Tacora Resources Plans Iron Ore IPO on the TSX

Montana-based Tacora Resources has filed for an initial public offering (IPO) on the Toronto Stock Exchange as it gears up to reopen the Scully iron ore mine in Newfoundland and Labrador.

Last summer, the company bought the asset for $9.8 million from Cleveland-Cliffs (NYSE:CLV), which shut the mine down in 2014. Tacora is preparing to restart production in Q4 of this year, and expects to begin iron ore concentrate shipments about a year after the IPO closes.

The company estimates that restarting the mine will require $205.5 million in capital expenditures. Aside from the equity raise from the IPO, Tacora is also planning to raise money in the debt markets.  

The terms of the IPO have yet to be announced, but BMO Capital Markets and Jeffries Securities will act as lead underwriters for the offering. Meanwhile, Stikeman Elliott will provide legal counsel to Tacora.

In July, the miner entered into a five-year sales agreement with US-based service provider Cargill, which will purchase 100 percent of the high-grade iron ore concentrate produced by Tacora through 2022.

At the time, Tacora’s president, Matt Lehtinen, also announced a new labor agreement with Canada’s United Steelworkers union.

“This region has a rich tradition in iron ore mining and with the continued support of all stakeholders, the people of Labrador West can look forward to seeing Scully’s valued iron reserves come back into production,” he said.

Part of Wabush Mines, Scully began operating in 1965, with iron concentrate railed to a pelletizing facility in Quebec for shipment to Europe and North America. Before it closed in 2014, Wabush Mines was Canada’s third-largest iron ore operation, with an annual capacity of 6 million tonnes.

After years of low prices, iron ore rebounded last year and continued to climb in January on the back of Chinese steel production cuts. However, FocusEconomics panelists expect iron ore prices to pull back from current levels as the ban on steel output relaxes in the spring.

They estimate that the average iron ore price will be $59.60 per tonne in 2018. The most bullish forecast for the year comes from Oxford Economics, which is calling for a price of $70; meanwhile, Liberum Capital is the most bearish with a forecast of $42.50.

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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.