the 1933 Act, whether on a demand basis or
      in connection with the registration of securities of the Company for its
  own account or for the account of any other Person.

5 - 2 

	 	(f) 	
      The Company has filed all Disclosure Documents with the
      Securities Authorities and SEC pursuant to Canadian Securities Laws and
      1934 Act, respectively, since January 31, 2012. When filed, all Disclosure
      Documents complied as to form in all material respects with the
      requirements of the applicable Securities Laws and 1934 Act, respectively,
      and did not contain any untrue statement of a material fact or omit to
      state any material fact necessary in order to make the statements made
      therein, not misleading. The Company is engaged only in the business
      described in the Disclosure Documents, and the Disclosure Documents
      contain a complete and accurate description of the business of the Company
      in all material respects.

	 	 	 	 
	 	(g) 	
      Since January 31, 2012, there has not been:

	 	 	 	 
	 		(i) 	
      any change in the consolidated assets, liabilities,
      financial condition or operating results of the Company from that
      reflected in the financial statements included in the Annual Report,
      except changes in the ordinary course of business which have not had, in
      the aggregate, a Material Adverse Effect;

	 	 	 	 
	 		(ii) 	
      any declaration or payment of any dividend, or any
      authorization or payment of any distribution, on any of the capital stock
      of the Company, or any redemption or repurchase of any securities of the
      Company;

	 	 	 	 
	 		(iii) 	
      material damage, destruction or loss, whether or not
      covered by insurance, to any assets or properties of the
Company;

	 	 	 	 
	 		(iv) 	
      any waiver by the Company of a material right or of a
      material debt owed to it;

	 	 	 	 
	 		(v) 	
      any satisfaction or discharge of any Encumbrance or
      payment of any obligation by the Company, except in the ordinary course of
      business and which is not material to the assets, properties, financial
      condition, operating results or business of the Company taken as a whole
      (as such business is presently conducted and as it is proposed to be
      conducted);

	 	 	 	 
	 		(vi) 	
      any material change or amendment to a material agreement
      by which the Company or any of their respective assets or properties are
      bound or subject;

	 	 	 	 
	 		(vii) 	
      any material labour difficulties or labour union
      organizing activities with respect to employees of the Company;

	 	 	 	 
	 		(viii) 	
      any material transaction entered into by the Company
      other than in the ordinary course of business; or

	 	 	 	 
	 		(ix) 	
      any other event or condition of any character that may
      have a Material Adverse Effect.

	 	 	 	 
	 	(h) 	
      The execution, delivery and performance of the Agreement
      by the Company and the issuance and sale of the Rights Offering Securities
      by the Company will not conflict with or result in a breach or violation
      of any of the terms and provisions of, or constitute
a default under (i) the Company’s constating documents
      (including any certificates of designation) or articles or any
      shareholders agreement relating to it, as in effect on the date hereof, or
      (ii) except where it could not, individually or in the aggregate,
      reasonably be expected to result in a Material Adverse Effect, (A) any
      statute, rule, regulation or order of any Governmental Entity having
      jurisdiction over the Company or any of their respective properties, or
      (B) any agreement or instrument to which the Company is a party or by
      which the Company is bound or to which any of the properties of the
      Company is subject (including an event that with notice or lapse of time
      or both would become a default, and including any event that would give to
      others any rights of termination, amendment, acceleration or cancellation,
      with or without notice, lapse of time or both). Except where it could not,
      individually or in the aggregate, reasonably be expected to result in a
      Material Adverse Effect, the Company, to its knowledge, (i) is not in
      violation of any statute, rule or regulation applicable to the Company or
      its assets or activities, (ii) is not in violation of any judgment, order
      or decree applicable to the Company or its assets and, (iii) is not in
      breach or violation of any agreement, note or instrument to which they or
      their assets are a party or are bound or subject. The Company has not
      received written notice from any Person of any claim or investigation
      that, if adversely determined, would render the preceding sentence untrue
or incomplete.

5 - 3 

	 	(i) 	
      The Company has prepared and filed all tax returns
      required to have been filed by it with all appropriate Governmental
      Entities and paid all taxes due owed by it, taking into account permitted
      extensions. The charges, accruals and reserves on the books of the Company
      in respect of taxes for all fiscal periods are adequate, and there are no
      unpaid assessments against the Company nor, to the knowledge of the
      Company, any basis for the assessment of any additional taxes, penalties
      or interest for any fiscal period or audits by any federal, state or local
      taxing authority except such as which are not material. All taxes and
      assessments and levies that the Company is required to withhold or to
      collect for payment have been duly withheld and collected and paid to the
      proper Governmental Entity or third party when due, taking into account
      permitted extensions. There are no tax liens or claims pending or, to the
      Company’s knowledge, threatened against the Company or any of its assets
      or property. There are no outstanding tax sharing agreements or other such
      arrangements between the Company and any other Person.

	 	 	 
	 	(j) 	
      The only jurisdictions (or registration districts within
      such jurisdictions) in which the Company has any place of business or
      stores any material tangible assets are as set forth in Schedule
    5(J).

	 	 	 
	 	(k) 	
      The Company has good and marketable title to all real
      properties and all other properties and assets owned by it and material to
      its operations, in each case free from Encumbrances other than Permitted
      Encumbrances and defects that would materially affect the value thereof or
      materially interfere with the use made or currently planned to be made
      thereof by them; and the Company directly or indirectly holds any leased
      real or personal property material to its operations under valid and
      enforceable leases with no exceptions that would materially interfere with
      the use made or currently planned to be made thereof by them. Schedule
      5(K) sets forth a complete and accurate legal description of all the real
      property owned by the Company. The Company has adequate rights of ingress
      and egress for the operation of the business in the ordinary course from
      and to the Owned Real Property. The Company does not own any real property
      other than the Owned Real Property, and the Company has not agreed to
      acquire any real property or interest in real property other than the
      Owned Real Property.

	 	 	 
	 	(l) 	
      The Company is not party to any lease, sublease,
      agreement to lease, offer to lease, renewal of lease or other right or
      interest in or to real property (each a "Lease") except in respect
      of the Leased Real Properties. Each Lease is in good standing in all
      material respects and all amounts owing thereunder have been paid by the
      Company. Schedule 5(L) sets forth a complete and accurate legal
      description of all the real property leased by the Company. The Company has adequate rights of ingress
      and egress for the operation of the business from and to Leased Real
      Property.

5 - 4 

	 	(m) 	
      The uses to which the Owned Real Property and the Leased
      Real Property are being put by the Company are not in breach, in any
      material respect, of any applicable Law.

	 	 	 
	 	(n) 	
      No part of the Owned Real Property or the Leased Real
      Property of the Company has been taken or expropriated by any Governmental
      Entity nor has any written notice or proceeding in respect thereof been
      given or commenced nor is the Company aware of any intent or proposal to
      give any such notice or commence any such proceedings.

	 	 	 
	 	(o) 	
      The Company possesses adequate certificates, authorities
      or permits issued by appropriate Governmental Entities necessary to
      conduct the business now operated by it which could, individually or in
      the aggregate, reasonably be expected to result in a Material Adverse
      Effect if not obtained, and has not received any written notice of
      proceedings relating to the revocation or modification of any such
      certificate, authority or permit. The Company is in compliance with all
      applicable Laws, non- compliance with which could reasonably be expected
      to have a Material Adverse Effect.

	 	 	 
	 	(p) 	
      The Company is not in default, nor has any event or
      circumstance occurred which, but for the passage of time or the giving of
      notice, or both, would constitute a default under any material agreement.
      No Event of Default has occurred and is continuing.

	 	 	 
	 	(q) 	
      There are no existing Encumbrances relating to the assets
      of the Company other than Permitted Encumbrances except as set out on
      Schedule 5(Q).

	 	 	 
	 	(r) 	
      There are no Pension Plans in existence. All Benefit
      Plans to which the Company is a party are described in Schedule 5(R).
      There has not been any improper withdrawal or application of any asset of
      the Benefit Plans. There is no proceeding, action, suit or claim,
      including by any Governmental Entity (other than routine claims for
      benefits) pending or, to the Company’s knowledge, threatened involving the
      Benefit Plans, and no fact exists which could give rise to that type of
      proceeding, action, suit or claim. All contributions or premiums required
      to be made or paid by the Company in respect of the Benefit Plans have
      been made or paid in accordance with the terms of such plans and all
      applicable Law. All contributions to the Benefit Plans by way of
      authorized payroll deduction or otherwise have been properly withheld or
      collected by the Company and have been fully paid into those plans in
      compliance with the plans and applicable Law. All reports and disclosures
      relating to the Benefit Plans required by those plans and any applicable
      Law to be filed or distributed have been filed or distributed in
      compliance with the plans and applicable Law.

	 	(s) 	(i) 	No material labor dispute with
      the employees of the Company exists or, to the 
	 	  	  	knowledge of the Company, is
      imminent. 

	 	(ii) 	
      The Company has paid all wages and other forms of
      compensation due and owing and have made and remitted all required
      statutory and other deductions and there are no outstanding or pending
      labor or employment-related liabilities.

	 	 	 
	 	(iii) 	
      (A) The Company is not a party to any collective
      agreement or other labour contract except as set out on Schedule 5(S), (B)
      no union or other labor organization is actively seeking to organize, or
      to be recognized as, a collective bargaining unit of employees of the
      Company, and (C) there is no pending or, to the Company’s knowledge,
      threatened, strike, work stoppage, material unfair labor practice claim,
      or other material labor dispute against or affecting the
  Company.

5 - 5 

	 	(t) 	
      All Material Agreements of the Company are in full force
      and effect, unamended, and the Company or, to their knowledge, any other
      party to any such agreement is not in material default with respect
      thereto.

	 	 	 	 
	 	(u) 	
      All books and records of the Company have been fully,
      properly and accurately kept and completed in accordance with IFRS and
      there are no material inaccuracies or discrepancies of any kind contained
      or reflected therein.

	 	 	 	 
	 	(v) 	
      The Company owns or possesses adequate rights or licenses
      to the inventions, know- how, patents, patent rights, copyrights,
      trademarks, trade names, licenses, approvals, governmental authorizations,
      trade secrets, confidential information and other intellectual property
      rights, free and clear of all Encumbrances, equities and other adverse
      claims, necessary to conduct the business now operated by it and presently
      contemplated to be operated by it (collectively, "Intellectual Property
      Rights"), and the Company has not received any written notice of
      infringement of or conflict with asserted rights of others with respect to
      any Intellectual Property Rights.

	 	 	 	 
	 	(w) 	
      To the knowledge of the Company, the Company is not in
      violation of any statute, rule, regulation, decision or order of any
      Governmental Entity relating to the use, disposal or release of hazardous
      or toxic substances or relating to the protection or restoration of the
      environment or human exposure to hazardous or toxic substances
      (collectively, "Environmental Laws"), do not own or operate any
      real property contaminated with any substance that is subject to any
      Environmental Laws, are not liable for any off-site disposal or
      contamination pursuant to any Environmental Laws, and are not subject to
      any claim relating to any Environmental Laws, which violation,
      contamination, ownership, operation, liability or claim would individually
      or in the aggregate have a Material Adverse Effect except as set forth in
      Schedule 5(W); and the Company is not aware of any pending investigation
      that might lead to such a claim. The business and operations of the
      Company complies in all material respects with Environmental Laws and the
      Company holds all permits and licenses necessary to conduct its business
      and operations in compliance with Environmental Laws. All material costs
      to ensure compliance with Environmental Laws, including those with respect
      to future closure and rehabilitation costs, are accurately reflected in
      the Company’s financial statements.

	 	 	 	 
	 	(x) 	
      Schedule 5(X) lists all mineral interests and rights,
      including claims, concessions, surface rights, easements, exploration
      licenses and exploitation licenses and leases (collectively, the
      "Mineral Rights") associated with the NorthMet Project which are
      held directly or indirectly by the Company or to which it is a party.
      Except as would not reasonably be expected to have a Material Adverse
      Effect:

	 	 	 	 
	 		(i) 	
      the Company is the sole legal and beneficial owner of all
      right, title and interest in and to the Mineral Rights, free and clear of
      any Encumbrances, except Permitted Encumbrances;

	 	 	 	 
	 		(ii) 	
      all of the Mineral Rights have been properly located and
      recorded in compliance with applicable Laws and are comprised of valid and
      subsisting mineral claims;

	 	 	 	 
	 		(iii) 	
      the Mineral Rights are in good standing under applicable
      Laws and all work required to be performed and filed in respect thereof
      has been performed and filed, all taxes, rentals, fees, expenditures and
      other payments in respect thereof have been paid or incurred and all
      filings in respect thereof have been made;

	 	 	 	 
	 		(iv) 	
      there is no adverse claim against or challenge to the
      title to or ownership of any of the Mineral
Rights;

5 - 6 

	 	(v) 	
      the Company has the exclusive right to deal with all of
      the Mineral Rights;

	 	 	 
	 	(vi) 	
      no person other than the Company has any interest in any
      of the Mineral Rights or the production or profits therefrom or any
      royalty in respect thereof or any right to acquire any such
    interest;

	 	 	 
	 	(vii) 	
      there are no options, back-in rights, earn- in rights,
      rights of first refusal or similar provisions or rights which would affect
      the interest of the Company in any of the Mineral Rights;

	 	 	 
	 	(viii) 	
      there are no restrictions on the ability of the Company
      to use, transfer or exploit any of the Mineral Rights, except pursuant to
      applicable Laws;

	 	 	 
	 	(ix) 	
      the Company has not received any written notice from any
      Governmental Entity of any revocation or intention to revoke any interest
      of the Company in any of the Mineral Rights; and

	 	 	 
	 	(x) 	
      the Company has all surface rights, including easements
      and rights of way from landowners or Governmental Entities, that are
      required to develop and exploit the NorthMet Project as contemplated in
      the AGP Technical Report and no third party or group holds any such rights
      that would be required by the Company to develop and exploit the NorthMet
      Project as contemplated in the AGP Technical Report on or before the date
      hereof.

	 	(y) 	
      There are no pending actions, suits or proceedings
      against or affecting the Company or any of its respective properties that,
      if determined adversely, would individually or in the aggregate have a
      Material Adverse Effect and, to the knowledge of the Company, no such
      actions, suits or proceedings are threatened or contemplated. There are no
      pending actions, suits or proceedings against or affecting the Company
      that involve this Agreement or the rights of Glencore or the obligations
      of the Company thereunder and, to the knowledge of the Company, no such
      actions, suits or proceedings are threatened or contemplated.

	 	 	 
	 	(z) 	
      The financial statements included in the Disclosure
      Documents present fairly and accurately in all material respects the
      consolidated balance sheet of the Company as of the dates shown and its
      consolidated statements of loss and comprehensive loss, consolidated
      statements of changes in shareholder equity and consolidated statement of
      cash flows for the periods shown, and such other financial statements have
      been prepared in conformity with IFRS in effect from time to time in
      Canada applied on a consistent basis throughout the periods involved
      except as set forth in the notes thereto. Except as set forth in the
      annual financial statements of the Company included in the Annual Report,
      the Company does not have any liabilities, contingent or otherwise, which
      individually or in the aggregate would result in a Material Adverse
      Effect.

	 	 	 
	 	(aa) 	
      The Company maintains in full force and effect insurance
      coverage that the Company reasonably believes to be adequate against all
      liabilities, claims and risks against which it is customary for comparably
      situated companies to insure. All such insurance policies are (i)
      sufficient for compliance with all requirements of applicable Law and of
      all Material Agreements, (ii) are valid, outstanding and enforceable
      policies, and (iii) provide adequate insurance coverage in at least such
      amounts and against at least such risks (but including in any event,
      public liability) as are usually insured against in the same general area
      by companies engaged in the same or a similar business. All premiums with
      respect thereto have been paid in accordance with their respective terms,
      and no written notice of cancellation or termination has been received
      with respect to any such policy.

5 - 7 

	 	(bb) 	
      There are no proceedings pending or, to the Company’s
      knowledge, threatened against the Company relating to the continued
      listing of the Shares on the TSX or the NYSE MKT.

	 	 	 
	 	(cc) 	
      The Company is in material compliance with all applicable
      provisions of the Sarbanes- Oxley Act that are in effect.

