Champion Iron subsidiary ink agreement with Sojitz Corp

29 May 2017

Champion Iron Limited announced that its subsidiary, Quebec Iron Ore Inc has signed a Framework Off-Take Agreement with Sojitz Corporation (“Sojitz”), [a major trading company based in Tokyo, Japan], pursuant to which Sojitz would purchase up to 3,000,000 DMT per annum from QIO after the re-commencement of commercial operations at the Bloom Lake Iron Mine located near Fermont, Quebec. Champion is also pleased to announce that it has arranged a $40 million debt and equity bridge financing for Quebec Iron Ore Inc. in order to restart operations at Bloom Lake.

In connection with the Bloom Lake restart and in order to beneficially utilize the summer construction season for required upgrades to the Bloom Lake tailings management system and other process plant upgrades and long-lead items, CIA has arranged, on behalf of QIO, a $40 million bridge financing, comprised of $26 million in debt and $14 million in equity. The debt component consists of a $20 million loan from Sojitz, together with a $6 million loan from Resources Québec Inc., a 36.8% equity shareholder in QIO, both of which are pari-passu one-year term loans secured against the Bloom Lake fixed assets and large scale mining equipment.

The $14 million equity investment in QIO consists of a proportionate contribution from QIO’s two shareholders, namely Champion, a 63.2% equity shareholder, and the government of Québec, who have committed to invest $8.8 million and $5.2 million, respectively, into QIO.

In connection with its $8.8 million financing into QIO, Champion is proceeding with the non-brokered sale of $10 million in unsecured subordinated convertible debentures (the “Debentures”), convertible at the option of the holder at any time into Champion Ordinary Shares (“Shares”) at a conversion price of $1.00 per Share. Should Champion and QIO not complete the master financing (“Master Financing”) of a minimum of $212 million to finance the Bloom Lake feasibility capital expenditures by November 30, 2017, then the conversion price will be adjusted to the lesser of $1.00 or to the five-day weighted average trading price of the Shares on the TSX determined as of the date of conversion. The Debentures will have a term to maturity of 12 months and bear interest at a rate of 8%.

Pursuant to the Agreement, Sojitz will purchase up to 3,000,000 DMT per annum from QIO, upon re-commencement of commercial operations at Bloom Lake. The Agreement is for an initial five-year term from the date that commercial operations commence at Bloom Lake and shall automatically extend for successive terms of five-years.

Following the recent completion of the Bloom Lake Feasibility Study, which demonstrates that recommencing iron ore mining operations at Bloom Lake is financially viable, QIO and Champion are proceeding with securing financing for the restart. In addition to the $40 million dollar financing described above, QIO and Champion are proceeding expeditiously and are in advanced discussions to obtain the necessary financing to fund the costs detailed in the “Capital Expenditures Including Working Capital” component of the Bloom Lake Feasibility Study. Details of the Master Financing will be announced when the terms and conditions are finalized with the lenders and investors.

Source : Steelguru