Former Barrick CEO-led group to buy Iamgold niobium mine for $500m

3rd October 2014

By: Henry Lazenby

Creamer Media Deputy Editor: North America


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TORONTO ( – Canadian gold miner Iamgold on Friday announced that it had agreed to sell its important Niobec niobium mine, in Quebec, to a group of companies led by Magris Resources, the investment company founded by former Barrick Gold CEO Aaron Regent, for $500-million in cash.

TSX- and NYSE-listed Iamgold said the deal to sell the mine, in Saint-Honoré-de-Chicoutimi in the Saguenay-Lac-Saint-Jean region, would include the next-door rare earth element (REE) deposit.

Niobium, or columbium as it is also referred to in certain parts of the world, is mostly used in alloys, with 0.1% being enough to significantly enhance the strength of steel.

Under the terms of the sale agreement, the Magris-led consortium would pay $500-million in cash on closing, as well as a further $30-million when the adjacent REE deposit goes into commercial production. A 2% gross proceeds royalty would be payable on any REE output.

"This sale unlocks the value of Niobec for our shareholders, positions Iamgold as a pure gold play and significantly improves our liquidity, which provides us with the opportunity to further improve the grade and cost structure of our portfolio of gold assets," president and CEO Steve Letwin said.

Carol Banducci, Iamgold’s executive VP and CFO, noted that Niobec had been a steady contributor to the company’s operating cash flow since 2006, when Iamgold acquired gold producer Chambior for $3-billion.

During the three months ended June 30, the Niobec mine produced 1.4-million kilograms of niobium with an operating margin of $18/kg. Iamgold had revised its 2014 guidance for the mine upward to 5.5-million kilograms, up from 5.2-million kilograms previously.

“Niobec has many of the characteristics we've been looking for… strong market fundamentals for its core product, substantial operating margins and a long mine life in an attractive jurisdiction. We are very impressed with the quality of the management team and are looking forward to working with them to increase the full potential of the operation while simultaneously only doing so in a safe and environmentally responsible manner,” Magris chairperson and CEO Aaron Regent explained.

Iamgold said the additional liquidity provided by this sale offered it an opportunity to invest in the profitable growth of its gold portfolio.

“However, we are committed to taking a disciplined approach to investment, seeking out only appropriately-sized opportunities that improve our overall cost structure and cash-flow generation capabilities. In the absence of appropriate investment opportunities, we would consider reducing financial leverage (as prescribed by the terms of the bond indenture),” Banducci said.

The group of companies included Magris Resources, as well as Hong-Kong-based investment company CEF Holdings – 50% owned by Cheung Kong Holdings and 50% by the Canadian Imperial Bank of Commerce – and Singapore-based investment company Temasek, with a portfolio covering a broad spectrum of sectors.

The closing transaction proceeds of $500-million, were expected to lift Iamgold’s current cash and cash equivalents, as well as the market value of the company's gold holdings, and strengthen its liquid assets to more than $800-million.

“Along with the company's $500-million in unused credit facilities, Iamgold would have substantial liquidity of over $1.3-billion,” Banducci noted.

Niobec would be reclassified as ‘held for sale’ for the purposes of the company’s fourth-quarter results. Based on current estimates, the expected gain on the transaction was expected to be about $50-million to $60-million. The transaction was targeted to close in the fourth quarter, subject to regulatory approvals.

Toronto-headquartered Magris pointed out that National Bank of Canada and the Bank of Nova Scotia had committed and underwritten a $250-million amortising term loan and a $25-million revolving credit facility to assist with funding the transaction.

Edited by Tracy Hancock
Creamer Media Contributing Editor


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