	 	 	 
	 	(dd) 	
      The Company is in material compliance with all applicable
      corporate governance requirements set forth in the rules of the NYSE MKT
      currently in effect.

	 	 	 
	 	(ee) 	
      In respect of financial reporting for the fiscal year
      ended January 31, 2012 and all subsequent periods, the Company maintains a
      system of internal control over financial reporting sufficient to provide
      reasonable assurances that (i) transactions are executed in accordance
      with management’s general or specific authorization; (ii) transactions are
      recorded as necessary to permit preparation of financial statements of the
      Company in conformity with generally accepted accounting principles and to
      maintain accountability for assets; (iii) access to the Company’s assets
      is permitted only in accordance with management’s general or specific
      authorization; and (iv) the recorded accountability for assets of the
      Company is compared with existing assets at reasonable intervals and
      appropriate actions is taken with respect to any differences. The Company
      has not been advised of (i) any significant deficiencies in the design or
      operation of its internal control over financial reporting that could
      adversely affect its ability to record, process, summarize and report
      financial data, (ii) any material weaknesses in its internal control over
      financial reporting or (iii) any fraud, whether or not material, that
      involves management or other employees who have significant role in the
      internal control over its financial reporting.

	 	 	 
	 	(ff) 	
      The Company has established and maintains disclosure
      controls and procedures (as such term is defined in Rules 12a- 15(e) and
      15d-15(e) of the 1934 Act), which are effective in all material respects
      to perform the functions for which they are established.

	 	 	 
	 	(gg) 	
      PricewaterhouseCoopers LLP, who have audited certain
      financial statements of the Company and delivered their report with
      respect to the audited financial statements included in the Annual Report,
      is an independent registered public accountant with respect to the Company
      within the meaning of the 1933 Act (including without limitation the
      Sarbanes-Oxley Act).

	 	 	 
	 	(hh) 	
      Neither the aggregate value of the assets in Canada of
      PolyMet and its Subsidiaries, nor the gross revenues from sales in or from
      Canada generated from those assets, as determined in accordance with Part
      IX of the Competition Act (Canada) and the Regulations Respecting
      Notifiable Transactions Pursuant to Part VIII of the Competition Act
      (Canada), SOR 87- 348, exceeds the prescribed value referred to in Section
      110 of the Competition Act.

	 	 	 
	 	(ii) 	
      The value of the assets of PolyMet and its Subsidiaries
      carrying on a Canadian business is, collectively, less than C$344 million,
      as determined by Section 3 of the Investment Canada Regulations.

	 	 	 
	 	(jj) 	
      The Rights Offering Shares issuable to Glencore will be
      duly and validly issued and registered in the name of Glencore (or as it
      may direct in writing) and upon receipt of the Exercise Price in respect
      of the Basic Entitlement Shares and Additional Subscription Shares and on
      fulfillment of the Standby Commitment, the Rights Offering Shares will be
      validly issued, fully paid, non-assessable and will be free and clear of
      all liens, pledges, claims, encumbrances, security interests or other
      restrictions except for any restrictions on resale or transfer imposed by
      Securities Laws and not subject to any option to purchase or similar right
      (it being acknowledged by Glencore that the number of
  Standby Shares that it may be entitled to receive pursuant to the
      Rights Offering will depend on the number of Shares issued to those
      Persons who have exercised Rights prior to the Rights Offering Expiry Time
  and the limitation in Section 2.4 of Schedule 2).

5 - 8 

	 	(kk) 	
      The Rights Offering Shares will be allotted and issued
      subject to the notice of articles and articles of PolyMet, and on terms
      that they will, when issued, be fully paid, non- assessable and free and
      clear of all encumbrances and restrictions, except for restrictions on
      transfer imposed by applicable securities laws.

	 	 	 
	 	(ll) 	
      PolyMet is a reporting issuer in good standing in the
      Provinces of British Columbia, Alberta and Ontario.

	 	 	 
	 	(mm) 	
      PolyMet is qualified to file a prospectus in the form of
      a short form prospectus pursuant to the provisions of NI 44- 101 – Short
      Form Prospectus Distributions.

	 	 	 
	 	(nn) 	
      (i) the common shares, without par value, of PolyMet are
      registered under Section 12(b) of the 1934 Act, (ii) PolyMet is required
      to file reports pursuant to Section 13 of the 1934 Act, (iii) PolyMet has
      filed all reports required to be filed pursuant to Section 13 of the 1934
      Act and (iv) PolyMet is in compliance with all of its other obligations
      under the 1934 Act.

	 	 	 
	 	(oo) 	
      PolyMet is a "foreign private issuer" within the meaning
      of Rule 3b- 4 under the 1934 Act, and PolyMet meets the requirements for
      use of Form F-10 under the 1933 Act for registration under the 1933 Act of
      the offering of the Rights Offering Securities to be issued in connection
      with the Rights Offering.

	 	 	 
	 	(pp) 	
      No order halting or suspending trading in securities of
      PolyMet or prohibiting the sale of such securities is outstanding against
      PolyMet, and to the knowledge of PolyMet and the directors and officers
      thereof, no investigations or proceedings for such purpose are pending or
      threatened.

	 	 	 
	 	(qq) 	
      PolyMet has waived the application of its Rights Plan to
      the transactions contemplated by this Agreement.

	 	 	 
	 	(rr) 	
      The Board has determined that neither the fair market
      value of the subject matter of, nor the fair market value of the
      consideration for, the transactions contemplated by this Agreement
      relating to Glencore (other than the Loan), exceeds 25% of PolyMet’s
      market capitalization in accordance with Part 5 of MI 61- 101.

	 	 	 
	 	(ss) 	
      The Board has determined that the Loan and related
      transactions are exempt from the formal valuation and minority approval
      requirements of Part 5 of MI 61- 101.

	 	 	 
	 	(tt) 	
      No approval of the Company’s Shareholders is required for
      (i) the execution and delivery by the Company of this Agreement, (ii) the
      issuance of any of the Rights, the Shares issuable upon exercise of the
      Rights and/or the Standby Shares as contemplated by this Agreement, or
      (iii) the consummation of the other transactions contemplated by this
      Agreement.

	 	 	 
	 	(uu) 	
      The Market Capitalization for the purposes of MI 61-101
      is US$216,584,327.

	 	 	 
	 	(vv) 	
      At the time of its filing with any Securities Authority
      and the SEC or otherwise and as at the Rights Offering Closing Date, the
      Prospectus and Registration Statement did and will comply with the
      requirements of Securities Laws in all material respects; and at the time
      of its filing and as at the Rights Offering Closing Date, the information
      and statements contained therein are true and correct in all material
      respects, contain no Misrepresentation and constitute full, true and plain disclosure of all material facts and do not omit any material facts relating to PolyMet and its Subsidiaries taken as a whole and as concerns the Rights Offering and the transactions contemplated herein; provided that the foregoing will not apply to any information or statements contained in the Prospectus or Registration Statement relating solely to Glencore that Glencore has specifically provided to PolyMet in writing for inclusion in such Prospectus and Registration Statement. 

SCHEDULE 5(A) 

The Company does not own or hold any shares of, or have any
other interest in, directly or indirectly, any person other than PMI except the
following: 

	 	1) 	
      200,000 common shares of Acadian Mining Corporation
      (TSX:ADA), representing approximately 0.3% of Acadian Mining Corporation’s
      issued and outstanding common shares, as of April 10, 2013.

	 	 	 
	 	2) 	
      36,806 common shares of Medgold Resources Corporation
      (TSX:MED), representing less than 0.1% of Medgold Resources Corporation’s
      issued and outstanding common shares, as of April 10,
  2013.

SCHEDULE 5(E) 

As of the date hereof: 

	(a) 	
      the authorized capital stock of the Company is an
      unlimited number of Common Shares in the capital of the Company, without
      par value;

	 	 
	(b) 	
      the number of Shares of capital stock of the Company
      issued and outstanding is 183,250,082;

	 	 
	(c) 	
      the number of Shares of capital stock of the Company
      issuable pursuant to the Company’s equity compensation plans (including
      those issuable subject to approval by the Company’s shareholders) is
      18,636,000; and

	 	 
	(d) 	
      the number of Shares of capital stock of the Company
      issuable and reserved for issuance pursuant to securities exercisable for,
      or convertible into or exchangeable for any Shares of capital stock of the
      Company is 7,083,333.

No person is entitled to preemptive or similar statutory or
contractual rights with respect to any securities of the Company except for the
pre-emptive rights that the Standby Purchaser currently has with respect to
their right of first refusal to provide material financings other than certain
forms of equity financing, subject to regulatory approval, as long as the
Standby Purchaser owns 10% or more of the issued and outstanding Common Shares
of the Company. As long as the Standby Purchaser owns more than 5% of the issued
and outstanding Common Shares of the Company, it has the right to participate
pro rata in any equity-related financing by the Company to maintain its
ownership interest on a fully diluted basis. 

The Company has no knowledge of any voting agreements, buy-sell
agreements, option or right of first purchase agreements or other agreements of
any kind among any of the securityholders of the Company relating to the
securities of the Company held by them.

The Company has not granted any person the right to require the
Company to register any securities of the Company under the 1933 Act, whether on
a demand basis or in connection with the registration of securities of the
Company for its own account or for the account of any other Person except the
Standby Purchaser.

SCHEDULE 5(J) 

The only jurisdictions (or registration districts within such
jurisdictions) in which the Company has any place of business or stores any
material tangible assets are: 

	 	1) 	
      Vancouver, British Columbia, Canada

	 	 	 
	 	2) 	
      Toronto, Ontario, Canada

	 	 	 
	 	3) 	
      St. Paul, Minnesota, USA

	 	 	 
	 	4) 	
      St. Louis County, Minnesota,
USA

SCHEDULE 5(K) 

The following sets forth a complete and accurate legal
description of all the real property owned by the Company:

	 	1) 	
      Erie Plant Site Complex

	 	 	 
	 		
      All the real property located within St. Louis County,
      Minnesota, legally described as follows,
to-wit:

The Northwest Quarter of the Northwest
Quarter, the Southwest Quarter of the Northwest Quarter, the Northwest Quarter
of the Southwest Quarter, and the Southwest Quarter of the Southwest Quarter;
all in Section 2, Township 59 North, Range 14 West, except all minerals and
mineral rights as shown on the Certificates of Title for this land. (Torrens
property. Parts of Certificate of Title Nos. 311938 and 312572.)

All of Section 3, Township 59 North,
Range 14 West, except all minerals and mineral rights as shown on the
Certificates of Title for this land. (Torrens property. Parts of Certificate of
Title Nos. 315402, 311834, and 312572.)

All of Section 4, Township 59 North,
Range 14 West, except all minerals and mineral rights as shown on the
Certificates of Title for this land. (Torrens property. Parts of Certificate of
Title Nos. 311938, 311834 and 312572.)

All of Section 5, Township 59 North,
Range 14 West, except all minerals and mineral rights as shown on the
Certificates of Title for this land. (Torrens property. Parts of Certificate of
Title Nos. 311834 and 312572.)

The East Half of the Northeast
Quarter, and the East Half of the Southeast Quarter; all in Section 6, Township
59 North, Range 14 West, except all minerals and mineral rights as shown on the
Certificates of Title for this land. (Torrens property. Parts of Certificate of
Title Nos. 311834 and 312572.)

The East Half of the Northeast
Quarter, and the Northeast Quarter of the Southeast Quarter; all in Section 7,
Township 59 North, Range 14 West, except all minerals and mineral rights as
shown on the Certificates of Title for this land. (Torrens property. Parts of
Certificate of Title Nos. 311834 and 312572.)

The Northeast Quarter, the Northwest
Quarter except railroad right of way, the Southwest Quarter except railroad
right of way, and the Southeast Quarter except railroad right of way; all in
Section 8, Township 59 North, Range 14 West, except all minerals and mineral
rights as shown on the Certificates of Title for this land. (Torrens property.
Parts of Certificate of Title Nos. 311834 and 312572.)

All of Section 9, Township 59 North,
Range 14 West, except all minerals and mineral rights as shown on the
Certificates of Title for this land. Torrens property. Parts of Certificate of
Title Nos. 311834 and 312572.)

All of Section 10, Township 59 North,
Range 14 West, except all minerals and mineral rights as shown on the
Certificates of Title for this land. (Torrens property. Parts of Certificate of
Title Nos. 305424, 315402, 305334, 305297, 311938, 311834, and 312572.)

The Northwest Quarter of the Northwest
Quarter of Section 11, Township 59 North, Range 14 West, except all minerals and
mineral rights as shown on the Certificate of Title for this land. (Torrens
property. Part of Certificate of Title No. 312572.) 

5(K) - 2 

That part of the Northwest Quarter of
Section 15, Township 59 North, Range 14 West of the Fourth Principal Meridian,
lying northerly of a line lying 200 feet north of the following described line,
measured perpendicular thereto and perpendicular to the tangent to curves
therein: Commencing at the northwest corner of said Section 15; thence South 05
degrees 49 minutes 40 seconds East, based on the St. Louis County Central Zone
Coordinate System, for a distance of 400.76 feet to the point of beginning;
thence North 86 degrees 44 minutes 30 seconds East 1235.77 feet; thence along a
tangential curve concave to the south having a radius of 1699.87 feet, the chord
of which bears South 65 degrees 34 minutes 06 seconds East with a chord length
of 1415.84 feet; thence North 85 degrees 08 minutes 37 seconds East 167.41 feet
more or less to the east line of said Northwest Quarter of Section 15 and there
terminating, except all minerals and mineral rights as shown on the Certificates
of Title for this land. (Torrens property. Parts of Certificate of Title Nos.
305424 and 311938.)

The North Half of the Northeast
Quarter, the North Half of the Northwest Quarter, the Southwest Quarter of the
Northwest Quarter, and the North Half of the Southeast Quarter of the Northwest
Quarter; all in Section 16, Township 59 North, Range 14 West, except all
minerals and mineral rights as shown on the Certificate of Title for this land.
(Torrens property. Part of Certificate of Title No. 305297.)

The East Half of the Northeast Quarter
of Section 17, Township 59 North, Range 14 West; and also that part of the
Southwest Quarter of the Northeast Quarter of Section 17, Township 59 North,
Range 14 West of the Fourth Principal Meridian, lying easterly of a line lying
40 feet west of the following described line, measured perpendicular thereto,
and the extension thereof to the south boundary of said Southwest Quarter of the
Northeast Quarter: Commencing at the Center Quarter corner of said Section 17;
thence North 89 degrees 14 minutes 59 seconds East based on the St. Louis County
Central Zone Coordinate System for a distance of 986.23 feet to the point of
beginning; thence North 06 degrees 28 minutes 39 seconds East 1224.55 feet more
or less to the north line of the Southwest Quarter of the Northeast Quarter of
said Section 17 and there terminating; and also that part of the Northwest
Quarter of the Northeast Quarter of Section 17, Township 59 North, Range 14 West
of the Fourth Principal Meridian lying easterly of the following described line:
Commencing at the North Quarter corner of said Section 17; thence North 88
degrees 50 minutes 33 seconds East based on the St. Louis County Central Zone
Coordinate System for a distance of 486.89 feet to the point of beginning;
thence South 11 degrees 19 minutes 32 seconds East 719.70 feet; thence along a
tangential curve concave to the west having a radius of 1494.37 feet, the chord
of which bears South 00 degrees 27 minutes 55 seconds West with a chord length
of 505.49 feet, to the south line of said Northwest Quarter of the Northeast
Quarter of Section 17 and there terminating, except all minerals and mineral
rights as shown on the Certificates of Title for this land. (Torrens property.
Parts of Certificate of Title Nos. 311834 and 312572.) 

