‘Quebec Inc.’ backs Niobec purchase

A inflow of cash from Quebec’s biggest institutions has allowed Quebec City-based Mazarin (MAZ-T) to close the $48-million acquisition of Teck‘s (TEK-T) half-interest in the Niobec niobium mine in the Saguenay region.

The National Bank of Canada and the Laurentian Bank of Canada have lent Mazarin $32 million, with $20 million directed toward the acquisition and $12 million used to refinance credit lines to two Mazarin subsidiaries, AlumiCa and Dolomex.

In March, Mazarin arranged a $10-million convertible debenture with the provincial-employee pension fund Caisse de dpt et placement du Qubec, through the latter’s subsidiary, Capital d’Amrique. The debenture bears interest at 10% annually and is convertible into 14.3 million Mazarin shares priced at 70 each.

As a $400,000 payment for arranging the debenture, Mazarin also issued Caisse de dpt 655,738 Mazarin shares at a deemed price of 61 each.

The pension fund now holds more than 4 million Mazarin shares, or a 8.84% interest. If it converts the debenture, that figure would rise to 18.3 million shares for a 31.5% stake.

In addition, the limited partnerships Sodmex and Sodmex II, in which Caisse de dpt indirectly holds an interest, have respectively acquired 947,883 and 781,217 Mazarin shares.

Mazarin has lined up another $10 million from Quebec-government owned Soquem in the form of preferred Mazarin shares and a debenture.

From Quebec’s big labour fund, the Fonds de solidarit FTQ, Mazarin has arranged another $4-million convertible debenture exercisable into Mazarin shares. As well, Mazarin issued 266,666 shares to the labour fund as a fee.

In December, Mazarin raised a total of $5.5 million from three Quebec investment funds: REA Inc., REA Dynamique and SIPAR Inc. About $3 million was raised as a result of issuing shares, while the remaining $2.5 million came in the form of convertible debentures bearing interest at 10% per year.

Teck has now received a $43-million cash payment from Mazarin. The remaining $5 million is due in three years, with no interest accrued.

This is a slight modification of the original deal struck in November 2000, which foresaw an upfront cash payment of $45 million and a later payment of $5 million.

Mazarin now assumes operatorship of the mine. Cambior (CBJ-T), which owns the remaining 50% interest, retains its role as marketer of all niobium production.

Prior to closing the Niobec acquisition, Mazarin completed a reorganization that grouped together the assets held by AlumiCa, Dolomex and the numbered company 9098-8890 Quebec, which holds Mazarin’s Lac Knife graphite project. The company resulting from this amalgamation is 9102-3648 Quebec.

For the nine months ended Dec. 31, 2000, Mazarin posted a net loss of $945,000 (3 per share) on revenue of $7.4 million, compared with a loss of $908,000 (3 per share) on revenue of $6.1 million during the corresponding period in 1999.

In January, Mazarin signed an agreement to supply a large American steel manufacturer with 4,000 tonnes of calcium aluminate per year, representing more than $1.5 million in annual sales.