Thursday 29th September 2016

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Champion Iron begins financing on signing $53.3-million deal to buy Bloom Lake

by Greg Klein | December 11, 2015

Obviously betting on better times ahead, Champion Iron TSX:CIA announced a definitive agreement December 11 to buy the Labrador Trough property abandoned by Cliffs Natural Resources NYE:CLF. Still subject to court approval, Champion subsidiary Quebec Iron Ore would get the assets for $10.5 million, around $41.7 million in environmental costs and about $1.1 million in bond obligations. Now all the company has to do is raise the money.

Champion’s bid was approved last spring by a court-appointed monitor of Cliffs affiliates now under bankruptcy proceedings. Champion expects to close in Q1 2016.

Bloom Lake is considered an exceptional opportunity for Champion and one that would not have presented itself without the challenges of the current downturn in bulk commodities.—Michael O’Keeffe, CEO/chairperson of Champion Iron

To help fund the deal, the company also announced a private placement of up to $25 million. Commitments totalling up to $15 million have already come in from two parties, one of them controlled by Champion CEO/chairperson Michael O’Keeffe, who could end up with as much as 19.95% of the company. “Additionally, discussions with strategic partners, funds, government agencies and private investors are at an advanced stage” that might help finance up to two years of care and maintenance “should low iron ore prices prevail during this period,” Champion stated.

Champion sees a potential increase in annual maximum production, previously six million tons of iron fines at 66% iron, to over seven million tons at a similar grade. The company also hopes to reduce costs substantially.

In November last year Cliffs estimated another $1.2 billion would be needed to make Bloom Lake viable. But Champion’s announcement stated, “Even with an extended care and maintenance and planned upgrade period, Bloom Lake could potentially become one of the lowest capital cost iron ore mines in the world.”

Quebec’s Plan Nord fund has put up $20 million to study the feasibility of a new rail line linking the Bloom Lake-Fire Lake region with the St. Lawrence deep-water port of Sept-Iles. Two railways already serve the Trough, one of them a private carrier operated by an ArcelorMittal subsidiary.

Last May Quebec economy minister Jacques Daoust said the province was open to the idea of investing in Cliff’s former Bloom Lake assets. The company’s subsidiary suspended operations late last year before entering creditor protection in January.

In April Cliffs sold its Ring of Fire chromite deposits to Noront Resources TSXV:NOT for US$27.5 million.

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