International gold producer IAMGold Corporation announced on Friday that it had reached a deal with a group of companies led by Magris Resources Inc. to sell its Niobec mine for $500 million after tax.
The Niobec mine is one of three niobium producers in the world. Niobium (formerly columbium) is a metal with superconductive properties used in the production of high-grade structural steel and superalloys. NASA uses a niobium-titanium alloy to make its rockets and lunar modules. Niobium is also used to make alloys for jet engines, medical devices and mobile phones.
IAMGold acquired the Niobec mine when it bought Cambior Inc. in 2006.
Apart from Magris Resources, which is led by former Barrick Gold Corp CEO Aaron Regent, the group of companies includes Hong Kong-based CEF Holdings Limited, Canadian Imperial Bank of Commerce, and Singapore-based investment firm Temasek.
The Niobec Mine is 125 miles (200km) north of Quebec City (Photo: Niobec.com).
The sale includes the Niobec mine, which is located in Quebec, as well as the adjacent rare earth element deposit.
The total transaction includes a cash payment of $500 million, which is payable on completion of the deal, plus $30 million when the adjacent rare earth element deposit (REE) goes into commercial production. The buyers will continue paying IAMGold a 2% gross royalty on any REE production.
Sale will improve IAMGold’s liquidity
IAMGold’s President and CEO, Steve Letwin, said:
“This sale unlocks the value of Niobec for our shareholders, positions IAMGOLD as a pure gold play and significantly improves our liquidity, which provides us with the opportunity to further improve the grade and cost structure of our portfolio of gold assets. On behalf of the Board of Directors, I extend my thanks to the entire Niobec team for their outstanding efforts over the years to improve their operating performance and strengthen the attractiveness of this asset.”
“I also commend all our employees who continue to work hard and find innovative ways to improve productivity and reduce costs, getting us closer to our target of being free cash flow positive at our owner-operated gold mines, including capital spending.”
After completion of the sale, IAMGold said its liquid assets will exceed $800 million. Carol Banducci, IAMGOLD’s Executive Vice President and CFO said “Along with the Company’s $500 million in unused credit facilities, IAMGOLD would have substantial liquidity of over $1.3 billion.” (Liquid assets are assets that can quickly be turned into cash without losing their value.)
In an interview with Reuters, Mr. Regent said “We like the fundamentals in the niobium market. It’s a consolidated market with stable pricing and good growth due to the demand for high strength steel. We see it as an asset that will generate a lot of free cash flow and it’s a good base asset to build a portfolio around. We’re still in the market looking at other assets and our partners on this deal are aligned in that objective.”
The purchase, which is expected to be completed by the end of 2014, is being partly financed by a loan from the Bank of Nova Scotia and the National Bank of Canada.
About IAMGold Corporation
IAMGold Corporation is based in Toronto, Canada, It was founded in 1991 as International African Mining Gold Corporation by Mark Nathanson and William Pugliese.
The company employs more than 5,600 workers. From its operations in Africa, South America and North America, it produces nearly 1 million ounces of gold annually.