Champion Iron Ltd. [CIA-TSX, ASX; CHPRF-OTC] said Wednesday May 29 that its Quebec Iron Ore Inc. subsidiary has concluded an agreement in principal with La Caisse de depot et placement due Quebec (CDPQ) for a preferred share offering of $185 million.
Champion said it has also secured a commitment for a fully underwritten US$200 million credit facility with the Bank of Nova Scotia and Societe Generale.
Champion is a producing iron ore exploration and development company with major projects in the southern Labrador Trough, Canada’s largest iron-ore producing region. Champion is developing eight iron-rich projects, each of which is strategically located near the electrical grid, all-season roads, railway lines, and connections to the Gulf of St. Lawrence.
Its flagship asset has been the 63.2%-owned Bloom Lake iron ore property where commercial production began in June, 2018. Quebec Iron Ore is the operator of the Bloom Lake Mining Complex.
Champion also has a 100% stake in the 752 km2 Fremont Iron Ore Project in northeastern Quebec, and full ownership of the Gullbridge-Powderhorn property in northern central Newfoundland.
Champion said financing proceeds will be used to fund strategic initiatives and to refinance Quebec Iron Ore’s current outstanding credit facilities, thereby significantly reducing their carrying costs.
In addition, Champion said Quebec Iron Ore has concluded an agreement with the government of Quebec, through its agent Ressources Quebec Inc. [RQ], to acquire RQ’s 36.8% equity interest Quebec Iron Ore for a cash consideration of $211 million.
The transaction would increase Champion’s stake in Quebec Iron Ore to 100%.
“Modifying the capital structure of Champion will provide substantial cost savings to our company,” said Champion CEO David Cataford. “We are thrilled to see CDPQ continue to support our growth initiatives and count on new financial partners like Scotiabank and Societe Generale,” he said.
Champion Iron’s ordinary shares rose 5.4% or 15 cents on Wednesday to $2.93 on active volume of 2.1 million. The shares trade in a 52-week range of 89 cents and $2.93.
Commenting on the global iron ore market in newsletter dated April 15, 2019, the company said the P62 benchmark iron ore price rose by over 27% following the tailings dam failure at Vale SA’s [VALE-NYSE] Feijao iron ore mine in Brazil. The breach occurred on Friday, January 25, 2018.
Vale is the world’s largest producer of iron ore and nickel. It has substantial nickel mining operations in Canada (including Sudbury, Ontario, and Voisey’s Bay, Labrador) as well as in Caledonia and Indonesia.
According to the most recent available data, Champion said Vale’s anticipated impact amounts to 93 million tonnes per year of iron ore and 11 million tonnes per year of pellet capacity. That compares to a total global seaborne market of 1,550 million tonnes per year.
Despite the issues at Vale, year-to-date iron ore shipments from Brazilian ports are down a mere 0.1% year-over-year, Champion said.