Monday, November 23, 2009

Cliff Resources To Buy Canada's Freewest

US iron-ore and coal miner Cliffs Natural Resources has agreed to buy Montreal-based chromite junior Freewest Resources Canada, the two companies announced on Monday.

Freewest is exploring in Canada's 'Ring of Fire' district, an emerging multi-metal exploration district in the James Bay Lowlands of Ontario, which is getting increasing intention from investors, and where the company has confirmed chromite and vanadium discoveries.

Last month, Freewest received an unsolicited takeover offer from rival Noront Resources, which is also active in the Ring of Fire, but Freewest rejected the offer of one Noront share for four Freewest shares as too low and “highly opportunistic”.

The company's board has, however, unanimously agreed to support and recommend the offer from Cliffs, of the share equivalent of C$0,55 a share, or a total of C$118-million.

Cliffs, which already owns 6,9% of Freewest shares, plus warrants which could increase its holding to 9,75%, will receive Freewest's three Ring of Fire properties – the Black Thor and Black Label projects, plus the company's 50% share in the adjacent Big Daddy joint venture.

The US group plans to build a mine producing between one-million and two-million tons a year of high-grade chromite ore, which would be processed into 400 000 t to 800 000 t of ferrochrome.

The company said it believes the three deposits are the “highest quality deposits” in the Ring of Fire district, and would provide a significantly long mine life and expansion potential.

“Ferrochrome is imported by the world's fastest growing steel markets and many countries have categorized it as a strategic resource,” said Cliffs CEO Joseph Carrabba.

“In addition to furnishing the raw-material needs of carbon steel producers, we will become a supplier to producers of stainless steel.”

The final share ratio for the transaction will be determined based on the volume-weighted average price of Cliffs' shares for the five days ending on the third trading day before the effective date of the acquisition.

On top of the Cliffs stock, Freewest shareholders will also receive one share, worth C$0,15 each, in a 'new Freewest' which will be spun out to hold the company's other properties.

The 'new' Freewest will trade on the TSX Venture Exchange, and will have assets in New Brunswick and Quebec. Its main focus will be on the Clarence Stream gold property in New Brunswick.

"We believe this transaction is clearly superior to the proposal put forward by Noront," Freewest CEO Mackenzie Watson said in a statement.

"It will provide Freewest shareholders with highly-liquid shares in a company with a market capitalisation in excess of $5-billion, while allowing New Freewest to continue as a well-financed exploration company focused on the high-grade Clarence Stream gold property and an attractive suite of early-stage exploration properties."

Cliffs mines coal and iron ore in the US and Australia, and also has a 30% stake in the Amapá iron-ore project, in Brazil.

Source: Mining Weekly

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