IAMGOLD Corporation today announced that it has reached an agreement to sell its Niobec mine, one of the world's three niobium producers, to a group of companies led by Magris Resources Inc. for cash proceeds of $500 million after tax upon closing. The sale of Niobec, which is located in Saint-Honoré-de-Chicoutimi in the Saguenay-Lac-Saint-Jean region, Quebec, is to include the adjacent rare earth element ("REE") deposit.
The total consideration of $530 million for the transaction is comprised of a cash payment of $500 million payable on closing, as well as an additional $30 million when the adjacent REE deposit goes into commercial production. A 2% gross proceeds royalty will be payable on any REE production.
"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," said the Company's President and CEO, Steve Letwin . "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."
"Niobec has been a steady contributor to our operating cash flow since 2006 when we acquired this asset as part of a larger transaction," said Carol Banducci , IAMGOLD's Executive Vice President and CFO. "We are pleased that the group of companies is led by Aaron Regent, who brings a wealth of experience in mining and finance to Niobec. The additional liquidity provided by this sale offers IAMGOLD an opportunity to invest in the profitable growth of our gold portfolio. However, we are committed to taking a disciplined approach to investment, seeking out only appropriately-sized opportunities that improve our overall cost structure and cash flow generation capabilities. In the absence of appropriate investment opportunities we would consider reducing financial leverage (as prescribed by the terms of the bond indenture)."
The group of companies includes Magris Resources, as well as CEF Holdings Limited; which is a Hong Kong based investment company owned 50% by Cheung Kong (Holdings) Limited and 50% by the Canadian Imperial Bank of Commerce ("CIBC"); and Temasek, which is a Singapore-based investment company with a portfolio that covers a broad spectrum of sectors.
"The transaction proceeds on closing of $500 million, when added to current cash and cash equivalents as well as the market value of the Company's gold holdings, strengthen IAMGOLD's liquid assets to over $800 million," continued Banducci. "Along with the Company's $500 million in unused credit facilities, IAMGOLD would have substantial liquidity of over $1.3 billion."
Niobec will be reclassified as "Held for Sale" for the purposes of IAMGOLD's fourth quarter 2014 results. Based on current estimates, the expected gain on the transaction is expected to be approximately $50 million to $60 million. The transaction is targeted to close in the fourth quarter of 2014, subject to the receipt of regulatory approvals.
TD Securities Inc. provided a fairness opinion to the Board of Directors of IAMGOLD in connection with the transaction.
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