The Northwest Quarter of the Southeast
Quarter of Section 18, Township 59 North, Range 14 West, and an undivided
5/288ths interest in that part of the Southeast Quarter of the Southwest Quarter
and of the Northeast Quarter of the Southwest Quarter of Section 18, Township 59
North, Range 14 West of the Fourth Principal Meridian, lying northerly of the
following described line: Commencing at the southeast corner of the Northeast
Quarter of the Southwest Quarter of said Section 18; thence North 89 degrees 59
minutes 35 seconds West, based on the St. Louis County Central Zone Coordinate
System for a distance of 333.97 feet to the point of beginning; thence South 65
degrees 24 minutes 26 seconds West 484.44 feet ; thence North 23 degrees 19
minutes 04 seconds West 1244.30 feet; thence on a tangential curve concave to
the southwest having a radius of 517.57 feet, the chord of which bears North 35
degrees 16 minutes 19 seconds West with a chord
length of 204.99 feet, to the west line of the Northeast Quarter of the
Southwest Quarter of said Section 18 and there terminating, except all minerals
and mineral rights as shown on the Certificates of Title for this land. (Torrens
property. Parts of Certificate of Title Nos. 305424, 305295, and 305292.)

5(K) - 3 

The Southeast Quarter of the Northeast
Quarter, and the East Half of the Southeast Quarter; all in Section 31, Township
60 North, Range 14 West, except minerals and mineral rights as shown on the
Certificates of Title for this land. (Torrens property. Parts of Certificate of
Title Nos. 305296 and 311757.)

All of Section 32, Township 60 North,
Range 14 West, except all minerals and mineral rights as shown on the
Certificates of Title for this land. (Torrens property. Parts of Certificate of
Title Nos. 305296 and 305295.)

All of Section 33, Township 60 North,
Range 14 West, except all minerals and mineral rights as shown on the
Certificates of Title for this land. (Torrens property. Parts of Certificate of
Title Nos. 305296 and 305295.)

All of Section 34, Township 60 North,
Range 14 West, except all minerals and mineral rights as shown on the
Certificates of Title for this land. (Torrens property. Parts of Certificate of
Title Nos. 315402 and 305296.)

The West Half of the Northwest
Quarter, and the West Half of the Southwest Quarter; all in Section 35, Township
60 North, Range 14 West, except all minerals and mineral rights as shown on the
Certificates of Title for this land. (Torrens property. Parts of Certificate of
Title Nos. 315402 and 305296.) 

5(K) - 4 

 

5(K) - 5 

 

5(K) - 6 

 

5(K) - 7 

 

5(K) - 8 

 

5(K) - 9 

 

5(K) - 10 

 

5(K) - 11 

 

5(K) - 12 

 

5(K) - 13 

2)        Leonard Land
Company Purchase 

The following described lands lying in
Township 59 North, Range 16 West of the Fourth Principal Meridian, St. Louis
County, Minnesota: 

Tract 1: S1⁄2 of SW1⁄4,
Section 9; 

Tract 2: All of Section
16; 

Tract 3: E1⁄2 of Section
19; 

Tract 4: All of Section
20; 

Tract 5: All of Section
21; 

Tract 6: That portion of
SW1⁄4 of SW1⁄4 lying West of Pike River Road, Section 22; 

Tract 7: Those portions
of the W1⁄2 of NW1⁄4 and W1⁄2 of SW1⁄4, lying West of Pike River Road, Section 27; 

Tract 8: All of Section
28 except that part lying East of Pike River Road and except that part of the S1⁄2
of the S1⁄2 lying South and Southeast of the Pike River; 

Tract 9: All of Section
29; 

Tract 10: E1⁄2 of Section
30; 

Tract 11: E1⁄2, SW1⁄4 of
SW1⁄4, and E1⁄2 of SW1⁄4 of Section 31; 

Tract 12: All of Section
32 lying West and North of the Pike River, except the E1⁄2 of the NE1⁄4 of SE1⁄4 of
SW1⁄4, excluding the Southerly 264 feet; and, 

Tract 13: That part of
Section 33 lying West of the Pike River.

Subject to mineral reservations of
record. 

AND 

The following described lands lying in
Township 58 North, Range 16 West of the Fourth Principal Meridian, St. Louis
County, Minnesota: 

Tract 14: That part of
Section 5 lying north and west of Pike River; and, 

Tract 15: That part of
Section 6 lying north and west of Pike River.

Subject to mineral reservations of
record. 

5(K) - 14 

	 	3) 	
      Wheaton College Purchase

	 	 	 
	 		
      Lot Three (3), Section Nine (9), Township Sixty-four (64)
      North, Range Three (3) East of the Fourth Principal Meridian, Cook County,
      Minnesota. Subject to mineral reservations of record.

	 	 	 
	 	4) 	
      Lake-Forest Enterprise Purchase

	 	 	 
	 		
      The following described lands lying in Lake County,
      Minnesota:

	 		
      Subject to mineral reservations of record.

	 	 	 
	 	5) 	
      O’Reilly Hunting Club Purchase

	 	 	 
	 		
      The following described lands lying in St. Louis County,
      Minnesota:

	 	 	 
	 		
      E 1⁄2 of NW 1⁄4, NE 1⁄4 of SW 1⁄4, and E 1⁄2 of W 1⁄2 of NW 1⁄4,
      Section 17, Township 66 North, Range 17 East

	 	 	 
	 		
      Subject to mineral reservations of
  record.

5(K) - 15 

6)        Encumbrances on
assets of the Company other than Permitted Encumbrances 

 

5(K) - 16 

 

5(K) - 17 

 

5(K) - 18 

 

5(K) - 19 

 

SCHEDULE 5(L) 

The following sets forth a complete and accurate legal
description of all the real property leased by the Company: 

	 	1) 	
      PolyMet is party to an agreement dated November 13, 2012
      whereby it leases office space in Suite 5700 of the building commonly
      known as First Canadian Place, located at 100 King Street West ,Toronto,
      Ontario.

	 	 	 
	 	2) 	
      PMI Inc. is party to a Lease Agreement dated October 27,
      2011 whereby it leases approximately 2,379 rentable square feet in Suites
      2005 and 2060 of the building commonly known as UBS Plaza, located at 444
      Cedar Street, St. Paul, Minnesota.

	 	 	 
	 	3) 	
      Mineral rights on 4,162 acres in St. Louis County
      acquired under a Mineral Lease between USX Corporation and PolyMet, dated
      January 4, 1989, as subsequently amended and assigned December 19, 1994,
      as further amended on July 20, 2001, and February 13, 2007. During the
      year ended January 31, 2005, United States Steel Corporation assigned the
      lease to RGGS Land & Minerals Ltd., L.P.

	 	 	 
	 	4) 	
      Mineral rights on 120 acres in St. Louis County acquired
      under a Mineral Lease between LMC Minerals and PolyMet, dated December 1,
      2008.

	 	 	 
	 	5) 	
      PMI, Inc. is party to a Contract for Deed (Block 1),
      dated December 20, 2006, whereby it obtained rights to the leased real
      property legally described in Schedule 1.4 of the Contract for Deed as
      follows:

 

	 	6) 	
      EIP/AG for Waterfowl options

	 		
      PolyMet holds a mortgage over real property in Aitkin
      County, Minnesota, legally described as
follows:

5(L) - 2 

 

5(L) - 3 

	 	7) 	
      Lake- Forest Enterprises option

	 		
      An exclusive option to purchase the following described
      lands lying in Lake County Minnesota:

	 	 	 
	 		
      Section 8, Township 57, Range 11

	 		
      NE 1/4 of NW 1⁄4, SE 1⁄4 of NW 1⁄4, SW 1⁄4 of NW 1⁄4

	 	 	 
	 		
      Section 30, Township 59, Range 9,

	 		
      SE 1⁄4 of SW 1⁄4, NE 1⁄4 of SE 1⁄4, SW 1⁄4 of SE 1⁄4, SE 1⁄4 of SE
    1⁄4

	 	 	 
	 		
      Section 31, Township 59, Range 9,

	 		
      NW 1⁄4 of NE 1⁄4, NE 1⁄4 of NW 1⁄4, NW 1⁄4 of NW 1⁄4 or Lot
  1

	 	 	 
	 		
      Section 7, Township 59, Range 9,

	 		
      SE 1⁄4 of SE 1⁄4, SW 1⁄4 of SE 1⁄4, SE 1⁄4 of SW 1⁄4

	 	 	 
	 		
      Section 8, Township 59, Range 9, 
SW 1⁄4 of SW
  1⁄4

	 	 	 
	 		
      Section 17, Township 59, Range 9, 
NW 1⁄4 of NW
  1⁄4

	 	 	 
	 		
      Section 18, Township 59, Range 9,

	 		
      NE 1⁄4 of NE 1⁄4, NW 1⁄4 of NE 1⁄4, SE 1⁄4 of NE 1⁄4, SW 1⁄4 of NE 1⁄4,
      NE 1⁄4 of NW 1⁄4

	 	 	 
	 		
      Section 15, Township 58, Range 10,

	 		
      NE 1⁄4 of NE 1⁄4, NW 1⁄4 of NE 1⁄4, SW 1⁄4 of NE 1⁄4, SE 1⁄4 of NE 1⁄4
      
NE 1⁄4 of NW 1⁄4, NW 1⁄4 of NW 1⁄4, SW 1⁄4 of NW 1⁄4, SE 1⁄4 of NW 1⁄4 
NE 1⁄4 of SW
      1⁄4, NW 1⁄4 of SW 1⁄4, SW 1⁄4 of SW 1⁄4, SE 1⁄4 of SW 1⁄4 
NE 1⁄4 of SE 1⁄4, NW 1⁄4 of SE
      1⁄4, SW 1⁄4 of SE 1⁄4, SE 1⁄4 of SE 1⁄4

	 	 	 
	 		
      Section 22, Township 58, Range 10 
NE 1⁄4 of NE 1⁄4, NW 1⁄4
      of NE 1⁄4 
NE 1⁄4 of NW 1⁄4

	 	 	 
	 	8) 	
      Harley Investment Company options

	 		
      An exclusive option to purchase the following described
      lands lying in Pine County, Minnesota:

 

5(L) - 4 

	 	9) 	
      Burns Enterprises – Aitkin County options

	 		
      An exclusive option to purchase the following described
      lands lying in Aitkin County, Minnesota:

 

5(L) - 5 

 

5(L) - 6 

	 	10) 	
      Burns Enterprises – St. Louis County options

	 		
      An exclusive option to purchase the following described
      lands lying in St. Louis County, Minnesota:

 

5(L) - 7 

 

SCHEDULE 5(Q) 

Refer to the disclosure set out at Schedule 5(K)(6) for a
listing of any existing Encumbrances relating to the assets of the Company other
than Permitted Encumbrances. 

SCHEDULE 5(R) 

All Benefit Plans to which the Company
is a party are described below: 

	1) 	
      Canadian Insurance – Great West Life – Policy No.
      277003

	Classification 

	All eligible employees 
3-month waiting
      period 
Number of hours worked = 24/week 
	Life Insurance 

	100% of annual earnings to a maximum of
      $100,000 
Benefits reduce 50% at age 65, and terminates at the age of
      71 
Non Evidence Limit: $100,000 
	AD&D 
	Same as life 
24 hour coverage including
      loss of use 
	Long Term Disability 

	66.67% of monthly earnings 
Maximum
      Benefit: $5,000 
Commences: 120th Day 
Benefit Period: to age 65
      
Primary CPP integration 
Taxable 

	Extended Health
      

	Deductible – Nil 
100% Co-Insurance – pay
      direct drug card 
100% reimbursement on global medical assistance,
      out-of-country care, for in- 
Canada ambulance and hospital 
Overall
      Lifetime Maximum: unlimited 
Semi-private hospital coverage
      
Out-of-country travel 
Private duty nursing - $10,000/year
      
Hearing Aids - $300 per 5 years 
Paramedical practitioners - $500
      per practitioner per year including: 
acupuncturist, chiropractor,
      physiotherapists, psychologist/social workers, 
dieticians,
      podiatrists, speech therapists, massage therapists, 
Custom-made
      orthopedic shoes – one pair per calendar year up to $300 
Custom-made
      orthotics - $300 per year 
Eyeglasses or contact lenses - $250/2 years
      for adults. Every year for children 
under 18 
	Dental Coverage 

	Deductible – Nil – Recall examination every 6
      months, fluoride included 
Basic Services – 100% 
Coverage includes
      diagnostic and preventative services, routine restorative, 
surgical,
      periodontal, endodontics and denture repairs 
Amalgam and composite
      fillings. 
Major services – 50% 
Dentures and bridgework: $1,500 for
      5 years 
Combined maximum for basic and major: $2,500 per person per
      year 

5(R) - 2 

	2) 	
      U.S. Insurance

	Group Medical Plan 

	Provider: Blue Cross Blue Shield of
      Minnesota 
Group Policy Number: 4A933-A0 
Plan Year: January 1 –
      December 31 
Effective Date: January 1, 2013 
Eligibility: Immediate
      for all employees + dependents 
Participating employees contribute as
      follows: 

	

     
	
                               
      Coverage 
                               
      Employee 
                               
      Employee +
      1 
                               
      Family 	Monthly Pre- Tax 
Employee Contribution 
$
      60.00 
$ 90.00 
$120.00 

	  	Premiums paid for this coverage pays all claims.
  
	Group Dental Plan 

	Provider: Delta Dental 
Group Policy Number:
      3626- 1642 
Plan Year: January 1 – December 31 
Effective Date:
      January 1, 2013 
Eligibility: Immediate for all employees and
      dependents 
Participating employees contribute as follows:
  

	

	
                               
      Coverage 
                               
      Employee: 
                               
      Employee +
      1 
                               
      Family 	Monthly Pre- Tax 
Employee Contribution
      
$25.00 
$40.00 
$70.00 

	  	Premiums paid for this coverage pays all claims.
  
	Group Life & AD&D 
(Accidental Death
      & 
Dismemberment) 
	Provider: Reliance Standard 
Group Number: GL
      143854 
Effective Date: January 1, 2013 
Eligibility: Immediate,
      automatic coverage for all employees 

	
   
	Coverage: 

	2x
      salary up to $250,000 per employee 
$10,000 spouse/$2,000 child (6 mo.
      – 19 yrs.) 
$500 infant (14 days but less than 6 mo.)

	  	Participating employees contribute $0. 
	Group Short Term 
Disability
      

	Provider: Reliance Standard 
Group Number: STD
      159501 
Effective Date: January 1, 2013 
Eligibility: Immediate,
      automatic coverage for all employees 
Benefit Percentage: 60% with
      maximum of $1,000 per week 
Benefit Duration: 25 weeks
      
Participating employees contribute $0. 
	Group Long Term Disability
    

	Provider: Reliance Standard 
Group Number: LTD
      117699 
Effective Date: January 1, 2013 
Eligibility: Immediate,
      automatic coverage for all employees 
Benefit Percentage: 60% with
      maximum of $5,000 per month 
Elimination Period: 180 days 
Benefit
      Duration: To Social Security Normal Retirement Age 
Participating
      employees contribute $0. 
	Vacation 
	Varies by employee. 
A formal vacation policy is
      being developed. 
	Retirement Savings Plan 
(401k and Profit
      Sharing) 
	Funds Administrator: American Funds 
Plan ID
      Number: BRK81428 
Plan Year: January 1 – December 31

5(R) - 3 

	
      

	
      Third Party Administrator for Retirement Plans: TSC (Tax
      Shelter Corp) Effective Date: January 1, 2013. 

401k
      Contributions 
Eligibility: 1st day of month OR
      1st day of month following date of hire. Employees must be 21
      years of age. 
The Company will make a monthly contribution equal to 3%
      of employee’s monthly compensation to the Plan. 
Employee may also
      elect to contribute to the 401K through a salary reduction program.
      Employees may contribute up to the maximum amount allowed by the IRS on a
      pre- tax basis. The Company will make a monthly matching contribution of
      $.50 on the dollar up to 6% of employee’s contribution (maximum matching
      contribution of 3%). 

Profit Sharing 
Eligibility:
      Employee must be 21 years of age, completed 1,000 hours of service, and be
      employed on the last day of the Plan year. 
The annual contribution
      amount is discretionary and set by the Company each year.
  

SCHEDULE 5(S) 

Project Labour Agreement among On Site Contractors and Iron
Range Building and Construction Trades Counsel, Affiliated International Unions,
The United Brotherhood of Carpenters and The International Brotherhood of
Teamsters and Laborers' International Union of North America for The
Refurbishment of the Existing Plant and Construction of the Metallurgical Plant
dated August 17, 2007 and First Amendment dated September 2, 2008. 

