Cliffs Natural Resources Inc. announced that it plans to exercise its right of first refusal and acquire U.S. Steel Canada’s 44.6% interest and ArcelorMittal Dofasco’s 28.6% interest in the Wabush Mines joint venture.
On October 9, Consolidated Thompson Iron Mines Ltd. announced an agreement with U.S. Steel Canada and ArcelorMittal Dofasco to acquire their interests for approximately $88 million in cash. Under the terms of the Wabush Mines partnership, Cliffs has a right of first refusal to acquire each of its partners’ interest. By exercising this right, Cliffs is entitled to receive the same terms and conditions contained in the agreement with Consolidated Thompson and thus increase its ownership stake to 100%.
With Wabush Mines’ 5.5 million tons of rated capacity, acquisition of the 73.2% will increase Cliffs’ North American iron ore rated equity production capacity by about 4.0 million tons.
Cliffs says that the transaction carries no integration risk because it has been the managing partner of Wabush Mines since operations began there in 1965. The company has about 770 employees at Wabush Mines and the hourly workforce is represented by The United Steelworkers.
"Cliffs is enthusiastic about the opportunity to own 100% of Wabush Mines,” said Donald J. Gallagher, Cliffs Natural Resources’ President, North American business unit. “Our commercial team has had great success marketing the blast furnace pellets produced there to a diverse customer set, including steelmakers in North America, Europe, and Asia. Wabush also has an excellent operating team that understands how to run mines and a dedicated and skilled workforce.”
Wabush Mines includes the Scully Iron Ore Mine near Wabush, Newfoundland, Labrador; the pellet plant and port facilities at Point Noire, Quebec; and integrated rail facilities. In addition, Wabush Mines owns an equity position in an electricity generation utility in Newfoundland that provides power for its mining operations.
Completion of the transaction is subject to a number of conditions, including receipt of requisite regulatory approval and the execution of definitive agreements. Closing is expected to occur in the fourth quarter of 2009.
Cliffs Natural Resources, an international mining and natural resources company, is the largest producer of iron ore pellets in North America, a major supplier of direct-shipping lump and fines iron ore out of Australia, and a significant producer of metallurgical coal. The company is organized through three geographic business units: The North American business unit is comprised of six iron ore mines owned or managed in Michigan, Minnesota, and Eastern Canada, and two coking coal mining complexes located in West Virginia and Alabama. The Asia Pacific business unit is comprised of two iron ore mining complexes in Western Australia and a 45% economic interest in a coking and thermal coal mine in Queensland, Australia. The South American business unit includes a 30% interest in the Amapá Project, an iron ore project in the state of Amapá in Brazil.