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Business North - The Daily Briefing - Business Newspaper Online
Cliffs to acquire chromite deposits in Canadian “Ring of Fire”
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11/23/2009 |
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CLEVELAND – Nov. 23, 2009 – Cliffs Natural Resources Inc. (NYSE: CLF) today announced it has entered into a definitive agreement to acquire the “Ring of Fire” chromite properties of Montreal-based Freewest Resources Canada Inc. (TSX-V: FWR).
Cliffs plays the role of a white-knight suitor for Freewest, which was the target of hostile takeover effort by Noront Resources Ltd. Cliffs will acquire 100 percent of outstanding shares for $150.6 million, or 70 cents per share.
Under the terms of the agreement, Cliffs will acquire Freewest’s interests in the Ring of Fire properties in northern Ontario, comprising three world-class chromite deposits: 100 percent of “Black Thor” and “Black Label,” and 50 percent of “Big Daddy,” an adjacent deposit held by a joint venture of Freewest, KWG Resources and Spider Resources. Freewest’s other assets will be spun off into a “new” Freewest.
Following this spin-off transaction, the “new” Freewest would exist independently and its common stock would continue to trade on the TSX Venture Exchange. Freewest has provided additional information on the transaction’s structure in a press release issued today.
Cliffs expects commercial plans to bring the deposit to market would include construction of the open-pit mine and mine-site processing facility, as well as a remote electric arc furnace (EAF) to further process the ore into high-grade ferrochrome. The EAF facility is anticipated to be located on the north shore of Lake Superior.
Should the project go forward as planned, the permitting process is anticipated to require approximately three years, with production commencing around 2015.
Cliffs’ Chairman, President and CEO Joseph A. Carrabba said, “Ferrochrome is imported by the world’s fastest growing steel markets and many countries have categorized it as a strategic resource. We believe this discovery represents one of the premier chromite deposits in the world. Given the operation’s unique location, our objective will be to supply ferrochrome to stainless steel producers around the world.”
Cliffs acquired a significant position in Freewest Resources in a private placement in June 2009 and has closely followed the technical development of these assets. A formal study of the chromium deposits will commence in early 2010, and is expected to be completed in the first half of the year.
Chromite is an essential raw material for the production of chromium. Cliffs estimates that more than 90 percent of chromite ore is converted to ferrochrome, a critical ingredient in the production of stainless steel, as well as other steels and nonferrous alloys. End markets for stainless steel, alloy steel and other products that use ferrochrome include transportation, electrical, engineering, building and construction and metal goods.
In addition, chromite is a key industrial mineral in the steel industry for the manufacture of refractory bricks, furnace linings and foundry sand.
Currently, most resources and production are in the Eastern Hemisphere, requiring all stainless steel producers in North America and most of Europe and Asia to import ferrochrome. Market reports estimate that four countries—South Africa, Kazakhstan, Finland and Turkey—control nearly 80 percent of the world’s 24 million tonnes of chromite ore production. (One tonne equals 2,204.6 lbs.) Cliffs indicated that, because of its proximity to North American and European stainless steel production, a merchant ferrochrome operation in Ontario would have a distinct competitive freight advantage over producers in other parts of the world.
Cliffs will host a conference call to discuss its proposed acquisition of Freewest Resources today, Nov. 23, 2009, at 1 p.m. ET. A slide deck will be used to supplement the discussion. The call will be broadcast live on Cliffs’ website. After the the audio and slides will be archived and available for download from the website.
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