SCHEDULE 5(W) 
ENVIRONMENTAL MATTERS

1.    Environmental Remediation and Reclamation

Under the Contract for Deed between Cliffs Erie LLC and PMI
dated November 15, 2005, an easement over, under, and across the premises is
specifically reserved for the benefit of Cliffs Erie LLC, and its successors and
assigns for the purpose of performing all environmental remediation and
reclamation activities on the premises that may be required pursuant to Cliffs
Erie LLC’s Permit to Mine, Mine Closure Plan, environmental permits issued by
the State of Minnesota, and the State Master Agreement among Cliffs Erie LLC,
the State of Minnesota, the Minnesota Iron Range Resources and Rehabilitation,
the Minnesota Department of Natural Resources, Minnesota Pollution Control
Agency, the Minnesota Department of Revenue, Cleveland-Cliffs Inc, Minnesota
Power, Rainy River Energy Corporation – Taconite Harbor, LTV Steel Mining
Company, and LTV Steel Company, Inc. (i.e. the “CE Remediation Obligations”).
The easement is for ingress and egress, excavation, contouring, earth moving,
blasting, filling, demolition and removal of buildings and structures, soil or
substance removal, soil, air and water testing and monitoring, and all other
actions incidental to or required pursuant to the CE Remediation Obligations.
The easement does not create any duty, obligation or liability whatsoever to
perform the CE Remediation Obligations to Cliffs Erie LLC or any third party; it
is strictly for the benefit of Cliffs Erie LLC and its successors and assigns.

By accepting the Contract for Deed, PMI, and its successors and
assigns, consented to the performance of the CE Remediation Obligations by PMI,
and its successors and assigns, if and to the extent required by the State of
Minnesota or an agency thereof, as an improvement to the premises for the
purposes of Chapter 514 of the Minnesota Statutes, and to any mechanics’ lien
that may arise thereunder. 

2.    Environmental Rehabilitation Provision

As part of the consideration for the Contract for Deed between
Cliffs Erie LLC and PMI dated November 15, 2005 and the Asset Purchase Agreement
between Cliffs Erie LLC and PolyMet dated December 20, 2006 (“Cliffs
II”), PolyMet indemnified Cliffs Erie LLC for the liability for final
reclamation and closure of the mine and acquired property.

PolyMet’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.

In April 2010, Cliffs Erie LLC entered into a consent decree
with the Minnesota Pollution Control Agency (“MPCA”) relating to alleged
violations on the Cliffs Erie Property. This consent decree required submission
of field study plan outlines and short term mitigation plans. In April 2012,
long-term mitigation plans were submitted to the MPCA for its review and
approval. In October 2012, a response was received from the MPCA approving plans
for pilot tests of various treatment options to determine the best course of
action. Although there is substantial uncertainty related to applicable water
quality standards, engineering scope, and responsibility for the financial
liability, the October response from the MPCA provides clarification to the
potential liability for the long term mitigation plan. The Company has included
its best estimate of the liabilities related to this consent decree in its
environmental rehabilitation provision. 

PolyMet’s estimate of the present value of the obligation to
reclaim the NorthMet Project is based upon existing reclamation standards at
October 31, 2012 and IFRS. PolyMet’s estimate of the fair value of the asset
retirement obligation was $56.8 million. The estimate was based upon an October
31, 2012 undiscounted future cost of $28.2 million for the first Cliffs
transaction and $32.9 million for Cliffs II.

SCHEDULE 5(X) 
PROPERTY AND MINERAL RIGHTS

1.     Resource Property Agreements

By an agreement dated January 4, 1989, and subsequently amended
and assigned December 19, 1994, and amended on July 20, 2001 and on February 13,
2007, PolyMet leases certain lands in St. Louis County, Minnesota from USX
Corporation. During the year ended January 31, 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 January
31, 2013. The agreement requires future annual lease payments of $150,000.

PolyMet 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 PolyMet.
PolyMet’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. 

The mineral rights include: 

	  	  	DESCRIPTION 	 	ACREAGE 	OWNERSHIP 
	  	  	  	  	  	 
	T59N, R13W 	 	  	  	  	 
	  	  	  	  	  	 
	Sec. 1 - 	Lot 1 	(NE1/4 	NE1/4) 	34.63 	100% Minerals (RR) 
	  	Lot 2 	(NW1/4 	NE1/4) 	34.86 	100% Minerals (RR) 
	  	SW1/4 	NE1/4 	  	40.00 	100% Minerals (RR) 
	  	SE1/4 	NE1/4 	  	40.00 	100% Minerals (RR) 
	  	Lot 3 	(NE1/4 	NW1/4) 	35.09 	100% Minerals (RR) 
	  	Lot 4 	(NW1/4 	NW1/4) 	35.32 	100% Minerals (RR) 
	  	SW1/4 	NW1/4 	  	40.00 	100% Minerals (RR) 
	  	SE1/4 	NW1/4 	  	40.00 	100% Minerals (RR) 
	  	NE1/4 	SW1/4 	  	40.00 	100% Minerals (RR) 
	  	NW1/4 	SW1/4 	  	40.00 	100% Minerals (RR) 
	  	SW1/4 	SW1/4 	  	40.00 	100% Minerals (RR) 
	  	SE1/4 	SW1/4 	  	40.00 	100% Minerals (RR) 
	  	NE1/4 	SE1/4 	  	40.00 	100% Minerals (RR) 
	  	NW1/4 	SE1/4 	  	40.00 	100% Minerals (RR) 
	  	SW1/4 	SE1/4 	  	40.00 	100% Minerals (RR) 
	  	  	  	  	  	 
	Sec. 2 - 	Lot 1 	(NE1/4 	NE1/4) 	37.48 	100% Minerals (RR) 
	  	Lot 2 	(NW1/4 	NE1/4) 	37.57 	100% Minerals (RR) 
	  	SW1/4 	NE1/4 	  	40.00 	100% Minerals (RR) 
	  	SE1/4 	NE1/4 	  	40.00 	100% Minerals (RR) 
	  	Lot 3 	(NE1/4 	NW1/4) 	37.66 	100% Minerals (RR) 
	  	Lot 4 	(NW1/4 	NW1/4) 	37.75 	100% Minerals (RR) 
	  	SW1/4 	NW1/4 	  	40.00 	100% Minerals (RR) 
	  	SE1/4 	NW1/4 	  	40.00 	100% Minerals (RR) 
	  	NE1/4 	SW1/4 	  	40.00 	100% Minerals (RR)
  

5(X) - 2 

	  	NW1/4 	SW1/4 	  	40.00 	100% Minerals (RR) 
	  	SW1/4 	SW1/4 	  	40.00 	100% Minerals (RR) 
	  	SE1/4 	SW1/4 	  	40.00 	100% Minerals (RR) 
	  	NE1/4 	SE1/4 	  	40.00 	100% Minerals (RR) 
	  	NW1/4 	SE1/4 	  	40.00 	100% Minerals (RR) 
	  	SW1/4 	SE1/4 	  	40.00 	100% Minerals (RR) 
	  	SE1/4 	SE1/4 	  	40.00 	100% Minerals (RR) 
	  	  	  	  	  	 
	Sec. 3 - 	Lot 1 	(NE1/4 	NE1/4) 	37.85 	100% Minerals (RR) 
	  	Lot 2 	(NW1/4 	NE1/4) 	37.96 	100% Minerals (RR) 
	  	SW1/4 	NE1/4 	  	40.00 	100% Minerals (RR) 
	  	SE1/4 	NE1/4 	  	40.00 	100% Minerals (RR) 
	(Sec 3) 	Lot 3 	(NE1/4 	NW1/4) 	38.07 	100% Minerals (RR) 
	  	Lot 4 	(NW1/4 	NW1/4) 	38.18 	100% Minerals (RR) 
	  	SW1/4 	NW1/4 	  	40.00 	100% Minerals (RR) 
	  	SE1/4 	NW1/4 	  	40.00 	100% Minerals (RR) 
	  	NE1/4 	SW1/4 	  	40.00 	100% Minerals (RR) 
	  	NW1/4 	SW1/4 	  	40.00 	100% Minerals (RR) 
	  	SW1/4 	SW1/4 	  	40.00 	100% Minerals (RR) 
	  	SE1/4 	SW1/4 	  	40.00 	100% Minerals (RR) 
	  	NE1/4 	SE1/4 	  	40.00 	100% Minerals (RR) 
	  	NW1/4 	SE1/4 	  	40.00 	100% Minerals (RR) 
	  	SW1/4 	SE1/4 	  	40.00 	100% Minerals (RR) 
	  	SE1/4 	SE1/4 	  	40.00 	100% Minerals (RR) 
	  	  	  	  	  	 
	Sec. 4 - 	SE1/4 	SW1/4 	  	40.00 	100% Minerals (RR) 
	  	NE1/4 	SE1/4 	  	40.00 	100% Minerals (RR) 
	  	NW1/4 	SE1/4 	  	40.00 	100% Minerals (RR) 
	  	SW1/4 	SE1/4 	  	40.00 	100% Minerals (RR) 
	  	SE1/4 	SE1/4 	  	40.00 	100% Minerals (RR) 
	  	  	  	  	  	 
	Sec. 9 - 	NE1/4 	NE1/4 	  	40.00 	100% Minerals (RR) 
	  	NW1/4 	NE1/4 	  	40.00 	100% Minerals (RR) 
	  	SW1/4 	NE1/4 	  	40.00 	100% Minerals (RR) 
	  	SE1/4 	NE1/4 	  	40.00 	100% Minerals (RR) 
	  	NE1/4 	NW1/4 	  	40.00 	100% Minerals (RR) 
	  	NW1/4 	NW1/4 	  	40.00 	100% Minerals (RR) 
	  	SW1/4 	NW1/4 	  	40.00 	100% Minerals (RR) 
	  	SE1/4 	NW1/4 	  	40.00 	100% Minerals (RR) 
	  	NE1/4 	SW1/4 	  	40.00 	100% Minerals (RR) 
	  	NW1/4 	SW1/4 	  	40.00 	100% Minerals (RR) 
	  	SW1/4 	SW1/4 	  	40.00 	100% Minerals (RR) 
	  	SE1/4 	SW1/4 	  	40.00 	100% Minerals (RR) 
	  	NE1/4 	SE1/4 	  	40.00 	100% Minerals (RR) 
	  	NW1/4 	SE1/4 	  	40.00 	100% Minerals (RR) 
	  	SE1/4 	SE1/4 	  	40.00 	100% Minerals (RR) 
	  	  	  	  	  	 
	Sec. 10 - 	NE1/4 	NE1/4 	  	40.00 	100% Minerals (RR) 
	  	NW1/4 	NE1/4 	  	40.00 	100% Minerals (RR) 
	  	SW1/4 	NE1/4 	  	40.00 	100% Minerals (RR) 
	  	SE1/4 	NE1/4 	  	40.00 	100% Minerals (RR) 
	  	NE1/4 	NW1/4 	  	40.00 	100% Minerals (RR) 
	  	NW1/4 	NW1/4 	  	40.00 	100% Minerals (RR) 
	  	SW1/4 	NW1/4 	  	40.00 	100% Minerals (RR) 
	  	SE1/4 	NW1/4 	  	40.00 	100% Minerals (RR) 
	  	NE1/4 	SW1/4 	  	40.00 	100% Minerals (RR)

5(X) - 3 

	  	SE1/4 	SW1/4 	 	40.00 	100% Minerals (RR) 
	  	NE1/4 	SE1/4 	 	40.00 	100% Minerals (RR) 
	  	NW1/4 	SE1/4 	 	40.00 	100% Minerals (RR) 
	  	  	  	 	  	 
	Sec. 11 - 	NE1/4 	NE1/4 	 	40.00 	100% Minerals (RR) 
	  	NW1/4 	NE-1/4 	 	40.00 	100% Minerals (RR) 
	  	SW1/4 	NE1/4 	 	40.00 	100% Minerals (RR) 
	  	SE1/4 	NE1/4 	 	40.00 	100% Minerals (RR) 
	  	NE1/4 	NW1/4 	 	40.00 	100% Minerals (RR) 
	(Sec 11) 	NW1/4 	NW1/4 	 	40.00 	100% Minerals (RR) 
	  	SW1/4 	NW1/4 	 	40.00 	100% Minerals (RR) 
	  	SE1/4 	NW1/4 	 	40.00 	100% Minerals (RR) 
	  	NE1/4 	SW1/4 	 	40.00 	100% Minerals (RR) 
	  	NW1/4 	SW1/4 	 	40.00 	100% Minerals (RR) 
	  	SW1/4 	SW1/4 	 	40.00 	100% Minerals (RR) 
	  	SE1/4 	SW1/4 	 	40.00 	100% Minerals (RR) 
	  	NE1/4 	SE1/4 	 	40.00 	100% Minerals (RR) 
	  	NW1/4 	SE1/4 	 	40.00 	100% Minerals (RR) 
	  	SW1/4 	SE1/4 	 	40.00 	100% Minerals (RR) 
	  	SE1/4 	SE1/4 	 	40.00 	100% Minerals (RR) 
	  	  	  	 	  	 
	Sec. 12 - 	NE1/4 	NE1/4 	 	40.00 	100% Minerals (RR) 
	  	SW1/4 	NE1/4 	 	40.00 	100% Minerals (RR) 
	  	SE1/4 	NE1/4 	 	40.00 	100% Minerals (RR) 
	  	NE1/4 	NW1/4 	 	40.00 	100% Minerals (RR) 
	  	NW1/4 	NW1/4 	 	40.00 	100% Minerals (RR) 
	  	SW1/4 	NW1/4 	 	40.00 	100% Minerals (RR) 
	  	SE1/4 	NW1/4 	 	40.00 	100% Minerals (RR) 
	  	NE1/4 	SW1/4 	 	40.00 	100% Minerals (RR) 
	  	NW1/4 	SW1/4 	 	40.00 	100% Minerals (RR) 
	  	SW1/4 	SW1/4 	 	40.00 	100% Minerals (RR) 
	  	SE1/4 	SW1/4 	 	40.00 	100% Minerals (RR) 
	  	NE1/4 	SE1/4 	 	40.00 	100% Minerals (RR) 
	  	NW1/4 	SE1/4 	 	40.00 	100% Minerals (RR) 
	  	SW1/4 	SE1/4 	 	40.00 	100% Minerals (RR) 
	  	SE1/4 	SE1/4 	 	40.00 	100% Minerals (RR) 

Pursuant to an agreement effective December 1, 2008, the
Company leases 120 acres from LMC Minerals. The initial term of the renewable
lease is 20 years and calls for minimum annual lease payments of $3,000 on each
successive anniversary date for the first four years after which the minimum
annual lease payment increases to $30,000. The initial term may be extended for
up to four additional five-year periods on the same terms. All lease payments
have been paid or accrued to January 31, 2013. The next payment is due in
November 2013. 

The lease payments are considered advance royalty payments and
will be deducted from future production royalties payable to the lessor, which
range from 3% to 5% based on the net smelter return that we receive. 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. 

The mineral rights include: 

SW 1⁄4 of SE 1⁄4, Section 9; NW 1⁄4 of SW 1⁄4, Section 10; SW 1⁄4 of SW
1⁄4, Section 10; all located in Township 59 North, Range 13 West 

SCHEDULE 6 

REPRESENTATIONS AND WARRANTIES OF
GLENCORE 

Glencore represents and warrants to the Company as at the date
  of this Agreement that: 

	 	(a) 	
      Glencore is a corporation duly incorporated, validly
      existing and in good standing under the laws of the jurisdiction of its
      incorporation and has the corporate power and authority to own its
      properties and to carry on its business as now being conducted.

	 	 	 
	 	(b) 	
      Glencore has full corporate power and authority and has
      taken all requisite action on its part necessary for (i) the
      authorization, execution and delivery of the Agreement, (ii) authorization
      of the performance of all of its obligations hereunder and
    thereunder.

	 	 	 
	 	(c) 	
      The Agreement has been duly executed and delivered by
      Glencore and the Agreement constitutes a legal, valid and binding
      obligation of Glencore, enforceable against Glencore in accordance with
      its terms, except as such enforceability may be limited by (i) applicable
      bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium,
      liquidation or similar laws relating to, or affecting generally the
      enforcement of, creditors’ rights and remedies or (ii) equitable
      principles relating to the availability of specific performance,
      injunctive relief and other equitable remedies.

