Champion Iron to Fully Acquire Bloom Lake Asset for C$211 Million

- May 30th, 2019

Champion Iron subsidiary Quebec Iron Ore has acquired the remaining 36.8 percent stake in the Bloom Lake mining complex for C$211 million.

Through an agreement with the Quebec government, Champion Iron (TSX:CIA,ASX:CIA,OTC Pink:CHPRF) subsidiary Quebec Iron Ore (QIO) has acquired the remaining 36.8 percent stake in the Bloom Lake mining complex for C$211 million.

Prior to this week, Champion held a majority stake in the Bloom Lake iron ore operation while government agent Ressources Québec retained the other share.

The fresh transaction makes Bloom Lake wholly owned by Champion; the company originally gained a stake in the asset in 2016, when it purchased the interest from Cleveland-Cliffs (NYSE:CLF), at the time known as Cliffs Natural Resources, for C$10.5 million.

Mineral reserves at the project are estimated at 411.7 million tonnes with average iron content of 30 percent. Average annual concentrate production of 7.4 million tonnes is expected over a 21 year mine life; total revenues over Bloom Lake’s lifespan are docketed for around C$15.1 billion.

Champion also announced that its subsidiary QIO has completed an agreement with la Caisse de dépôt et placement du Québec (CDPQ) for a preferred share offering of C$185 million.

Additionally, QIO has received a commitment for a fully underwritten US$200 million credit facility with the Bank of Nova Scotia (TSX:BNS,NYSE:BNS) and Société Générale (OTC Pink:SCGLF,EPA:GLE).

According to the company, the proceeds will be used to fund “strategic initiatives” and refinance QIO’s outstanding credit facilities.

“Modifying the capital structure of Champion will provide substantial cost savings to our company. We are thrilled to see CDPQ continue to support our growth initiatives and count on new financial partners like Scotiabank and Société Générale. Their confidence in our company is extremely motivating,” Champion CEO David Cataford said in a statement.

“Increasing our ownership of Bloom Lake to 100 percent is a prudent use of our capital, given the proven production and cash flow generation this project has delivered.”

The company also stated that taking full ownership of Bloom Lake will allow production of high-grade iron ore to increase by approximately 2.75 million tonnes per year; the acquisition is expected to close sometime this summer.

As of 12:50 p.m. EDT on Wednesday (May 29), iron ore was up 0.21 percent at US$98.59 per tonne.

By 11:00 a.m. EDT on the Toronto Stock Exchange, Champion shares were up 1.04 percent and trading at C$2.91 apiece.

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Securities Disclosure: I, Olivia Da Silva, hold no direct investment interest in any company mentioned in this article.

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