National Post

New life for Bloom Lake with buyer for iron ore mine.

- By Peter Koven Financial Post pkoven@nationalpo­st.com Twitter. com/peterkoven

A buyer has finally emerged for the troubled Bloom Lake iron ore mine in Quebec, which was shuttered nearly a year ago after incurring massive losses.

Junior miner Champion Iron Ltd. has won an auction to -buy the mine out of bankrupt cy protection for $10.5 million. Champion, which has offices in Canada and Australia, will also a-ssume $42.8 million of liabil ities as part of the agreement.

“Bloom Lake is considered an exceptiona­l opportunit­y for Champion, and one that w- ould not have presented it self without the challenges of the current downturn in bulk c-ommodities,” executive chair man Michael O’Keeffe said in a statement.

I-ndeed, the price tag is considerab­ly lower than what Bloom Lake fetched the last time it was sold.

In 2011, U. S. miner Cliffs N-atural Resources Inc. ac q-uired the mine for a stagger ing $ 4.9 billion in cash. That deal was done at the absolute top of the iron ore market, and turned out to be a disaster for the buyer.

Bloom Lake simply never worked the way Cliffs expected. T-he company faced major oper ating challenges and incurred losses quarter after quarter u-ntil it finally halted produc tion at the end of 2014. Cliffs then put the mine into creditor protection to insulate itself from future closure costs.

Cliffs was wise to shut down when it did, because Bloom Lake would be losing even more money today due to the crash in iron ore prices. The mine had cash costs of US$91.54 a tonne in 2014, while current iron ore prices are below US$40. Prices h-ave plunged because of soar ing production from Australia, which has created a big glut in the market.

It will not be easy for Champion to make the mine profitable.

Du-ring the bankruptcy pro ceedings, the company said it gained “significan­t insight and confidence” into Bloom Lake. It plans to implement a new mine plan that would boost production to more than seven m- illion tonnes, from six mil l-ion previously. It also sees op portunitie­s for cost reductions, and revealed that commodity traders and steel producers are interested in buying the output from the mine.

Of course, Champion i-s un likely to restart the mine as long as iron ore prices remain this weak. Bloom Lake is currently on so- called “care and maintenanc­e,” which means the plant and equipment a- re being preserved for a po tential restart in the future. Champion said it thinks it can reduce monthly care and maintenanc­e costs.

It is trying to raise capital that would allow it to keep the mine in this state for as long as 24 months.

Champion plans to raise $- 25 million f r om a pri vate placement in order to buy Bloom Lake. Most of that money will come from O’Keeffe and one other party, who have agreed to invest up to $15 million in the company.

Bloom Lake is just one of many mining assets that are being resold for a fraction of what they fetched during the commodity boom.

 ?? Clifs Nat ural Resources ?? Cliffs Natural Resources’ Bloom Lake iron ore mine in Quebec is currently in “care and maintenanc­e”
phase as new buyer Champion Iron Ltd., waits for a recovery in commodity prices.
Clifs Nat ural Resources Cliffs Natural Resources’ Bloom Lake iron ore mine in Quebec is currently in “care and maintenanc­e” phase as new buyer Champion Iron Ltd., waits for a recovery in commodity prices.

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