	 	 	 
	 	(d) 	
      There has been no voluntary or involuntary action taken
      either by or against Glencore for any winding-up, dissolution,
      liquidation, bankruptcy, receivership, administration or similar or
      analogous events in respect of Glencore or all or any part of its assets
      or revenues.

	 	 	 
	 	(e) 	
      The execution and delivery of this Agreement by Glencore
      will not result in any material breach of any agreement to which it is a
      party which would have a material adverse effect on its ability to perform
      its obligations under this Agreement.

SCHEDULE S1 
MATERIAL AGREEMENTS 

	1. 	
      Contract for Deed between Cliffs Erie LLC and PMI dated
      November 15, 2005.

	 	 
	2. 	
      Sale Agreement II between Cliffs Erie LLC and PMI dated
      December 20, 2006.

	 	 
	3. 	
      Contract for Deed between Cliffs Erie LLC and PMI dated
      December 20, 2006 recorded as document no. 1070975.

	 	 
	4. 	
      Contract for Deed between Cliffs Erie LLC and PMI dated
      December 20, 2006 recorded as document no. 1070974.

	 	 
	5. 	
      Mineral Lease between USX Corporation and PolyMet, dated
      January 4, 1989, and subsequently amended and assigned December 19, 1994,
      as further amended on July 20, 2001 and February 13, 2007. During the year
      ended January 31, 2005, United States Steel Corporation assigned the lease
      to RGGS Land & Minerals Ltd., L.P.

	 	 
	6. 	
      Electric Services Agreement between Minnesota Power and
      PolyMet, dated December 11, 2006.

	 	 
	7. 	
      Amendment to Electric Services Agreement between
      Minnesota Power and PolyMet, dated September 24, 2008, extending the
      project milestone dates of the December 11, 2006 agreement.

	 	 
	8. 	
      Electric Services Agreement Negotiation Letter (with
      attached term sheet) between Minnesota Power and PolyMet, dated October
      30, 2006.

	 	 
	9. 	
      Project Labour Agreement between On Site Contractors and
      Iron Range Building and Construction Trades Counsel, Affiliated
      International Unions, The United Brotherhood of Carpenters and The
      International Brotherhood of Teamsters and Laborers' International Union
      of North America for The Refurbishment of the Existing Plant and
      Construction of the Metallurgical Plant dated August 17, 2007 and First
      Amendment dated September 2, 2008.

	 	 
	10. 	
      Bateman Engineering Professional and Technical Services
      Agreement dated April 1, 2007.

	 	 
	11. 	
      Contract#A87462 between the State of Minnesota, through
      its Department of Natural Resources Commissioners Office and PolyMet
      Mining Inc. dated April 3, 2006 and most recently amended March 23,
      2013.

	 	 
	12. 	
      Purchase Agreement between PMI and Glencore, dated
      October 31, 2008.

	 	 
	13. 	
      Floating Rate Secured Debenture between PMI and Glencore,
      dated October 31, 2008.

	 	 
	14. 	
      Guarantee between PolyMet and Glencore, dated October 31,
      2008.

	 	 
	15. 	
      Security Agreement between PolyMet and Glencore, dated
      October 31, 2008.

	 	 
	16. 	
      Security Agreement between PMI and Glencore, dated
      October 31, 2008.

	 	 
	17. 	
      Pledge Agreement between PolyMet and Glencore, dated
      October 31, 2008.

	 	 
	18. 	
      Exchange Warrant of PolyMet, dated October 31,
    2008.

	 	 
	19. 	
      Purchase Warrant of PolyMet, dated October 31,
    2008.

	 	 
	20. 	
      Amendment Letter number 11 to Purchase Agreement between
      PolyMet and Glencore.

S1 - 2 

	21. 	
      Mineral Lease between PMI and Longyear Mesaba Company,
      dated December 1, 2008.

	 	 
	22. 	
      Amendment and Waiver between PMI, PolyMet and Glencore
      dated November 12, 2010.

	 	 
	23. 	
      Purchase Warrant between PolyMet and Glencore, dated
      November 12, 2010.

	 	 
	24. 	
      Land Acquisition Agreement between PolyMet, Andresen
      Butterworth, P.A., and Lake- Forest Enterprise, Inc, dated May 21,
      2010.

	 	 
	25. 	
      Land Acquisition Agreement between PolyMet, Andresen
      Butterworth, P.A., and Lake- Forest Enterprise, Inc, dated June 17,
      2010.

	 	 
	26. 	
      Land Acquisition Agreement between PolyMet, Andresen
      Butterworth, P.A., and Mick O’Reilly Hunting Club, LLC, dated March 28,
      2011.

	 	 
	27. 	
      Loan Agreement between PolyMet and the State of
      Minnesota’s Office of the Commissioner of Iron Range Resources and
      Rehabilitation dated June 29, 2011 and related schedules.

	 	 
	28. 	
      Warranty Deed from Leonard Land Company for real property
      in St. Louis County, Minnesota, dated June 29, 2011 (recorded as document
  no. 901695).

	 	 
	29. 	
      Warranty Deed from Wheaton College for real property in
      Cook County, Minnesota, dated June 30, 2011 (recorded as document no.
  115045).

	 	 
	30. 	
      Purchase Warrant between PolyMet and Glencore, dated
      November 30, 2011.

	 	 
	31. 	
      Amendment and Waiver between PolyMet and Glencore dated
      November 30, 2011.

	 	 
	32. 	
      Amended and Restated Exchange Warrant between PolyMet and
      Glencore, dated November 30, 2011.

	 	 
	33. 	
      Registration Rights Agreement and Amendment to Existing
      Registration Rights Agreement between PolyMet and Glencore dated November
      30, 2011.

	 	 
	34. 	
      Agreement for the Purchase and Development of Wetland
      Credits between PolyMet and AG for Waterfowl, LLP, dated February 28, 2012
      and related schedules. During the year ended January 31, 2013, AG for
      Waterfowl assigned the agreement to EIP Minnesota, LLC.

	 	 
	35. 	
      Option to Purchase Agreement between PMI and Harley
      Investment Company, dated February 9, 2007, most recently renewed on
      October 29, 2012.

	 	 
	36. 	
      Option to Purchase Agreement between PMI and Burns
      Enterprises, LLC, dated May 23, 2007, most recently renewed on January 21,
      2013.

	 	 
	37. 	
      Option to Purchase Agreement between PMI and Burns
      Enterprises, LLC, dated July 2, 2010, most recently renewed on April 2,
      2012.

	 	 
	38. 	
      Omnibus Share Compensation Plan, most recently ratified
      and reconfirmed on July 10, 2012.

	 	 
	39. 	
      Shareholder Rights Plan, most recently approved on July
      10, 2012 between PolyMet and Computershare (formerly known as Pacific
      Corporate Trust Company).

EXHIBIT 5.4(e) 
FORM OF FARRIS, VAUGHAN, WILLS
& MURPHY LLP OPINION 

[•] 

Glencore AG 
Baarermattstrasse 3 
PO Box 777, 6341 Baar

Switzerland 

Dear Sirs: 

	 	RE: 	PolyMet Mining Corp. 

1.                      
SCOPE OF REVIEW 

1.1                    
We have acted as counsel to PolyMet Mining Corp. (the “Company”) in
connection with the negotiation, execution and delivery of a Standby Purchase
Agreement (the “Agreement”) dated April 10, 2013 between the Company and
Glencore AG (“Glencore”). 

1.2                    
This opinion is being provided pursuant to section 5.4(e) of the Agreement.
Capitalized terms used but otherwise not defined in this opinion have the same
meaning herein as are ascribed thereto in the Agreement. 

1.3                     For
the purposes of giving this opinion, we have examined and reviewed execution
copies of the following documents: 

	(a) 	
      the Agreement;

	 	 
	(b) 	
      the Registration Rights Agreement;

	 	 
	(c) 	
      the Rights Certificate (and together with the Agreement
      and the Registration Rights Agreement, the “Transaction
      Documents”);

	 	 
	(d) 	
      the Preliminary Prospectus dated April 10, 2013;
    and

	 	 
	(e) 	
      the Final Prospectus dated [•],
2013.

2.                      
LEGAL SYSTEM 

2.1                    
The scope of our review is restricted to and this opinion is rendered solely
with respect to the laws of the Province of British Columbia, and the federal
laws of Canada having application therein as of the date hereof.

3.                      
RELIANCE AND ASSUMPTIONS 

3.1                    
In the examination and consideration of the documents (including the Transaction
Documents) required to deliver this opinion, we have assumed the genuineness of
all signatures thereto, the legal capacity of all individuals, the authenticity
of all documents submitted to us as originals, the conformity to authentic
original documents of all documents submitted to us as photostatted, telecopied
or certified copies and the accuracy and completeness of any information
provided to us by any office of public record. We have assumed the Transaction
Documents are the legal, valid and binding obligations of the Parties thereto,
other than the Company, enforceable against such Parties in accordance with
their respective terms. 

5.4(e) - 2 

3.2                    
For the purposes of this opinion, we have also examined such other records,
certificates and documents and have considered such questions of law and made
such investigations and inquiries as we have considered necessary or advisable
for the purposes of this opinion, including the following: 

	(a) 	
      Certificates of Good Standing for the Company dated [•],
      2013 and issued by the Registrar under the Business Corporations Act
      (British Columbia)

	 	 	 
	(b) 	
      An officer's certificate of the Company dated [•], 2013
      (the “Officer’s Certificate”) attaching thereto a copy of each of
      the following:

	 	 	 
		(i) 	
      the Company’s constating documents; and

	 	 	 
		(ii) 	
      resolutions of the Board (“Corporate
      Resolutions”).

3.3                    
In expressing the opinion in paragraph 4.1 we have relied exclusively upon the
certificate referred to in paragraph 3.2(a). 

3.4                    
In expressing the opinion in paragraph 4.3, with respect to the number of common
shares of the Company (the “Shares”) that are issued and outstanding, we
have relied exclusively upon a letter dated April [•], 2013 and provided to us
by Computershare Investor Services Inc., acting in its capacity as registrar and
transfer agent to the Company, a copy of which has been delivered to you. 

3.5                    
In expressing the opinion in paragraph 4.4, we have relied exclusively upon our
review of the reporting issuers list prepared by the British Columbia Securities
Commission (“BCSC”) and published on the BCSC's website on April [•],
2013 which list we assume continues to be accurate as of the date hereof. 

3.6                     In
expressing the opinion in paragraphs 4.5 to 4.9 inclusive we have relied upon
our review of the Officer’s Certificate referred to in paragraph 3.2(b). 

3.7                     In
expressing the opinion in paragraphs 4.14, we have relied exclusively upon the
letter from the Toronto Stock Exchange (“TSX”) dated April [•], 2013, a
copy of which has been provided to you. 

3.8                     Whenever
our opinion herein with respect to the existence or absence of any agreement or
other instrument or any agreement or other instrument or any judgment, writ,
injunction, decree, order, award or ruling is qualified by the expression “to
our knowledge” or “of which we are aware” or words to like effect, it is based
solely on the actual knowledge of our current partners and associate lawyers
directly involved in, and obtained during the course of, representing the
Company in connection with the matters contemplated by the Transaction
Documents. 

3.9                     We
understand that the assumptions, qualifications and reliances expressed in the
preceding paragraphs are satisfactory to you. 

4.                      
OPINION 

                          Based
upon and subject to the foregoing and subject to the qualifications hereinafter
set forth, we are of the opinion that: 

4.1                    
The Company exists as a company under the Business Corporations Act
(British Columbia) and is, with respect to the filing of annual reports, in good
standing with the Office of the Registrar of Companies for the Province of
British Columbia.

5.4(e) - 3 

4.2                     The
Company has the necessary corporate power and capacity to enter into and carry
out its obligations under each Transaction Document and to issue the Rights
Offering Securities as contemplated by the Agreement.

4.3                     The
authorized capital of the Company consists of an unlimited number of Shares of
which • Share are issued and outstanding. 

4.4                     The
Company is a “reporting issuer” under the Securities Act (British
Columbia) and is not included in the list of issuers in default prepared by the
BCSC. 

4.5                     Each
Transaction Document and the performance by the Company of its obligations
thereunder have been duly authorized by all necessary corporate action by the
Company. 

4.6                     Each
Transaction Document has been duly executed and delivered by the Company and
constitutes a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms. 

4.7                     All
necessary corporate action has been taken by the Company to authorize the
creation, issuance and distribution of the Rights Offering Securities. 

4.8                    
The execution and delivery of the Prospectus and the filing of the Prospectus
pursuant to Securities Laws of the Province of British Columbia has been duly
authorized by all necessary corporate action by the Company. 

4.9                     The
Rights have been duly authorized and validly issued by the Company and upon the
valid exercise of the Rights and payment of the exercise price for the Rights
Offering Shares as provided for in the Rights Certificate, the Rights Offering
Shares issued upon the exercise of the Rights will be duly authorized and
validly issued as fully paid and non-assessable common shares in the capital of
the Company. 

4.10                 
 Upon the payment of the exercise price for the Standby Shares as provided
for in the Agreement, the Standby Shares will be duly authorized and validly
issued as fully paid and non-assessable common shares in the capital of the
Company. 

4.11                 
 Neither the execution and delivery by the Company of a Transaction
Document nor the consummation of the transactions contemplated thereby results
in a breach (whether after notice or lapse of time or both) of any of the terms,
conditions or provisions of or constitute a default under: (i) the notice of
articles or articles of the Company; (ii) any applicable law of the of the
Province of British Columbia, and the federal laws of Canada having application
therein; (iii) any agreement of which we are aware to which the Company is a
party or by which the Company is bound; or (iv) any judgment, writ, injunction,
decree, order award or ruling of a Governmental Entity of the Province of
British Columbia or of Canada and of which we are aware and to which the Company
is subject. 

4.12                 
 All documents required to have been filed or delivered by the Company and
all proceedings, approvals, consents, authorizations and permits required to
have been taken or obtained by the Company under Securities Laws have been
filed, delivered, taken or obtained to qualify the distribution of the Rights in
the Qualifying Jurisdictions. 

4.13                 
 No prospectus or other documents are required to be filed or delivered,
proceedings taken or approvals, permits, consents or authorizations required to
be obtained under the Securities Laws of the Qualifying Jurisdictions (other
than such as have been filed or obtained) to permit the issue and delivery of
the Rights Offering Shares and the Standby Shares. 

5.4(e) - 4 

4.14                  
The Rights have been approved for listing on the TSX and the Rights Offering
Shares and Standby Shares have been conditionally approved for listing on the
TSX subject only to the listing conditions set out in the letter from the TSX
referred to in paragraph 3.5. 

4.15                  
No notice, registration and filing or report with, an no consent, approval,
order or other authorization of, any Governmental Entity having jurisdiction in
British Columbia is require in connection with the execution, delivery and
performance of the Transaction Documents by the Company, other than those that
have been obtained. 

4.16                  
Based on the provisions of the Tax Act the Regulations thereunder, and the
proposals to amend the Tax Act and the Regulations publicly announced by or on
behalf of the Minister of Finance (Canada) prior to the date hereof, the Rights
Offering Securities, when issued, will be qualified investments under the Tax
Act and the regulations thereunder for trusts governed by registered retirement
savings plans, registered retirement income funds, deferred profit sharing plans
and registered education savings plans, provided that the Rights and common
shares of the Company are listed at that time on a “designated” stock exchange
in Canada (which currently includes the TSX). 

4.17                  
The statements set forth under the heading “Canadian Federal Income Tax
Considerations” and “Eligibility for Investment” in the Final Prospectus are
accurate subject to the assumptions and other qualifications referred to
therein. 

