Cons Thompson aims to buy majority stake in Wabush Mines

Toronto-based junior Consolidated Thompson Iron Mines (CLM-V) has struck a deal to buy from Cleveland-Cliffs (CLF-N) and Stelco a 71.4% interest in the Wabush Mines iron ore joint venture in Labrador and Quebec for US$64.3 million plus 3 million warrants. Each warrant allows the holder to buy a share for $5.10 within two years

However, Mittal Steel subsidiary Dofasco, which owns the remaining 28.6% of the Wabush Mines joint venture, has a 90-day right-of-first refusal on both the Cleveland-Cliffs and Stelco stakes.

As part of the preliminary deal, and assuming that Dofasco doesn’t exercise its purchase option, Consolidated Thompson will enter into an off-take arrangement with Cleveland-Cliffs and Stelco from closing until December 2009 in respect of a portion of their pro rata share of the 4.8 million tonnes committed annual Wabush Mines pellet production

Consolidated Thompson says it s currently in discussions with other international off-take partners for similar agreements.

The Wabush Mines joint venture comprises the Scully iron ore mine, the Point-Noire pelletizing facilities, harbour and port facilities at Sept-Iles, Que., integrated railway facilities and other related assets situated near the town of Wabush, Labrador and in Quebec. Current annual capacity of the Wabush Mines is 4.8 million tonnes of pellets.

Elsewhere in the region, some 10 km north of the Mount-Wright iron ore mine, Consolidated Thompson has its Bloom Lake iron ore deposit, and the company plans to upgrade the Wabush mill to accept Bloom Lake feed, so that the mill’s total capacity would be 8 million tonnes per year. The pelletizing plant would be similarly upgraded.

Production from Bloom Lake is anticipated in early 2009.