Thompson Iron Mines Count On Cliffs Deep Pockets
According to The Gazette, "Consolidated Thompson Iron Mines Ltd. can count on Cliffs Natural Resources Inc.'s deep pockets to support its $400-million plan to double the annual capacity of its Lac Bloom iron ore project in Quebec-Labrador to 16 million tonnes by 2012-13.
That's part of the deal under which the U.S. mining giant takes over Thompson for $4.9 billion cash or $17.25 a share for all the company's shares to get access to the burgeoning iron ore markets of China, India and Korea.
"Cliffs has essentially been an iron ore supplier to North American steel mills and as CEO Joe Carrabba says, you must do business in China if you want to play in today's commodity markets," said one industry veteran who didn't want to be named.
"They aren't playing catchup with the world leaders Vale of Brazil, BHP and Rio Tinto because they're too far ahead, but they're willing to pay a fair price to diversify immediately away from North America and benefit from an established customer base and iron ore at $150-to-$160 U.S. a tonne, up from $40 U.S. five years ago."
Cliffs currently has iron ore capacity of 30.1 million tonnes in North America, including Wabush Mines in Quebec-Labrador and other mines in Michigan and Minnesota. All these mines convert iron ore concentrates into pellets, the preferred material for North American steel mills.
Including other mines in Australia and Brazil, Cliffs has total world capacity of 40.6 million tonnes, rising to 48.6 million tonnes with the Thompson takeover and 56.6 million tonnes if Thompson's expansion goes through.
That will still be a far cry from the combined annual capacity of Vale, BHP and Rio -soon to total about one billion tonnes."Cliffs's offer, one of the biggest Canadian resource deals in a year, indicates a premium of 30 per cent over Thompson's closing price on Monday and the price compares with Thompson's earlier record high of $14.40. Thompson's share price jumped almost 30 per cent yesterday and hit $17.53 before slipping back to close near the offer price at $17.35, but analysts did not rate the chances of a counterbid likely. Cliffs has the support of Thompson's board and management and there is a "break" fee of $150 million, payable to Cliffs if Thompson accepts another offer. Other players with projects in Quebec-Labrador saw their shares jump, including New Millenium and Labrador Mines Holdings, both hoping to start new mine construction within months. Champion Minerals and Alderon Resources also got a lift. Cliffs's friendly bid also has the support of China's Wuhan Iron and Steel (Wisco), which provided $200 million of funding to keep the $750-million Lac Bloom mine and concentrator project near Fermont, 1,000 kilometres northeast of Montreal, on track as the 2008 financial crisis hit. In return, it got a 19-per-cent stake in Thompson and a minority direct interest in the mining operation. Read more: http://www.montrealgazette.com/Thompson+shares+spike+Cliffs+takeover/4100807/story.html#ixzz1AvQ15dQQ