Jun 8 2007
Stelco Inc. announced today that it has entered into an agreement providing for the sale of its 44.6% interest in the Wabush mine joint venture to Consolidated Thompson Mines Limited ("Consolidated") for total consideration with an estimated value to Stelco of $163.4 million.
The total transaction value includes cash of $44.4 million, assumed liabilities estimated at $94.6 million, approximately 1.9 million warrants to purchase shares of Consolidated valued at $1.7 million, and an agreement for Consolidated to supply iron ore pellets to Stelco until December 31, 2009 valued at $22.7 million. In addition, Stelco will retain its share of the Wabush iron ore inventory, which is valued at approximately $35.7 million.
The Wabush mine joint venture holds assets including the Scully iron ore mine and related assets situated at or near Wabush, Newfoundland and Labrador, and pelletizing facilities and related infrastructure located in Quebec. Wabush joint venture partners include Stelco, Cleveland-Cliffs Inc. (26.8%), and Dofasco Inc. (28.6%). The sale of Stelco's interest in Wabush is the result of an agreement between Stelco and Cleveland-Cliffs Inc, the mine's operating partner, with Consolidated providing for the sale of the interests of each of Stelco and Cleveland-Cliffs Inc to Consolidated.
"The Wabush mine requires some redevelopment work which has an associated capital requirement. Consolidated is better positioned to complete this work given operating synergies available to them with their neighbouring mining interests," said Rodney Mott, President and CEO. "This transaction will improve our financial position and accelerates our efforts to surface value in Stelco," added Mott.
Completion of the transaction is subject to the execution of definitive agreements and the receipt of all required third party consents and regulatory approvals. Dofasco Inc., the owner of the remaining 28.6% interest in the Wabush mine joint venture, has a right of first refusal over the proposed transaction which may be exercised for a period of 90 days in accordance with the provisions of the project agreements governing the joint venture. It is expected that the completion of the transaction will occur shortly following the waiver or expiry of the right of first refusal in favour of Dofasco Inc.
Stelco's iron ore interests in the Tilden and Hibbing mining projects are not impacted by this transaction.