Haul truck equipment await their next turn of duty at the mothballed Bloom Lake iron mine, Quebec
Photo by: Henry Lazenby
VANCOUVER (miningweekly.com) – The TSX-listed stock of project redeveloper Champion Iron on Tuesday gained more than 4% after the company announced that it had settled a dispute with the Sept-Îles Port Authority, from where iron-ore product from the Bloom Lake mine, in Quebec, will be shipped to market.
The Montreal-based company announced that its subsidiary, Champion Iron Mines (CIM), entered a conditional settlement agreement to resolve, without admission, its dispute with the Port of Sept-Îles concerning the July 13, 2012 take-or-pay accord between the parties.
The settlement of the dispute is conditional upon the closing of $180-million in debt financing to restart the Bloom Lake mine.
Under the contract, the port had agreed to reserve ten-million metric tons of iron-ore loading capacity for an initial term of 20 years, with options to renew the contract for four additional five-year terms.
CIM was required to pay C$25.58-million and to make take-or-pay payments as an advance on its future shipping, wharfage and equipment fees. At the time, Champion provided the port with irrevocable guarantees in the form of a deed of hypothec regarding its mining rights, title and interest over the Moire Lake and Don Lake deposits to secure its obligations under the agreement.
CONTRACT RENUNCIATION
On June 28, 2013, Champion sent the port a notice of termination of the agreement and requested it to pay C$6-million that had already been advanced. The company relied on a ‘renunciation’ provision of the Quebec Civil Code, which allows for cancellation of a contract if one party cannot perform under the contract.
Under this provision, Champion declared that the port could not provide access, as planned in the agreement, at the time the payments were due. The port subsequently issued the company with a notice of default for missing the payment due in July 2013.
On May 9, 2016, the port delivered a notice stating that the port facilities had been delivered and were operational and in accordance with the agreement. It further noted that Champion had to pay take-or-pay payments as an advance on the company’s future shipping, wharfage and equipment fees.
The port disputed the company’s entitlement to terminate the agreement and, on June 21, 2016, it sent Champion a notice of arbitration to have the dispute referred to arbitration under the terms of the agreement. As part of this arbitration, Champion expected that the port would seek an order forcing the company to pay C$19.58-million in unpaid advances plus interest, while the company vowed to contest the claim and ask for the reimbursement of the advances paid, plus interest. The port advised that take-or-pay payments due, as of March 31, amounted to C$3.7-million.
CASH PAYMENTS
Champion stated on Tuesday that the settlement agreement provided for, among other things, the immediate payment of an undisclosed sum of cash to the Port of Sept-Îles; CIM or its other subsidiary, Québec Iron Ore (QIO), making payments in tranches to settle in full the original C$19.58-million in unpaid advances, as well as a claim owing to the buy-in payment, under the 2012 agreement, and certain additional amounts.
Champion advised that the payments would be advances on QIO’s future shipping, wharfage and equipment fees under the 2012 agreement. The additional tranche payments are, like the settlement itself, conditional on the closing of the Bloom Lake financing transactions.
Champion’s TSX-listed stock gained C$0.04 a share on Tuesday to reach an intraday high of C$1.03 apiece.