Iron-ore miner Champion Iron hit a 52-week high on the TSX on Thursday morning, as the Australia-headquartered company announced the refinancing of its subsidiary Québec Iron Ore (QIO), the operator of Canada's Bloom Lake Mining Complex, and a transaction that will see it take full ownership of the mining operation.
QIO has concluded an in-principle agreement with la Caisse de dépôt et placement du Québec (CDPQ) for a preferred share offering of C$185-million plus a commitment for a fully underwritten $200-million credit facility with The Bank of Nova Scotia and Societe Generale.
The proceeds of such financings would be used to fund strategic initiatives and to refinance QIO's current outstanding credit facilities, thereby significantly reducing their carrying costs, Champion Iron said in a statement.
QIO has also concluded an agreement with the government of Québec to acquire its agent, Ressources Québec’s 36.8% equity interest in QIO for C$211-million in cash. This would increase Champion's stake in QIO to 100%.
"Modifying the capital structure of Champion will provide substantial cost savings to our company. We are thrilled to see CDPQ continue to support our growth initiatives and count on new financial partners like Scotiabank and Societe Generale. Their confidence in our company is extremely motivating,” said CEO David Cataford.
He also said that increasing Champion’s ownership of Bloom Lake to 100% was a prudent use of capital, given the proven production and cash flow generation the project had delivered.
The transaction would allow the increase of allocated production to Champion by about 2.75-million tonnes a year of high-grade iron-ore. The closing of the transaction is anticipated to occur in the summer of 2019 and is subject to customary conditions, as well as to the procurement by QIO of the necessary financing.
Champion would fund the transaction from proceeds of the newly refinanced facilities in addition to cash on hand.
Shares in Champion Iron jumped to a 52-week high of C$3.10 apiece, up from the previous day’s closing price of C$2.78 a share. The company is also listed on the ASX.