5.                      
QUALIFICATIONS 

5.1                    
The opinions expressed herein are subject to the following qualifications: 

	(a) 	
      the effects of any applicable bankruptcy, winding up,
      liquidation, insolvency, fraudulent preference, reorganization, moratorium
      or any other laws or judicial decisions of whatsoever nature or kind
      affecting the enforcement of creditors' rights and remedies generally,
      including, without limitation, the applicable provisions of the
      Bankruptcy and Insolvency Act (Canada),

	 	 	 
		
      Winding- Up and Restructuring Act (Canada),
      Companies' Creditors Arrangement Act (Canada) and British
      Columbia Business Corporations Act;

	 	 	 
	(b) 	
      general principles of equity which may apply to any
      proceeding, whether in equity or at law, including, without
    limitation:

	 	 	 
		(i) 	
      the powers of the court to stay proceedings before it and
      to stay the execution of judgments and to relieve from the consequences of
      default;

	 	 	 
		(ii) 	
      the concepts of materiality, good faith and fair
      dealing;

	 	 	 
		(iii) 	
      equitable remedies, such as specific performance and
      injunctive relief, may only be available in the discretion of the court
      and accordingly may not be available as a remedy in any particular
      circumstance;

	 	 	 
		(iv) 	
      principles limiting the availability of a remedy under a
      circumstance where Glencore has elected another remedy;

	 	 	 
		(v) 	
      limitations which may be imposed by law on the
      effectiveness of terms exculpating or exempting a party from a liability;
      and

	 	 	 
		(vi) 	
      the requirement that determinations, requests or demands
      which may be made pursuant to the exercise of discretion must be made
      reasonably;

5.4(e) - 5 

	(c) 	
      the ability to recover certain costs, fees and expenses
      in connection with litigation brought before the British Columbia Courts
      to enforce provisions of the Transaction Documents is in the discretion of
      the British Columbia Courts and counsel fees are subject to
    taxation;

	 	 	 
	(d) 	
      claims becoming barred under laws regarding limitation of
      actions;

	 	 	 
	(e) 	
      the Judgment Interest Act (British Columbia)
      limits interest on a judgment debt;

	 	 	 
	(f) 	
      determinations, calculations, demands, requests,
      instructions and acts made by Glencore in the exercise of a discretion
      given to it under any Transaction Document, may not be enforceable if made
      or performed unreasonably or arbitrarily, and may not be treated as
      conclusive notwithstanding contrary provisions in any Transaction
      Document;

	 	 	 
	(g) 	
      the Currency Act (Canada) precludes a court in
      Canada from giving a judgment in any currency other than Canadian
      currency;

	 	 	 
	(h) 	
      limitations upon the right of Glencore to receive
      immediate payment of amounts stated to be payable on demand;

	 	 	 
	(i) 	
      limitations upon the right of Glencore to enforce any
      Transaction Document on the basis of a default of a minor or non-
      substantive nature or having insubstantial consequences to
  Glencore;

	 	 	 
	(j) 	
      we express no opinion on provisions of the Transaction
      Documents:

	 	 	 
		(i) 	
      directly or indirectly purporting to exclude unwritten
      variations, amendments, waivers or consents or to establish evidentiary
      standards;

	 	 	 
		(ii) 	
      purporting to bind or confer a benefit upon, persons who
      are not parties to that document;

	 	 	 
		(iii) 	
      purporting to allow severance of invalid, illegal or
      unenforceable provisions;

	 	 	 
		(iv) 	
      dealing with the waiving by a party of certain legal,
      statutory or equitable rights or doctrines;

	 	 	 
		(v) 	
      purporting to relieve Glencore from the consequence of
      its own negligence;

	 	 	 
		(vi) 	
      which deem the Company to be holding certain assets in
      trust for Glencore on behalf of Glencore, since third parties dealing with
      the Company might otherwise have a preferential interest in the assets
      which are the subject of the deemed trust; or

	 	 	 
		(vii) 	
      which provide or have the effect of providing for a
      higher rate of interest after than before default or for the payment of
      rates and/or fees which may exceed the “criminal interest rate” provisions
      of the Criminal Code (Canada); and

	 	 	 
		(viii) 	
      which constitute an agreement to agree;

	 	 	 
	(k) 	
      provisions providing indemnification for a party's own
      acts or omissions when such act or omission involves negligence, a wilful
      or unlawful conduct or is found to constitute a penalty or be against
      public policy may not be enforceable and the enforceability of rights of
      indemnity may be limited to the extent that any such indemnity is found by
      a court to indemnify a party against the consequences of an unlawful act
      or is found to constitute a penalty or be against public policy;
  and

5.4(e) - 6 

	(l) 	
      to the extent that a particular contractual provision
      (including the obligation to pay default interest) is characterized by the
      British Columbia Courts as a penalty, and not as a genuine pre-estimate of
      damages, it will not be enforceable notwithstanding its characterization
      by the parties.

6.                     
RELIANCE LIMITATION 

                         This
opinion is intended for the sole benefit of the addressees and may not be made
available to or relied upon by any other person, firm or entity without our
prior written consent. This opinion is limited to the matters expressly set
forth in this letter, and no opinion has been implied, or may be inferred,
beyond the matters expressly stated. This opinion speaks only as to law and
facts in effect or existing as of the date hereof and we undertake no obligation
or responsibility to update or supplement this opinion to reflect any facts or
circumstances that may hereafter come to our attention or any changes in any law
that may hereafter occur. 

Yours truly, 

EXHIBIT 5.4(f) 
FORM OF TROUTMAN SANDERS OPINION

          1.      The
Registration Statement became effective upon filing with the Securities and
Exchange Commission. To the best of our knowledge, no stop order suspending the
effectiveness of the Registration Statement has been issued under the Securities
Act of 1933, as amended no proceedings for such purpose have been instituted or
are pending, contemplated or threatened by the Securities and Exchange
Commission.

          2.      The
execution and delivery each of the Agreement, the Registration Rights Agreement
and the Rights Certificate, by the Company and the performance by the Company of
obligations thereunder (i) will not result in any violation of the United States
federal securities law or the laws of the State of New York and (iii) will not
require any consent, approval, authorization or other order of, or registration
with, any New York or United States court or other governmental or regulatory
authority or agency, except for such consents, approvals, authorizations,
orders, or registrations which have been obtained or made by the Company or its
subsidiaries and are in full force and effect under the Securities Act of 1933
or applicable state securities or blue sky laws. 

          3.      Based
solely on the review of a letter, dated ____________, 2013, from the NYSE
Regulation delivered to you on the date hereof, the Rights Offering Shares and
the Standby Shares have been conditionally approved for listing on the NYSE
MKT.

          4.      Based
solely on the review of a letter, dated ____________, 2013, from the NYSE
Regulation delivered to you on the date hereof, the Rights have been approved
for listing on the NYSE MKT. 

          5.      The
statements under the heading “Certain United States Federal Income Tax
Consideration” in the Final Prospectus, to the extent that such statements
purport to constitute summaries of matters of law or regulation or legal
conclusions, fairly and accurately summarize the matters described therein in
all material respects, except that we render no opinion as to the Company’s
status as a “passive foreign investment company” within the meaning of such term
in the U.S. Internal Revenue Code of 1986, as amended.Echo Automotive, Inc.: Exhibit 10.1 - Filed by newsfilecorp.com

FINANCING AND SECURITY AGREEMENT

     This Financing Agreement (this
“Agreement”) is entered into this 20th day of May 2013 by and among
Echo Automotive, Inc., a Nevada corporation (the “Company”) and United Fleet
Financing LLC (“EASLER”). Each of the parties to this Agreement also referred to
as a “Party” and collectively the “Parties.” This Agreement sets forth the terms
for mezzanine financing to the Company from EASLER.

RECITALS

     WHEREAS, the Parties and their
respective Board of Directors have agreed to enter into a financing agreement as
detailed within; 

     WHEREAS, the Parties intend to
clarify the commitment of EASLER to providing financing for the Company as
evidenced by this Agreement; 

     WHEREAS, the Company will agree
to specific terms and conditions for such financing; 

     WHEREAS, EASLER will agree to
provide $1,500,000 of funding to the Company as part of this Agreement;

     WHEREAS, the Parties agree that
said funding will be provided to the Company in installment payments pursuant to
a form of Secured Convertible Note in the form set forth in Exhibit A;
and 

     WHEREAS, the Agreement will
provide for certain conversion and payable in kind features.

     NOW THEREFORE BE IT RESOLVED,
that for consideration noted in this Agreement, which all parties deem
sufficient, and intending to be bound by the provisions hereof, the Parties
agree as follows:

AGREEMENT

     1.
Financing. EASLER hereby agrees to provide the Company with
funding with the following schedule (the “Funding Commitments”): 

          1.1
Upon the execution of this Agreement, EASLER hereby agrees to provide the
Company $1,500,000 of funding (“Funding”) which will be issued by wire transfer
in nine (9) monthly installments (“Payment Schedule”) pursuant to the schedule
described within the Payment Schedule Table below.

Payment Schedule Table

	1 	6/15/13 	$166,000.00 
	2 	7/15/13 	$166,000.00 
	3 	7/30/13 	$166,000.00 
	4 	8/1/13 	$166,000.00 
	5 	9/1/13 	$166,000.00 
	6 	10/1/13 	$166,000.00 
	7 	11/1/13 	$166,000.00 
	8 	12/1/13 	$166,000.00 
	9 	1/1/14 	$172,000.00 

1

          1.2
As set forth within this Agreement, in connection for each $0.55 EASLER
provided in cash for financing for the Company, EASLER will receive a warrant to
purchase 1.25 shares of Echo restricted common stock at a per share exercise
price of $0.65 with a term of eighteen (18) months (the “Warrants”). The
Warrants shall be in substantially the form attached hereto as Exhibit
B.

          1.3
For purposes of clarification, subject to the other provisions of this
Agreement, upon final payment of the full Funding, the Company will have
received $1,500,000 from EASLER and the Company shall have issued Warrants to
EASLER to purchase 3,409,091 shares of Company restricted common stock at an
exercise price of $0.65 per share of cash received by the Company from EASLER
(“Warrant” or “Warrants”). The Warrants will have an eighteen (18) month
exercise right from date of issuance and will have a strike price of $0.65 per
share. Any Warrants due to EASLER from the Company will occur within ninety (90)
days from the receipt of any cash, resulting from the financing described
within, which triggers the Warrant(s) issuance. (Example: Company receives
$166,000 of cash from EASLER per this Agreement = $166,000/$0.55 = 301,818 X
1.25 = 377,273 of exercisable warrant at $0.65 strike price).

          1.4
The Funding is being provided to the Company by EASLER which has a maturity
date of five (5) years from the date of the first advance (“Maturity Date”).
Company may give Notice to EASLER of their request to convert any amount due
under the Note at any time after the 1 year anniversary of such Note. Upon
Notice, EASLER will have 5 business days to either convert per the terms of this
agreement or request to be paid in cash by Company. 

          1.5
EASLER may convert all amounts due Echo as described in the Note, Echo
Common stock, at any time.

          1.6
The eight percent (8%) interest due to EASLER will be paid annually with an
additional payable in kind (PIK) Note which will also bear interest at eight
percent (8%) paid annually (“Interest”). Interest will be accrued annually and
will not be due until the Maturity Date described within. The Company will have
the option to pay the Interest at any time during the Term without any type of
penalty in cash or common shares of the Company, at the Companies sole option,
calculated as 1 share per $0.55 of interest owed. 

          1.7
If EASLER elects, at its sole discretion, to convert any of the outstanding
Note balance to Echo restricted common stock, the conversion rate will be one
share of Company restricted common stock for each $0.55 (“Conversion”) (Example:
$1.5M repayment amount would convert to approximately 2,727,273 Echo restricted
common shares [$1,500,000/$0.55 = 2,727,273]). 

          1.8
If EASLER does not exercise each Warrant within the five (5) year term, the
Warrant will expire without further obligations from the Company.

          1.9
In the event both Parties agree in writing to accelerate the payment of any
portion of the Funding, EASLER will be provided with an additional Warrant per
the terms above for each dollar accelerated. For clarity, if EASLER were to
accelerate $100,000 of the funding from the last month, he would receive an
additional 100,000 Warrants.

     2. Default by
Easler.

          2.1
Acceleration of Obligations. In the event that any payment
required pursuant to Section 1 is not delivered to the Company within 15 days
after written Notice of a demand of the date such payment is due, all
obligations for payments pursuant to Section 1 will accelerate, and EASLER shall be obligated to provide the entire remaining Funding to
the Company, provided that no default or event of default has accrued or is
continuing by the Company under any agreement with Holder.

2

          2.2
Security Interest: To secure repayment of the Note, the
Company grants to EASLER a first lien security interest in the assets of the
company, including all patents, IP, and all other assets, of any kind until this
note is paid in full or converted per the terms of this agreement. This Security
Interest will be not be subordinated to any other debt or agreement without the
written consent of both parties.

     3. GENERAL
PROVISIONS.

          3.1
Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.

          3.2
Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Arizona, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
law. 

          3.3
Counterparts; Facsimile. This Agreement may be executed and
delivered by facsimile signature and in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.

          3.4
Amendments and Waivers. The terms of this Agreement may be
amended, terminated or waived only with the written consent of the Parties. 

          3.5
Notice. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, sent by facsimile or electronic mail or
otherwise delivered by hand, messenger or courier service addressed to the
address or record for the Parties on the Company’s books and records. Each such
notice or other communication shall for all purposes of this Agreement be
treated as effective or having been given (i) if delivered by hand, messenger or
courier service, when delivered (or if sent via a nationally-recognized
overnight courier service, freight prepaid, specifying next-business-day
delivery, one business day after deposit with the courier), or (ii) if sent via
mail, at the earlier of its receipt or three days after the same has been
deposited in a regularly-maintained receptacle for the deposit of the United
States mail, addressed and mailed as aforesaid, or (iii) if sent via facsimile,
upon confirmation of facsimile transfer or, if sent via electronic mail, when
directed to the relevant electronic mail address, if sent during normal business
hours of the recipient, or if not sent during normal business hours of the
recipient, then on the recipient’s next business day.

          3.6
Severability. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provision.

          3.7
Entire Agreement. This Agreement and the Exchange Agreement
constitute the full and entire understanding and agreement between the parties
with respect to the subject matter hereof, and any other written or oral
agreement relating to the subject matter hereof existing between the parties are
expressly canceled. To the extent of any conflict between this Agreement, the
Exchange Agreement or the EASLER Agreement, the Parties agree that the terms of
this Agreement shall prevail. 

3

IN WITNESS WHEREOF, the undersigned have caused their duly
authorized officers to execute this Agreement as of the date first above
written.

	 	THE COMPANY: 
	 	 
	 	ECHO AUTOMOTIVE, Inc., a Nevada
      corporation 
	 	 
	 	By: 	 
    
	 	  	DAN KENNEDY 
	 	  	Chief Executive Officer 
	 	  	  
	 	EASLER: 
	 	 
	 	UNITED FLEET FINANCING LLC 
	 	 
	 	By: 	 
    
	 	 	 
	 	Name: 	 
                         
             Kevin Easler 
	 	 	 
	 	Title: Sole Member

4

EXHIBIT A

Form of Secured Convertible Promissory Note

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, NOR UNDER ANY STATE SECURITIES LAW AND MAY NOT BE PLEDGED,
SOLD, ASSIGNED OR TRANSFERRED UNLESS (I) A REGISTRATION STATEMENT WITH RESPECT
THERETO IS EFFECTIVE UNDER THE SECURITIES ACT OF 1933, AS 

AMENDED (THE "SECURITIES ACT"), AND ANY APPLICABLE STATE
SECURITIES LAW REQUIREMENTS HAVE BEEN MET OR (II) EXEMPTIONS FROM THE
REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT AND THE REGISTRATION OR
QUALIFICATION REQUIREMENTS OF APPLICABLE STATE SECURITIES LAWS ARE
AVAILABLE.

$1,500,000.00

ECHO AUTOMOTIVE, INC.

