Consolidated Thompson shares drop on lost Wabush deal

Dofasco has exercised its option to buy the majority interest in the Wabush Mines iron ore joint venture in Quebec and Labrador, ending an attempt by Consolidated Thompson Iron Mines (CLM-V) to do the same.

Consolidated Thompson announced in June that it had struck a deal with Cleveland Cliffs and (CLF-N) and Stelco (STE-T, SECNF-O) to purchase their combined 71.4% interest in the Wabush Mines for US$64.3 million in cash, as well as some warrants and certain liabilities.

However, Dofasco, a subsidiary of steel maker Mittal Steel (MT-N), which already held the remaining 26.8%, had a 90-day right-of-first refusal on their majority interest.

Consolidated Thompson shares were busy on the Friday before the Labour Day weekend, dropping 9%, or 50, to $4.85 on a trading volume of more than 2 million.

Bruce Humphrey, chair of Consolidated Thompson, says Dofascos decision to buy Wabush shows that consolidation and demand of the iroin ore and steel industry will continue to be strong.

Management believes that both of these trends will eventually benefit Consolidated Thompson and our Bloom Lake deposit, Humphrey says of the companys flagship project, located in Quebec along the south end of the Labrador trough.

The company has been developing Bloom Lake at a rate of 7 million tonnes per year of iron ore concentrate, with production expected by 2009.

The company has committed $50 million in equipment and has secured $200 million in financing with talks of going up to $240 million. It has signed letters of intent to procure cement and structural steel worth $60 million as well.

In the meantime, Consolidated Thompson will keep its eye out for other opportunities, Humphrey says.