VANCOUVER (miningweekly.com) – Iron-ore mine redeveloper Champion Iron Ore has secured a funding commitment and a ten-year offtake agreement from global commodities giant Glencore International, the junior announced on Monday.

The TSX- and ASX-listed firm, whose subsidiary Quebec Iron Ore (QIO) is restarting the high-grade Bloom Lake iron mine, near Fermont, Quebec, has secured a conditional financing commitment of $25-million from Glencore in return for the non-brokered sale of a subordinated unsecured mandatory convertible debenture, on a private placement basis.

The commitment also contemplates that QIO and Glencore will enter into an offtake agreement with fixed terms for ten years.

Consequently, Champion has reduced the expected size of its public offering of subscription receipts from about C$50-million, to up to C$20-million.

“This has given our remaining capital raise a significant boost. This financing commitment marks another significant milestone for Bloom Lake and will ensure effective long-term access to markets where Bloom Lake’s high-quality iron-ore is in strong demand,” said Champion and QIO chairperson and CEO Michael O’Keeffe in a statement.

Under the terms of the agreement, the debenture will have a term to maturity of eight years and will bear interest at a rate of 12% for the first year. Thereafter, it will bear interest at the same rate as the subordinated debt expected to be provided by Caisse de dépôt et placement du Québec.

QIO previously received conditional commitments for debt financing of $180-million from Sprott Private Resource Lending and Caisse to finance the restart of Bloom Lake. Sprott will provide $80-million through a five-year senior secured loan-bearing interest rate of 7.5% a year, plus the greater of the US dollar three-month London Interbank Offered Rate and 1% a year.

Caisse will provide $100-million through a seven-year subordinated loan bearing interest at 12% for the first year, and, thereafter, at an interest rate linked to the price of iron-ore.

The Glencore debenture can be converted at any time into ordinary shares of Champion, at Glencore’s option, at a conversion price that reflects a 25% premium above the price of the subscription receipts offered under the prospectus offering.

The debenture will include a mandatory conversion clause at a conversion price of C$0.85 a share, which may be triggered by the lenders under the total $180-million loan facilities of QIO, provided that the forced conversion may not have the effect of causing Glencore to own 20% or more of the ordinary shares of Champion.

Glencore has also under terms of the agreement secured global offtake rights for the life-of-mine (LoM), with fixed commercial terms for a ten-year period for all tonnes of future Bloom Lake iron production not sold in Japan, under the existing offtake agreement with Sojitz Corporation.

In the event of a forced conversion, the offtake terms will apply for the LoM of Phase 1 of Bloom Lake and Glencore will have the option to convert the off-take terms into a free-on-board-based royalty.

Glencore will also have the right to nominate one person to the Champion board, subject to shareholder and regulatory approvals, the company announced.

Champion advised that the consummation of the $25-million financing commitment from Glencore and of the offtake agreement with Glencore, is conditional upon the executing definitive documentation and satisfying other customary closing conditions, including regulatory approvals such as the approval of the TSX and the ASX.