HAMILTON, ON, June 6 /CNW/ - Stelco Inc. (TSX: STE) announced today that it has entered into an agreement providing for the sale of its 44.6% interest in the Wabush mine joint venture to Consolidated Thompson Mines Limited ("Consolidated") for total consideration with an estimated value to Stelco of $163.4 million.
The total transaction value includes cash of $44.4 million, assumed liabilities estimated at $94.6 million, approximately 1.9 million warrants to purchase shares of Consolidated valued at $1.7 million, and an agreement for Consolidated to supply iron ore pellets to Stelco until December 31, 2009 valued at $22.7 million. In addition, Stelco will retain its share of the Wabush iron ore inventory, which is valued at approximately $35.7 million.
The Wabush mine joint venture holds assets including the Scully iron ore mine and related assets situated at or near Wabush, Newfoundland and Labrador, and pelletizing facilities and related infrastructure located in Quebec. Wabush joint venture partners include Stelco, Cleveland-Cliffs Inc. (26.8%), and Dofasco Inc. (28.6%). The sale of Stelco's interest in Wabush is the result of an agreement between Stelco and Cleveland-Cliffs Inc, the mine's operating partner, with Consolidated providing for the sale of the interests of each of Stelco and Cleveland-Cliffs Inc to Consolidated.
"The Wabush mine requires some redevelopment work which has an associated capital requirement. Consolidated is better positioned to complete this work given operating synergies available to them with their neighbouring mining interests," said Rodney Mott, President and CEO. "This transaction will improve our financial position and accelerates our efforts to surface value in Stelco," added Mott.
Completion of the transaction is subject to the execution of definitive agreements and the receipt of all required third party consents and regulatory approvals. Dofasco Inc., the owner of the remaining 28.6% interest in the Wabush mine joint venture, has a right of first refusal over the proposed transaction which may be exercised for a period of 90 days in accordance with the provisions of the project agreements governing the joint venture. It is expected that the completion of the transaction will occur shortly following the waiver or expiry of the right of first refusal in favour of Dofasco Inc.
Stelco's iron ore interests in the Tilden and Hibbing mining projects are not impacted by this transaction.
About Stelco
Stelco is one of Canada's largest steel companies. It is focused on its two Ontario-based integrated steel businesses located in Hamilton and in Nanticoke. These operations produce high quality value-added hot rolled, cold rolled, coated sheet and bar products. To learn more about Stelco and its businesses, please refer to our Web site at www.stelco.com.
CAUTION REGARDING FORWARD-LOOKING INFORMATION
This press release contains "forward-looking information" that is based on Stelco's expectations as of the date of this press release or as of the date which such information is identified to be given. This forward-looking information includes, among other things, factors relating to the business, operations and prospects of Stelco, including information regarding the proposed sale of Stelco's interest in the Wabush mine joint venture. Often, but not always, forward-looking information can be identified by the use of words and phrases such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or states that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved. Forward-looking information involves known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Stelco to be materially different from any future results, performance or achievements expressed or implied by the forward-looking information. Actual results, performance and achievements are likely to differ, and may differ materially, from those expressed or implied by the forward-looking information contained herein. Such forward-looking information is based on a number of assumptions which may prove to be incorrect, including, but not limited to: the successful negotiation and execution of definitive agreements relating to the Wabush sale transaction, the satisfaction of the conditions precedent to such transaction, iron ore prices and the value of assumed liabilities and off-take arrangements. While Stelco anticipates that subsequent events and developments may cause Stelco's views to change, Stelco specifically disclaims any obligation to update this forward-looking information. This forward-looking information should not be relied upon as representing Stelco's views as of any date subsequent to the date of this press release.
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