MONTREAL – Champion Iron Ltd. says its $53.3-million offer has been selected as the preferred bid for the insolvent and idle Bloom Lake mine in Quebec and its related railway assets and mineral claims.
The deal is expected to close early next year, subject to approval by the Quebec Superior Court, regulators and Champion shareholders.
A subsidiary of Champion (TSX:CIA) has agreed to pay $10.5 million in cash, assume about $41.7 million in environmental reclamation liabilities and replace $1.1 million worth of bonds.
The operations, which closed a year ago, were put up for sale in April as part of a court-supervised exit from Eastern Canada by Cliffs Natural Resources (NYSE:CLF).
Bloom Lake General Partner Ltd. and affiliates such as Cliffs Quebec Iron Mining filed for protection under the Companies’ Creditors Arrangement Act amid falling iron ore prices.
Champion said it expects to overcome the challenges of very low prices by increasing yearly output and cutting costs that would potentially make Bloom Lake “one of the lowest capital cost iron ore mines in the world.”
The Montreal-based company has been working to develop iron ore deposits in the Labrador Trough for more than a decade. It has also been managing a feasibility study backed by the Quebec government that is set to be released next year for a new railway linking the Bloom Lake area to the Port of Sept-Iles.
Cliffs acquired majority ownership of Bloom Lake _ a mine in the iron-rich Labrador Trough that began production in 2010 _ as part of its takeover of Consolidated Thompson Iron Mines Ltd. in a $4.9-billion deal that closed in 2011.