Consolidated Thompson strikes financing deal
The Canadian Press
March 6, 2008 at 6:13 PM EST
TORONTO — — Consolidated Thompson Iron Mines Ltd., [CLM-T ]a Toronto-based miner, says it has struck a financing deal to raise $156-million to help launch the Bloom Lake open-pit iron mine in Quebec.
This agreement "positions us with a very strong balance sheet in terms of cash," Richard Quesnel, president and chief executive officer, said Thursday in an interview.
"We already had $190-million in cash in hand. So with this financing it almost completes the financing requirement for the project," he said.
The company has struck a deal with underwriters to sell 20 million shares at $7.80 each and will use the money for the Bloom Lake mine in the North Shore region near Fermont, Que., and for acquisitions and working capital.
Consol. Thompson Iron Mines
Earlier Thursday, the Quebec government approved the mine, expected to operate for 34 years. Consolidated Thompson had bought the property in September, 2005.
The company announced Thursday that it had signed the financing agreement, which took about nine months to negotiate, with a syndicate of underwriters led by Macquarie Capital Markets, and including Canaccord Capital Corp., GMP Securities and RBC Capital Markets.
Mr. Quesnel said "we've already spent $50-million on the project itself. We're getting very close to finalizing our requirements."
The financing deal "gives us more flexibility to be able to move on and develop the mine now that we have our permits on a fast track and be able to deliver by the second quarter of 2009."
The mine is expected to begin operating in 2009 and produce seven million tonnes of high-quality 66.5 per cent iron concentrate per year.
The company said early last year, following the completion of a feasibility study, that the capital cost for the mine would be about $410-million.
China-based Worldlink Resources Ltd. had previously agreed to buy seven megatonnes, representing a full year of production.
The world's largest iron producer, Companhia Vale do Rio Doce, recently negotiated a 65 per cent hike in iron prices from some of its major customers — putting upward pressure on the widely used base metal, a primary raw material for steel production.
The deal with Worldlink comes at a time when the demand for steel has grown by 33 per cent in China over the last three years.
"The iron market is known to be cyclical, and the prospects for the next few years are very encouraging. Very strong demand for our product and rising prices on world markets make this an exceptionally good time to launch our project," Mr. Quesnel said.
"We've already committed roughly about half of our expense in terms of locking in on equipment, on supplies and the cement and infrastructure bringing it online," he said.
According to the feasibility study, total operating costs would be about $19.76 (U.S.) per tonne concentrate, with a total undiscounted cash flow of $2.75-billion, and forecast yearly cash flow exceeding $150-million.
The payback has been set at about 2.5 years.
At this point, Mr. Quesnel doesn't see any threat from a U.S. recession, but said "a global recession would have an impact."
The driver in the steel market has been the Asian market over the past three or four years with demand at 10 per cent and plus in China as well as India, he said.
In contrast, North American and European growth on steel consumption has been about 2 to 3 per cent, he said.
The ore will be moved directly by rail and ship to China through the deep sea port at Sept-Îles, Que. "We're building our own facilities there," Mr. Quesnel said.
To keep costs down, "We're setting ourselves up for bigger ships in the neighbourhood of 300,000 tonnes," he said.
As well, some of the highest quality ore comes from Canada.
"Ours is at 66.5 per cent concentrate. In the blast furnace this produces more tonnes per hour than, say, 58 per cent like some of the ore from Brazil," Mr. Quesnel said.
"The better quality there is, the more attractive it is to steel mills."
