In exchange for the project, Champion agreed to pay C $ 15 million in cash and to extinguish C $ 19.4 million of secured debt of Alderon and some of its affiliates by issuing 4.2 million shares. at Sprott and Altius Resources. The company also agreed to make “a finite production payment out of a fixed amount” of Kami’s future production.
The deal has been approved by the Supreme Court of Newfoundland and Labrador and is expected to close in the fourth quarter. It still requires approval from the provincial Ministry of Industry, Energy and Technology. Deloitte Restructuring acts as court appointed receiver for Alderon.
The Kami high-grade iron ore project is located in the Labrador Trough, near the Quebec border.
As part of the acquisition, Champion plans to obtain additional port capacity of 8 million tonnes per year, including prepayment of port-related costs, at the Port of Sept-Îles, which the company is currently using to export. iron ore from Bloom Lake. focus. As such, the company expects the acquisition to strategically position it for growth.
“As our company quickly gains global recognition for its ability to provide quality iron ore products, the acquisition would further position our company to meet the growing demand for high grade iron ore concentrate around the world.” Champion CEO David Cataford said in a release.
“With our proven ability to transform opportunities into valuable assets for our shareholders, the acquisition would add a very promising project to our portfolio, close to existing infrastructure. “
A 2018 feasibility study by Alderon described a 23-year mine life for Kami, with an average annual production of 7.8 million tonnes of premium concentrate grading 65.2% iron.
In a research note, BMO Capital Markets mining analyst Alexander Pearce noted that the acquisition both brings the production growth potential of a new asset nearby and could potentially reduce port costs for the Champion’s next expansion to Bloom Lake.
“At first glance, the acquisition appears to be a good fit for the business and is easily affordable according to our expectations,” Pearce wrote.
Planned investments of C $ 982 million for Kami could also be reduced through infrastructure shared with Bloom Lake. Champion will update the feasibility to assess potential synergies.
Champion also previously acquired his Bloom Lake under bankruptcy protection. After the mine was returned to service in 2018, the company is now expanding the mine to 15 million tonnes per year, up from 7.4 million tonnes per year.
(This article first appeared in the Canadian Mining Journal)