SECURED CONVERTIBLE PROMISSORY NOTE

May __, 2013

     Echo Automotive, Inc. a Nevada
corporation (the "Company"), the principal office of which is located at
16000 N. 80th Street, Suite E, Scottsdale, Arizona 85260, for value
received hereby promises to pay to United Fleet Financing LLC (the
"Holder"), or its registered assigns, the sum of One Million Five Hundred
Thousand Dollars and No Cents ($1,500,000.00), or such lesser amount as shall
then be outstanding hereunder. The principal amount hereof shall be funded by
Holder in several installments of One Hundred Sixty-Six Thousand Dollars and No
Cents ($166,000.00) on the date hereof and each month thereafter as set forth in
Schedule 1. Any unpaid accrued interest hereon, as set forth below, shall be due
and payable on each annual anniversary date of funding, or (ii) when declared
due and payable by the Holder upon the occurrence of an Event of Default (as
defined below). Payment for all principal amounts due hereunder shall be made by
mail to the registered address of the Holder at the end of the five (5) year
term unless accelerated for an event of default. This Secured Convertible
Promissory Note (“Note”) is one in a series of Notes issued by the
Company pursuant to that certain Financing and Security Agreement, dated as of
May 20, 2013, by and among the Company, Holder and certain other persons (the
“Financing and Security Agreement”). To the extent of any conflict
between the Financing and Security Agreement and this Note, the term of the Note
shall prevail and supersede in material respects.

     The following is a statement of
the rights of the Holder of this Note and the conditions to which this Note is
subject, and to which the Holder hereof, by the acceptance of this Note,
agrees:

     1. Definitions. As used in
this Note, the following terms, unless the context otherwise requires, have the
following meanings:

     (i)
"Company" includes any corporation which shall succeed to or assume the
obligations of the Company under this Note.

     (ii)
"Holder," when the context refers to a holder of this Note, shall mean
any person who shall at the time be the registered holder of this Note.

     2. Interest. Upon the
maturity of this Note, the Company shall pay interest at the rate of eight
percent (8.0%) per annum (the "Initial Interest Rate") on the principal
outstanding during the period beginning on the date of issuance of this Note and
ending on the date that the principal amount of this Note becomes due and
payable. In the event that the principal amount of this Note is not paid in full
when such amount becomes due and payable, interest at the rate equal to the
lesser of (a) the Initial Interest Rate plus five percent (5.0%) or (b) the
highest rate then permitted by law shall continue to accrue on the balance of
any unpaid principal until such balance is paid.

     3. Events of Default. If
any of the events specified in this Section 3 shall occur (herein
individually referred to as an "Event of Default"), the Holder of this
Note may, so long as such condition exists, declare the entire principal and
unpaid accrued interest hereon immediately due and payable, by notice in writing
to the Company:

     (i)
failure by the Company to make any payment under this Note of the principal or
unpaid accrued interest of this Note when due and payable if such failure is not
cured by the Company within ten (10) days after the Holder has given the Company
written notice of such default; or

     (ii)
failure of the Company to perform any other covenant contained herein or in any
other Loan Document (as defined in the Loan and Security Agreement), if the same
has continued for thirty (30) days after written notice specifying such failure
has been delivered to the Company by Holder; or

     (iii) an
Event of Default occurs on any of the other Notes and such default is not cured
within any applicable cure period in such Note; or

     (iv) the
institution by the Company of proceedings to be adjudicated as bankrupt or
insolvent, or the consent by it to institution of bankruptcy or insolvency
proceedings against it or the filing by it of a petition or answer or consent
seeking reorganization or release under the federal Bankruptcy Act, or any other
applicable federal or state law, or the consent by it to the filing of any such
petition or the appointment of a receiver, liquidator, assignee, trustee, or
other similar official of the Company, or of any substantial part of its
property, or the making by it of an assignment for the benefit of creditors, or
the taking of corporate action by the Company in furtherance of any such action;
or

     (v) if,
within sixty (60) days after the commencement of an action against the Company
(and service of process in connection therewith on the Company) seeking any
bankruptcy, insolvency, reorganization, liquidation, dissolution, or similar
relief under any present or future statute, law, or regulation, such action
shall not have been resolved in favor of the Company or all orders or
proceedings thereunder affecting the operations or the business of the Company
stayed, or if the stay of any such order or proceeding shall thereafter be set
aside, or if, within sixty (60) days after the appointment without the consent
or acquiescence of the Company of any trustee, receiver, or liquidator of the
Company or of all or any substantial part of the properties of the Company, such
appointment shall not have been vacated; or

-2-

     (vi) any
declared default of the Company under any Senior Indebtedness (as defined below)
that gives the holder thereof the right to accelerate such Senior Indebtedness,
and such Senior Indebtedness is in fact accelerated by the holder.

     4. Warrants. For each
installment of One Hundred Sixty-Six Thousand Dollars and No Cents
($166,000.00), Holder shall receive a five (5) year warrant to purchase 377,273
common shares of the Company at $0.65 per share.

     5. Security. The
obligations of the Company to the Holder pursuant to this Note shall be secured
by a lien on all assets of the Company, including a Pledge of the LLC’s
interests of Advanced Technical Asset Holdings LLC acquired on April 5, 2013,
which lien shall be evidenced by a security agreement. The lien in favor of
Holder shall be subordinated to any lien in favor of the holder(s) of the Senior
Indebtedness as provided in Section 4 of this Note. The Company hereby
authorizes and appoints the Holder to take all such action, including the filing
of a UCC-1 form.

     6. Conversion.

          6.1.
Voluntary Conversion. The Holder of this Note shall have the right, at
the Holder's option, to convert the entire unpaid principal amount and accrued
interest under this Note, in whole but not in part, into fully paid and
nonassessable shares of the Company’s common stock, par value $0.001 (the
“Common Stock”), at a per share conversion price equal to $0.55 per
share, subject to adjustment as provided below in Section 7 (the
“Conversion Price”).

          6.2.
Conversion Procedure. Before the Holder shall be entitled to convert this
Note into shares of Common Stock pursuant to Section 6.1, it shall (i)
surrender this Note, duly endorsed, at the principal corporate office of the
Company, (ii) deliver the Notice of Conversion set forth on Exhibit A
attached hereto by mail, postage prepaid, to the Company at its principal
corporate office, and (iii) state therein the name or names in which the
certificate or certificates for shares of Common Stock are to be issued. At its
expense, the Company shall, as soon as practicable thereafter, issue and deliver
to such Holder at the address of such Holder specified in the Notice of
Conversion a certificate or certificates for the number of shares which the
Holder shall be entitled upon such conversion (bearing such legends as are
required by applicable state and federal securities laws in the opinion of
counsel to the Company), together with any other securities and property to
which the Holder is entitled upon such conversion under the terms of this Note,
including a check payable to the Holder for any cash amounts payable as
described below in Section 6.4. Such conversion shall be deemed to have
been made immediately prior to the close of business on the date of such
surrender of this Note, and the person or persons entitled to receive the shares
of Common Stock issuable upon such conversion shall be treated for all purposes
as the record holder or holders of such shares of Common Stock as of such
date.

          6.3.
Mechanics and Effect of Conversion. No fractional shares shall be issued
upon conversion of this Note. In lieu of the Company issuing any fractional
shares to the Holder upon the conversion of this Note, the Company shall pay to
the Holder the amount of outstanding principal that is not so converted, such
payment to be made in cash. Upon conversion of this Note, the Company shall be
forever released from all its obligations and liabilities under this Note.

     7. Conversion Price
Adjustments.

          7.1.
Adjustments for Stock Splits and Subdivisions. In the event the Company
should at any time or from time to time after the date of issuance hereof fix a
record date for the effectuation of a split or subdivision of the outstanding
shares of Common Stock or the determination of holders of Common Stock entitled
to receive a dividend or other distribution payable in additional shares of Common Stock or other securities or rights convertible into,
or entitling the holder thereof to receive directly or indirectly, additional
shares of Common Stock (hereinafter referred to as “Stock Equivalents”)
without payment of any consideration by such holder for the additional shares of
Common Stock or the Stock Equivalents (including the additional shares of Common
Stock issuable upon conversion or exercise thereof), then, as of such record
date (or the date of such dividend, distribution, split, or subdivision if no
record date is fixed), the Conversion Price of this Note shall be appropriately
decreased so that the number of shares of Common Stock issuable upon conversion
of this Note shall be increased in proportion to such increase of outstanding
shares.

-3-

          7.2.
Adjustments for Reverse Stock Splits. If the number of shares of Common
Stock outstanding at any time after the date hereof is decreased by a
combination of the outstanding shares of Common Stock, then, following the
record date of such combination, the Conversion Price for this Note shall be
appropriately increased so that the number of shares of Common Stock issuable on
conversion hereof shall be decreased in proportion to such decrease in
outstanding shares.

          7.3.
Reclassification, Etc. In case of any reclassification or change of the
outstanding securities of the Company or of any reorganization of the Company
(or any other corporation the stock or securities of which are at the time
receivable upon the conversion of this Note) or any similar corporate
reorganization on or after the date hereof, or in the case the Company shall
consolidate with or merge into another corporation or convey all or
substantially all of its assets to another corporation on or after the date
hereof, then and in each such case the Holder of this Note, upon the conversion
hereof at any time after the consummation of such reclassification, change,
reorganization, consolidation, merger or conveyance, shall be entitled to
receive, in lieu of the stock or other securities and property receivable upon
the conversion hereof prior to such consummation, the stock or other securities
or property to which such Holder would have been entitled upon such consummation
if such Holder had converted this Note immediately prior thereto, all subject to
further adjustment as provided herein; and in each such case, the terms of this
Section 7.3 shall be applicable to the shares of stock or other
securities or property receivable upon the conversion of this Note after such
consummation.

          7.4.
Notices of Record Date, etc. In the event of:

              
  7.4.1 Any taking by the Company of a record of the holders of any
class of securities of the Company for the purpose of determining the holders
thereof who are entitled to receive any dividend (other than a cash dividend
payable out of earned surplus at the same rate as that of the last such cash
dividend theretofore paid) or other distribution, or any right to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right; or

            
    7.4.2 Any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company, or any
transfer of all or substantially all of the assets of the Company to any other
person or any consolidation or merger involving the Company; or

               
 7.4.3 Any voluntary or involuntary dissolution, liquidation, or winding up
of the Company,

then the Company will mail to the holder of this Note at least
ten (10) days prior to the earliest date specified therein, a notice specifying:
(i) the date on which any such record is to be taken for the purpose of such
dividend, distribution, or right, and the amount and character of such dividend,
distribution, or right; and (ii) the date on which any such reorganization,
reclassification, transfer, consolidation, merger, dissolution, liquidation, or winding up is expected to become
effective and the record date for determining stockholders entitled to vote
thereon.

-4-

          7.5.
Reservation of Stock Issuable Upon Conversion. The Company shall at all
times reserve and keep available out of its authorized but unissued shares of
Common Stock solely for the purpose of effecting the conversion of the Note such
number of its shares of Common Stock (and shares of its common stock for
issuance on conversion of such Common Stock) as shall from time to time be
sufficient to effect the conversion of the Note and of the Common Stock; and if
at any time the number of authorized but unissued shares of Common Stock (and
shares of its common stock for issuance on conversion of such Common Stock)
shall not be sufficient to effect the conversion of the entire outstanding
principal amount of this Note, in addition to such other remedies as shall be
available to the holder of this Note, the Company will use its best efforts to
take such corporate action as may, in the opinion of its counsel, be necessary
to increase its authorized but unissued shares of Common Stock or common stock,
as the case may be, to such number of shares as shall be sufficient for such
purposes.

     8. Assignment. Subject to
the restrictions on transfer described in Section 10 below, the rights
and obligations of the Company and the Holder of this Note shall be binding upon
and benefit the successors, assigns, heirs, administrators, and transferees of
the parties.

     9. Waiver and Amendment.
Any provision of this Note may be amended, waived, or modified upon the written
consent of the Company and Holder.

     10. Transfer of This Note or
Securities Issuable on Conversion Hereof. With respect to any offer, sale,
or other disposition of this Note or securities into which such Note may be
converted, the Holder will give written notice to the Company prior thereto,
describing briefly the manner thereof, together with a written opinion of such
Holder's counsel, to the effect that such offer, sale, or other distribution may
be effected without registration or qualification (under any federal or state
law then in effect). Promptly upon receiving such written notice and reasonably
satisfactory opinion, if so requested, the Company shall notify such Holder that
such Holder may sell or otherwise dispose of this Note or such securities, all
in accordance with the terms of the notice delivered to the Company. If a
determination has been made pursuant to this Section 10 that the opinion
of counsel for the Holder is not reasonably satisfactory to the Company, the
Company shall so notify the Holder promptly after such determination has been
made. Each Note thus transferred and each certificate representing the
securities thus transferred shall bear a legend as to the applicable
restrictions on transferability in order to ensure compliance with the
Securities Act, unless in the opinion of counsel for the Company such legend is
not required. The Company may issue stop transfer instructions to its transfer
agent in connection with such restrictions.

     11. Treatment of Note. To
the extent permitted by generally accepted accounting principles, the Company
will treat, account, and report the Note as debt and not equity for accounting
purposes and with respect to any returns filed with federal, state, or local tax
authorities.

     12. Notices. Any notice,
request, or other communication required or permitted hereunder shall be in
writing and shall be deemed to have been duly given on the date of service if
personally served on the party to whom such notice is to be given, on the date
of transmittal of service via telecopy to the party to whom notice is to be
given (with a confirming copy delivered within 24 hours thereafter), or on the
third day after mailing if mailed to the party to whom notice is to be given, by
first class mail, registered or certified mail, postage prepaid, or via a
recognized overnight courier providing a receipt for delivery and properly
addressed at the respective addresses of the parties as set forth herein. Any
party hereto may by notice so given change its address for future notice
hereunder.

-5-

     13. No Stockholder Rights.
Nothing contained in this Note shall be construed as conferring upon the Holder
or any other person the right to vote or to consent or to receive notice as a
stockholder in respect of meetings of stockholders for the election of directors
of the Company or any other matters or any rights whatsoever as a stockholder of
the Company; and no dividends or interest shall be payable or accrued in respect
of shares of capital stock obtainable hereunder until, and only to the extent
that, this Note shall have been converted.

     14. Governing Law. This
Note, the entire relationship of the parties hereto, and any litigation between
the parties (whether grounded in contract, tort, statute, law or equity) shall
be interpreted, construed, and enforced in accordance with the laws of the state
of Arizona, without regard to its choice of law principles.

     15. Heading; References.
All headings used herein are used for convenience only and shall not be used to
construe or interpret this Note. Except where otherwise indicated, all
references herein to Sections refer to Sections hereof.

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

-6-

     IN WITNESS WHEREOF, the Company
has caused this Note to be issued as of the day and year first above
written.

	 	ECHO AUTOMOTIVE, INC. 
	 	  
	 	  
	 	By:  
      ___________________________________
	 	         Dan Kennedy,
      Chief Executive Officer 

	Name of Holder: 	United Fleet Financing LLC 
	  	  
	Address: 	c/o Kevin Easler 
	  	19936 N. 101st Place 
	  	Scottsdale, AZ 85255 

-7-

EXHIBIT A

NOTICE OF CONVERSION

(To Be Signed Only Upon Conversion of Note)

     The undersigned, the holder of
the foregoing Note, hereby surrenders such Note for conversion into shares of
Common Stock of Echo Automotive, Inc. to the extent of $__________unpaid
principal amount of such Note, and requests that the certificates for such
shares be issued in the name of, and delivered to, _____________, whose address
is ______________________

Dated:______________________

	 	(Signature must conform in all respects to
      name of 
	 	holder as specified on the face of the Note)
    
	 	  
	 	  
	 	  
	 	(Address) 

A-1

SCHEDULE 1

Payment Schedule Table

	1 	6/15/13 	$166,000.00 
	2 	7/15/13 	$166,000.00 
	3 	7/30/13 	$166,000.00 
	4 	8/1/13 	$166,000.00 
	5 	9/1/13 	$166,000.00 
	6 	10/1/13 	$166,000.00 
	7 	11/1/13 	$166,000.00 
	8 	12/1/13 	$166,000.00 
	9 	1/1/14 	$172,000.00 

Schedule 1

EXHIBIT B

Form of Warrant Agreement

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER THE
SECURITIES LAWS OF ANY STATE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR
HYPOTHECATED UNLESS PERMITTED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS
PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM AND THE ISSUER OF THESE
SECURITIES HAS BEEN PROVIDED WITH AN OPINION OF LEGAL COUNSEL TO THE HOLDER IN
FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE SECURITIES TO THE EFFECT
THAT SUCH OFFER, SALE, TRANSFER, PLEDGE OR HYPOTHECATION IS EXEMPT FROM
REGISTRATION UNDER SUCH LAWS. 
	 	 
