Consolidated Thompson Iron Mines Ltd said on Monday that Chinese steel maker Wuhan Iron and Steel Corp (WISCO) has agreed to make a $240 million in the Canadian mining company in return for a 19.9 percent stake in the company.
Numerous Chinese companies have been acquiring stakes in foreign mining companies, in a bid to secure access to metals needed to fuel the country's rapid internal growth.
Chinese metals group Chinalco has just arranged a $21 billion loan to finance a major investment in Rio Tinto, while China's Minmetals has made a $1.7 billion bid for Australian miner OZ Minerals Ltd.
The letter of agreement between Consolidated Thompson and WISCO provides for WISCO to make a total investment in Consolidated Thompson of $240 million and in return Consolidated Thompson will issue 29.7 million of its common shares to WISCO.
This will represent 19.9 percent of Consolidated Thompson's outstanding shares post the transaction.
In addition, WISCO will receive not less than a 25 percent interest in a newly incorporated company that is to be established to operate the Bloom Lake mine, and will commit to purchase a similar percentage of iron ore production over the life of the mine.
Furthermore, WISCO will also be entitled to other long-term off take rights at fair market value from both the initial production and future expansion of the Bloom Lake project, as well as from Consolidated Thompson's Lamelee and Peppler Lake projects.
"This partnership will also strengthen Consolidated Thompson's potential to expand from the current mine plan of 8 million tons per year to 16 million tons of annual production of iron ore," said Consolidated Thompson's Chief Executive Richard Quesnel, in a statement.
Source: Reuters
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