Iamgold ponders Toronto or Hong Kong listing for niobium mine

25th May 2011 By: Matthew Hill

TORONTO (miningweekly.com) – Toronto-based Iamgold could list its Quebec Niobec niobium mine in Toronto or Hong Kong in the next 12 months, after selling a 10% to 20% stake to a strategic investor, a spokesperson said on Wednesday.

The company is considering an expansion that could triple production at the operation at a cost of up to $840-million, and an initial public offering could help fund this, VP for investor relations Bob Tait said in an interview.

After having disposed of the initial 10% to 20% stake, Iamgold would consider offloading a further chunk of Niobec shares, capping its ownership at 55%.

A preliminary study the company published earlier this month valued Niobec at up to $2-billion.

The report evaluated switching from conventional underground mining to a much larger openpit or block cave, which would increased the mine’s measured and indicated resources by 691% to 1,9-billion kilograms of niobium pentoxide.

The expansion could triple Niobec’s production and would likely see first output around 2015.

Iamgold will begin a prefeasibility study this year to determine which mining method would be the best.

Niobium is used to strengthen steel, and Niobec accounts for about 8% of global supplies, with only two other major producers making up most of the rest.

Tait said the company had received strong interest from steelmakers and funds for the strategic stake, representing different geographies.

“We’ve actively engaged in that search for some time, and that could result in something in the next couple of months,” he said.

Following the close of that deal, Iamgold would consider listing Niobec in Toronto or Hong Kong, though it had not reached a decision on this yet.

“If you think about where the growth in steel consumption is it’s in countries like China, not North America,” Tait said.

This month, the world’s biggest commodities trader, Glencore, debuted on the Hong Kong and London bourses.

Mining companies have increasingly looked east to access capital to fund acquisitions and mines.

Reuters reported on Tuesday that Iamgold had talked to potential investors in Asia, North America and Europe regarding the 10% to 15% strategic stake sale.

RARE EARTHS

What could prove a sweetener to Niobec is the rare earth potential at the mine. Holes drilled in 1985 showed that there were deposits of rare-earth elements including cerium, lanthanum, neodymium, praseodymium, samarium, dysprosium and europium at Niobec.

The core samples were not compliant with modern reporting standards, and Iamgold did some of its own drilling in March, with the metallurgical results due for the third quarter.

“The gut feel is that there is economic value there,” said Tait.

Rare-earth element prices have shot up over the past two years as China, which supplies 97% of the world’s demand, curbs production and exports in a bid to improve the industry’s environmental track record.

Rare earths are used in a variety of modern technologies, including flat screen televisions, smart phones and hybrid cars.

Iamgold acquired the Niobec mine, which started producing in the 1980s, through its 2006 merger with Cambior.