	Date of Issuance: _________, 2013 	Number of Shares__________________ 
	Warrant No. _____	           
                 (subject to adjustment)
  

	 
	ECHO AUTOMOTIVE, INC. 
	A NEVADA CORPORATION 
	 
	 
	Warrant 

     Echo Automotive, Inc., a Nevada
corporation (the “Company”), for value received, hereby certifies that
_______________________(the “Initial Holder”), or its registered assigns
(the Initial Holder or such registered assigns shall be referred to as the
“Registered Holder”), is entitled, subject to the terms set forth below,
to purchase from the Company at any time on or after the Exercise Date and on or
before the Expiration Date, up to ___________shares (the “Warrant
Shares”) of the Company’s common stock, $0.001 par value per share
(“Common Stock”), at a purchase price $______per share (the “Purchase
Price”). The number of shares of Warrant Shares and the Purchase Price may
be adjusted from time to time pursuant to the provisions of this Warrant. As
used herein, “Exercise Date” means any date after the date hereof and
prior to the Expiration Date on which the Registered Holder elects by written
notice to the Company to exercise this Warrant.

     This Warrant is issued pursuant
to that Securities Purchase Agreement, dated as of ___________, 2013, by and
among the Company and the Initial Holder (the “Purchase Agreement”). 

     1. Exercise.

          (a)
Manner of Exercise. This Warrant may be exercised by the Registered
Holder, in whole or in part, by surrendering this Warrant, with the
purchase/exercise form appended hereto as Exhibit A duly executed by such
Registered Holder or by such Registered Holder’s duly authorized attorney, at
the principal office of the Company, or at such other office or agency as the
Company may designate in writing, accompanied by payment in full of the Purchase
Price payable in respect of the number of shares of Warrant Shares purchased
upon such exercise. The Purchase Price may be paid by cash, check, or wire
transfer.

          (b)
Effective Time of Exercise. Each exercise of this Warrant shall be deemed
to have been effected immediately prior to the close of business on the day on
which this Warrant shall have been surrendered to the Company as provided in
Section 1(a) above. At such time, the person or persons in whose name or names
any certificates for Warrant Shares shall be issuable upon such exercise as
provided in Section 1(c) below shall be deemed to have become the holder or
holders of record of the Warrant Shares represented by such certificates.

1

          (c)
Delivery to Holder. As soon as practicable after the exercise of this
Warrant, in whole or in part, and in any event within ten (10) days thereafter,
the Company at its expense will cause to be issued in the name of, and delivered
to, the Registered Holder, or as such Holder (upon payment by such Holder of any
applicable transfer taxes) may direct:

                    (i)
a certificate or certificates for the number of shares of Warrant Shares to
which such Registered Holder shall be entitled, and

                    (ii)
in case such exercise is in part only, a new warrant or warrants (dated the date
hereof) of like tenor, calling in the aggregate on the face or faces thereof for
the number of shares of Warrant Shares equal (without giving effect to any
adjustment therein) to the number of such shares called for on the face of this
Warrant minus the number of such shares purchased by the Registered Holder upon
such exercise as provided in Section 1(a) above. 

     2. Adjustments.

          (a)
Stock Splits and Dividends. If outstanding shares of the Company’s Common
Stock shall be subdivided into a greater number of shares or a dividend in
Common Stock shall be paid in respect of Common Stock, then the Purchase Price
in effect immediately prior to such subdivision or at the record date of such
dividend shall simultaneously with the effectiveness of such subdivision or
immediately after the record date of such dividend be proportionately reduced.
If outstanding shares of Common Stock shall be combined into a smaller number of
shares, then the Purchase Price in effect immediately prior to such combination
shall, simultaneously with the effectiveness of such combination, be
proportionately increased. When any adjustment is required to be made in the
Purchase Price, the number of shares of Warrant Shares purchasable upon the
exercise of this Warrant shall be changed to the number determined by dividing
(i) an amount equal to the number of shares issuable upon the exercise of this
Warrant immediately prior to such adjustment, multiplied by the Purchase Price
in effect immediately prior to such adjustment, by (ii) the Purchase Price in
effect immediately after such adjustment.

          (b)
Reclassification, Etc. In case of any reclassification or change of the
outstanding securities of the Company or of any reorganization of the Company
(or any other corporation the stock or securities of which are at the time
receivable upon the exercise of this Warrant) or any similar corporate
reorganization on or after the date hereof, then and in each such case the
Registered Holder, upon the exercise hereof at any time after the consummation
of such reclassification, change, reorganization, merger or conveyance, shall be
entitled to receive, in lieu of the stock or other securities and property
receivable upon the exercise hereof prior to such consummation, the stock or
other securities or property to which such holder would have been entitled upon
such consummation if such holder had exercised this Warrant immediately prior
thereto, all subject to further adjustment as provided in this Section 2; and in
each such case, the terms of this Section 2 shall be applicable to the shares of
stock or other securities properly receivable upon the exercise of this Warrant
after such consummation.

          (c)
Adjustment Certificate. When any adjustment is required to be made in the
Warrant Shares or the Purchase Price pursuant to this Section 2, the Company
shall promptly mail to the Registered Holder a certificate setting forth (i) a
brief statement of the facts requiring such adjustment, (ii) the Purchase Price
after such adjustment and (iii) the kind and amount of stock or other securities
or property into which this Warrant shall be exercisable after such
adjustment.

     3. Transfers.

          (a)
Unregistered Security. This Warrant and the Warrant Shares have not been
registered under the Securities Act of 1933, as amended (the “Securities
Act”), and may not be sold, pledged, distributed, offered for sale,
transferred or otherwise disposed of in the absence of (i) an effective
registration statement under the Securities Act as to this Warrant or such
Warrant Shares and registration or qualification of this Warrant or such Warrant
Shares under any applicable U.S. federal or state securities law then in effect,
or (ii) an opinion of counsel, reasonably satisfactory to the Company, that such
registration or qualification is not required. Each certificate or other
instrument for Warrant Shares issued upon the exercise of this Warrant shall
bear a legend substantially to the foregoing effect.

2

          (b)
Transferability. Subject to the provisions of Section 3(a) hereof and
subject to the Company’s approval, this Warrant and all rights hereunder are
transferable, in whole or in part, upon surrender of the Warrant with a properly
executed assignment (in the form of Exhibit B hereto) at the principal
office of the Company.

          (c)
Warrant Register. The Company will maintain a register containing the
names and addresses of the Registered Holders of this Warrant. Until any
transfer of this Warrant is made in the warrant register, the Company may treat
the Registered Holder as the absolute owner hereof for all purposes;
provided, however, that if this Warrant is properly assigned in
blank, the Company may (but shall not be required to) treat the bearer hereof as
the absolute owner hereof for all purposes, notwithstanding any notice to the
contrary. Any Registered Holder may change such Registered Holder’s address as
shown on the warrant register by written notice to the Company requesting such
change.

     4. No Impairment. The
Company will not, by amendment of its charter or through reorganization,
consolidation, merger, dissolution, sale of assets or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
of this Warrant, but will (subject to Section 11 below) at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
action as may be necessary or appropriate in order to protect the rights of the
Registered Holder against impairment.

     5. Termination. This
Warrant (and the right to purchase securities upon exercise hereof) shall
terminate five (5) years from the date of issuance of this Warrant (the
“Expiration Date”).

     6. Notices of Certain
Transactions. In the event:

          (a)
the Company shall take a record of the holders of its Common Stock (or other
stock or securities at the time deliverable upon the exercise of this Warrant)
for the purpose of entitling or enabling them to receive any dividend or other
distribution, or to receive any right to subscribe for or purchase any shares of
stock of any class or any other securities, or to receive any other right, to
subscribe for or purchase any shares of stock of any class or any other
securities, or to receive any other right, or

          (b)
of any capital reorganization of the Company, any reclassification of the
capital stock of the Company, or any consolidation or merger of the Company with
or into another corporation, or

          (c)
of the voluntary or involuntary dissolution, liquidation or winding-up of the
Company,

then, and in each such case, the Company will mail or cause to
be mailed to the Registered Holder a notice specifying, as the case may be, (i)
the date on which a record is to be taken for the purpose of such dividend,
distribution or right, and stating the amount and character of such dividend,
distribution or right, or (ii) the effective date on which such
reclassification, reorganization, consolidation, merger, dissolution,
liquidation or winding-up is to take place, and the time, if any is to be fixed,
as of which the holders of record of Warrant Shares shall be entitled to
exchange their shares of Warrant Shares (or such other stock or securities) for
securities or other property deliverable upon such reclassification,
reorganization, consolidation, merger, dissolution, liquidation or winding-up.
Such notice shall be mailed at least ten (10) days prior to the record date or
effective date for the event specified in such notice.

     7. Reservation of Stock.
The Company will at all times reserve and keep available out of its authorized
but unissued stock, solely for the issuance and delivery upon the exercise of
this Warrant and other similar Warrants, such number of its duly authorized
shares of Common Stock as from time to time shall be issuable upon the exercise
of this Warrant and other similar Warrants. All of the shares of Common Stock
issuable upon exercise of this Warrant and other similar Warrants, when issued
and delivered in accordance with the terms hereof and thereof, will be duly
authorized, validly issued, fully paid and non-assessable, subject to no lien or
other encumbrance other than restrictions on transfer arising under applicable
securities laws and restrictions imposed by Section 3 hereof.

3

     8. Exchange of Warrants.
Upon the surrender by the Registered Holder of any Warrant or Warrants, properly
endorsed, to the Company at the principal office of the Company, the Company
will, subject to the provisions of Section 3 hereof, issue and deliver to or
upon the order of such Holder, at the Company’s expense, a new Warrant or
Warrants of like tenor, in the name of such Registered Holder or as such
Registered Holder (upon payment by such Registered Holder of any applicable
transfer taxes) may direct, calling in the aggregate on the face or faces
thereof for the number of shares of Common Stock called for on the face or faces
of the Warrant or Warrants so surrendered.

     9. Replacement of
Warrants. Upon receipt of evidence reasonably satisfactory to the Company of
the loss, theft, destruction or mutilation of this Warrant and (in the case of
loss, theft or destruction) upon delivery of an indemnity agreement (with surety
if reasonably required) in an amount reasonably satisfactory to the Company, or
(in the case of mutilation) upon surrender and cancellation of this Warrant, the
Company will issue, in lieu thereof, a new Warrant of like tenor.

     10. Notices. Any notice
required or permitted by this Warrant shall be in writing and shall be deemed
sufficient upon receipt, when delivered personally or by courier, overnight
delivery service or confirmed facsimile, or forty-eight (48) hours after being
deposited in the regular mail as certified or registered mail (airmail if sent
internationally) with postage prepaid, addressed (a) if to the Registered
Holder, to the address of the Registered Holder most recently furnished in
writing to the Company and (b) if to the Company, to the address set forth below
or subsequently modified by written notice to the Registered Holder.

     11. No Rights as
Stockholder. Until the exercise of this Warrant, the Registered Holder shall
not have or exercise any rights by virtue hereof as a stockholder of the
Company.

     12. Representations of
Registered Holder. By acceptance of this Warrant, the Registered Holder
hereby represents and acknowledges to the Company that:

          (a)
this Warrant and the Warrant Shares are “restricted securities” as such
term is used in the rules and regulations under the Securities Act and that such
securities have not been and will not be registered under the Securities Act or
any state securities law, and that such securities must be held indefinitely
unless registration is effected or transfer can be made pursuant to appropriate
exemptions;

          (b)
the Registered Holder has read, and fully understands, the terms of this Warrant
set forth on its face and the attachments hereto, including the restrictions on
transfer contained herein;

          (c)
the Registered Holder is purchasing for investment for its own account and not
with a view to or for sale in connection with any distribution of this Warrant
and the Warrant Shares and it has no intention of selling such securities in a
public distribution in violation of the federal securities laws or any
applicable state securities laws; provided that nothing contained herein will
prevent the Registered Holder from transferring such securities in compliance
with the terms of this Warrant and the applicable federal and state securities
laws; and

          (d)
the Company may affix one or more legends, including a legend in substantially
the following form (in addition to any other legend(s), if any, required by
applicable state corporate and/or securities laws) to certificates representing
Warrant Shares:

	
      “THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
      REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
      “ACT”), OR UNDER THE SECURITIES LAWS OF ANY STATE. THESE SECURITIES
      ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY
      NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED
      UNLESS PERMITTED UNDER THE ACT AND APPLICABLE STATE
      SECURITIES LAWS PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM
      AND THE ISSUER OF THESE SECURITIES HAS BEEN PROVIDED WITH AN
      OPINION OF LEGAL COUNSEL TO THE HOLDER IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE SECURITIES TO THE EFFECT
      THAT SUCH OFFER, SALE, TRANSFER, PLEDGE OR HYPOTHECATION IS EXEMPT
    FROM REGISTRATION UNDER SUCH LAWS.” 

4

     13. No Fractional Shares.
No fractional shares will be issued in connection with any exercise hereunder.
In lieu of any fractional shares which would otherwise be issuable, the Company
shall pay cash equal to the product of such fraction multiplied by the fair
market value of one such share on the date of exercise, as determined in good
faith by the Company’s Board of Directors.

     14. Amendment or Waiver.
Any term of this Warrant may be amended or waived upon written consent of the
Company and the Registered Holder.

     15. Headings. The headings
in this Warrant are for purposes of reference only and shall not limit or
otherwise affect the meaning of any provision of this Warrant.

     16. Governing Law. This
Warrant shall be governed, construed and interpreted in accordance with the laws
of the State of Nevada, without giving effect to principles of conflicts of
law.

[Remainder of Page Intentionally Left Blank]

5

     IN WITNESS WHEREOF, the Company
has caused this Warrant to be duly executed and delivered by its authorized
officer as of the date first above written.

	 	ECHO AUTOMOTIVE, INC., a Nevada
      corporation 
	 	 
	 	Signed: 
      __________________________________  
	 	 
	 	By:                         
      Wm. Daniel
      Kennedy                         
      
	 	 
	 	Title:                                      
      CEO                                       
      
	 	 	 
	 	Address: 	16000 N. 80th Street, Suite E 
	 	  	Scottsdale, AZ 85260 
	 	 	 
	 	Phone No.: 	(855) 324-6288 

INITIAL HOLDER: United Fleet Financing
LLC    

By:  __________________________________   

Print
Name:             
KevinEasler                                           

Title:              
Member                                                 

[SIGNATURE PAGE TO ECHO AUTOMOTIVE, INC. WARRANT]

EXHIBIT A

PURCHASE/EXERCISE FORM

	To: ECHO AUTOMOTIVE, INC. 	Dated:_________________ 

     The undersigned, pursuant to the
provisions set forth in the attached Warrant No. ___ hereby irrevocably elects
to purchase _____shares of the Common Stock covered by such Warrant and herewith
makes payment of $________, representing the full purchase price for such shares
at the price per share provided for in such Warrant.

     The undersigned acknowledges that
it has reviewed the representations and warranties contained in Section 12 of
the Warrant and by its signature below hereby makes such representations and
warranties to the Company as of the date hereof.

     The undersigned further
acknowledges that it has reviewed that certain Securities Purchase Agreement,
dated as of ________, 2013, among the Company and certain holders of the
Company’s securities (as amended from time to time) and agrees to be bound by
such provisions.

	 	Signature:
  _________________________________
	 	 
	 	Name (print):
  _______________________________
	 	 
	 	Title (if applic.)
    _____________________________
	 	 
	 	Company (if applic.):
    _________________________

EXHIBIT B

ASSIGNMENT FORM

     FOR VALUE RECEIVED,
_________________________________________hereby sells, assigns and transfers all
of the rights of the undersigned under the attached Warrant with respect to the
number of shares of Common Stock covered thereby set forth below, to:

	Name of
      Assignee 	 	Address/Fax Number 	 	No. of Shares 

 

 

	Dated: _________________________________	Signature:
  _________________________________
	 	 
	 	                  
      _________________________________
	 	 
	  	Witness:  
      _________________________________

B-1

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