Cons Thompson Iron to acquire 71.4% of Wabush JV
2007-06-06 11:22 ET - News Release
Shares issued 37,557,452
CLM Close 2007-06-05 C$ 5.10
Mr. Richard Quesnel reports
CONSOLIDATED THOMPSON ANNOUNCES PURCHASE OF MAJORITY INTEREST IN WABUSH MINES JOINT VENTURE
Consolidated Thompson Iron Mines Ltd. has entered into an agreement with Cleveland-Cliffs Inc. and Stelco Inc. to acquire a 71.4-per-cent interest in the Wabush Mines joint venture for a purchase price of $64.3-million (U.S.) plus 3.0 million common share purchase warrants. Each common share purchase warrant will entitle the holder thereof to acquire one CLM common share for a period of two years from issue at a price of $5.10 (Canadian) which is the closing price of the common shares of CLM on June 5, 2007. The boards of directors of each of Cleveland-Cliffs and Stelco have conditionally accepted this offer, subject to the purchase option of Dofasco Inc. discussed below. In connection with the acquisition and assuming that Dofasco does not exercise its purchase option, CLM will enter into an offtake arrangement with Cleveland-Cliffs and Stelco from closing until December, 2009, in respect of a portion of their pro rata share of the 4.8 million tonnes committed annual Wabush Mines pellet production. CLM is currently in discussions with other international offtake partners and it is confident that definitive agreements can be reached in the near term.
The Wabush Mines joint venture consists of integrated assets including the Scully iron ore mine, Point-Noire pelletizing facilities, harbour and port facilities at Sept-Iles, integrated railway facilities, and other related assets situated near Wabush, in Newfoundland and Labrador and Quebec. Current annual capacity of Wabush Mines is approximately 4.8 million metric tonnes of pellets.
The transaction, if accepted, would be beneficial to all parties. CLM would continue to develop Bloom Lake with a number of operational and financial benefits, including:
* Transforming CLM into an integrated producer immediately;
* Improving development timeline of Bloom Lake;
* Establishing offtake relationships;
* Operational synergies between Wabush and Bloom Lake;
* Strong financial accretion from year one.
Assuming completion of the acquisition, CLM would upgrade the milling facilities at Wabush to produce high-quality iron ore concentrate from the Bloom Lake iron ore deposit and the Scully mine at a rate exceeding 8.0 million tonnes per year. CLM would also upgrade the pelletizing facilities at Pointe Noire to process part of this concentrate and produce high-quality pellets in excess of 5.0 million tonnes per year.
CLM's development of Bloom Lake is advancing with the commencement of production now targeted for the first quarter of 2009. CLM believes that the close proximity, extensive infrastructure of the Wabush Mines assets and experienced work force will accelerate the development of the Bloom Lake deposit through the use of shared facilities, access to transportation and port facilities as well as streamline permitting requirements.
Commenting on the proposed acquisition, Richard Quesnel, president and chief executive officer of CLM, said: "While a stand-alone Bloom Lake project is extremely financially robust as evidenced by the results of our recent seven million tonnes per year feasibility study and the signing of a memorandum of understanding with a major China-based trading company for the long-term supply of iron ore concentrate; the proposed acquisition offers CLM the opportunity to have an integrated operation with immediate financial results and substantial operational synergies. As a result, we are very confident that this acquisition would represent immediate added value to our shareholders."
Bruce Humphrey, chairman of CLM, stated: "Since entering into discussions with the owners of Wabush Mines in late 2006, we have had the opportunity to perform extensive due diligence, including technical and engineering reviews as well as consultation with the governments of Newfoundland and Labrador and Quebec and the employees of Wabush Mines. This potential acquisition combined with an expansion at Bloom Lake would generate sustainable development in the area, benefit our regional economies and enhance shareholder value."
Completion of the acquisition is subject to a number of conditions, including receipt of requisite regulatory approval, including without limitation, the acceptance of the TSX Venture Exchange and the execution of definitive agreements. Completion of the acquisition is conditioned upon a 90-day purchase option that may be exercised by Dofasco Inc., a subsidiary of Mittal Steel Company NV, the remaining partner of the Wabush Mines joint venture. If Dofasco exercises this purchase option, the acquisition will not occur. Otherwise, closing is expected to occur shortly after the waiver or expiry of the purchase option. Cleveland-Cliffs and Stelco have granted CLM exclusivity rights with respect to the Wabush Mines joint venture assets during the term of the agreement except for any third party in respect of discussions or negotiations to acquire all shares or assets of Cleveland-Cliffs or Stelco.
Orion Securities Inc. is acting as financial adviser to Consolidated Thompson. Cassels Brock & Blackwell LLP is acting a legal adviser to Consolidated Thompson.
We seek Safe Harbor.
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