Canadian mining explorer Consolidated Thompson Iron Mines Ltd (TSX: CLM) announced on March 30 that it had cut a deal with China's Wuhan Iron and Steel Group Corporation (Wisco), in which Wisco would invest US$240 into CLM in exchange for 19.9 percent of CLM's shares.
The following day Bai Fang, Director of Wisco's party communication department, told the journalist: "It is only a framework agreement so far. Both sides are still in contact before signing the formal contract."
According to the deal, Wisco will buy 29,748,897 common shares from CLM at a price of US$240 million. Hence Wisco will represent 19.9 percent of CLM's standing shares. In addition, Wisco hs an option on no less than 25 percent of the shares of a newly established company, which is responsible for the Bloom Lake Project.
Other benefits to Wisco accruing from the deal include the right to purchase CLM's output at a fair market price, such as the current and in the future extended product line of Bloom Lake, Lamelee and Peppler Lake, which are also assets under CLM's name.
CLM COO Richard Quesnel claims in the announcement that "other than raising fund for the completion of Bloom Lake, this investment is also a critical move in building up a long-term partnership with Wisco, one of China's major steel manufacturers." Through this cooperation, CLM wishes to double its annual iron ore production from 8 million tons to 16 million.
According to available information, Lamelee and Peppler Lake, the two major iron ore assets of CLM are both in northeast Canada's Quebec Province, and are close to Bloom Lake Project, where a base of mine exploration is already present.
The Peppler Lake reserve is estimated to be 302 million tons, with a 28.4 percent Fe content, while Lamelee exceeds Peppler Lake both in reserve and Fe content.
Speaking of Wisco's North America strategy - while most Chinese steel firms are casting their eye over Australia - Bai Fang explains: "Our overseas strategies are not limited to Australia. And we will certainly consider other resources if they are suitable."
An anonymous official with the Canadian government told the journalist on March 31 that Canada's unique review and approval procedures requires approval from the Foreign Affairs and International Trade Departments for foreign investments above US$5 million, respectively responsible for the investor's performance record and the political issues involved.
This official also told the journalist that recently there have always been Chinese companies wishing to make investments in Canada. But due to the low-profile approach of the Canadian authorities, the country has attracted less attention than Australia in recent metals acquisitions. Furthermore, compared with the mining industry, Canadians tend to focus more on future industries like environmental engineering, green energy and biotechnology.
For more information, please consult the original article in Chinese:
http://www.21cbh.com/HTML/2009-4-1/HTML_QXHVFET459J8.html
(China.org.cn by Maverick Chen, April 1, 2009)
