Champion Minerals shares jump after shareholder rights plan

As rumours swirl that Champion Minerals (CHM-T) might become a takeover target for Arcelor Mittal (MT-N), the junior has adopted a shareholder rights plan. The news sent the company’s shares up 20% or 30¢ apiece on July 4 to close at $1.80.

Champion can be forgiven for feeling a little nervous these days. It is one of the largest landholders in the Fermont iron ore district of the Labrador Trough (northeastern Quebec and western Labrador), and its Fire Lake property is adjacent to the north of ArcelorMittal’s operating Fire Lake mine.

Fire Lake is one of Champion’s 17 properties in the district, where four producers currently account for roughly 40 million tonnes of iron-ore concentrate a year. The Fermont area is attractive with its water, power, roads and railways and its connection to three ports on the north shore of the St. Lawrence Seaway.

Champion owns 82.5% of the 17 properties with its joint-venture partner, Fancamp Exploration (FNC-V), owning the remaining 17.5%.

The Bellechasse property, about 6 km northwest of Champion’s Fire Lake north project, would also be attractive to a company like ArcelorMittal.

Bellechasse hosts a 10-km curvilinear syncline, cored by magnetite-rich iron formation. Champion notes on its website that the synformal geometry of the deposit is “complimentary to open-pit mining methods as the waste:ore strip ratio would be low.”

In 2009, P&E Mining Consultants published a National Instrument  43-101 inferred resource estimate of 215 million tonnes grading 29% total iron — double the historical estimate — based on diamond drilling results along 8 km of the 10 km indicated strike length of iron formation on the property. Champion believes more drilling will boost the current resource and will study the economics and synergies of making the Bellechasse project a satellite deposit that would be included in the upcoming Fire Lake North preliminary economic assessment update.

So far the adjacent properties (Bellechasse and Fire Lake North) have outlined a combined inferred resource estimate of 603 million tonnes grading 29% iron.

Meanwhile, Champion released a resource estimate for its Harvey-Tuttle project in February, which outlined inferred resources of 717 million tonnes grading 25% total iron at a 20% cut-off, or 947 million tonnes grading 23.2% total iron, at a 15% cut-off.

Last year Champion completed an initial drill program at Harvey-Tuttle. Significant assay results included 168.4 metres grading 30.3% total iron and three other intervals more than 92 metres in length containing over 32% total iron. Among 26 drill holes, there were ten, 35-metre intervals, with over 30% total iron.

At presstime Champion Minerals was trading at $1.75 per share within a 52-week range of 70 cents (July 20 2010) and $3.30 (Feb. 4 2011). It has about 84.3 million shares outstanding.