Consolidated Thompson Left in the Cold on Lost Wabush Deal

Dofasco, a subsidiary of steelmaker Arcelor Mittal, has exercised its option to buy the majority interest in the Wabush Mines iron ore joint venture in Quebec and Labrador, ending an attempt by Consolidated Thompson Iron Mines to do the same.

Consolidated Thompson announced in June that it had struck a deal with Cleveland-Cliffs and Stelcoto purchase their combined 71.4% interest in Wabush Mines for US$64.3 million in cash, as well as some warrants and certain liabilities.

However, Dofasco, which already held the remaining 26.8%, had a 90-day right-of-first-refusal on their majority interest.

Consolidated Thompson shares were busy on the Friday before the Labour Day weekend, dropping 9%, or 50, to $4.85 on a trading volume of more than 2 million shares.

Bruce Humphrey, chair of Consolidated Thompson, says Dofasco’s decision to buy Wabush shows that consolidation and demand of the iron ore and steel industry will continue to be strong.

“Management believes that both of these trends will eventually benefit Consolidated Thompson and our Bloom Lake deposit,” Humphrey says of the company’s flagship project, located in Quebec, along the southern end of the Labrador trough.

The company has been developing Bloom Lake at a rate of 7 million tonnes per year of iron ore concentrate, with production expected by 2009.

The company has committed $50 million in equipment and secured $200 million in financing with talk of increasing to $240 million. It has signed letters of intent to procure cement and structural steel worth $60 million.

In the meantime, Consolidated Thompson will keep its eye out for other opportunities, Humphrey says.