May 25, 2010 - Cliffs Natural Resources Inc. said that it intends to buy one or both of its junior partners in order to gain majority ownership of the Big Daddy chromite project in the McFaulds Lake area of northern Ontario.
Cleveland-based Cliffs gained a 47-percent interest in the Big Daddy deposit as part of the Canadian $240-million ($227 million) purchase of Montreal-based Freewest Resources Canada Inc. earlier this year.
Junior miners KWG Resources Inc. and Spider Resources Inc. each own 26.5 percent of Big Daddy and have the option to earn in up to 30 percent each.
Cliffs said it intends to offer to acquire KWG at a price of C13 cents (12.2 cents) cash per KWG common share, which represents a premium of 62.5 percent over the closing price of the common shares of KWG on the TSX Venture Exchange on May 21. This offer price implies a total value for KWG of C$100 million ($94 million), Cliffs said.
Cliffs intends to offer Spider a price of C13 cents in cash per Spider common share. This represents an identical 62.5-percent premium and has a total value for Spider of C$86 million ($81 million), Cliffs said.
"While we intend to provide each company's shareholders the opportunity to receive a significant cash premium, we only need to acquire either KWG or Spider in order to satisfy our strategic objectives with respect to the Big Daddy deposit," William Boor, president of Cliffs' ferroalloys business unit, said in a statement. "It would be a satisfactory outcome for Cliffs if either proposed acquisition were successful, leaving Cliffs as majority owner and operator of Big Daddy with one junior partner."
Cliffs also acquired a 100-percent interest in the adjacent Black Thor and Black Label chromite deposits via the previous Freewest purchase. Cliffs' current plan is to develop Black Thor and Black Label first because preliminary estimates for those deposits are larger and wider, making it more amenable to open-pit operations than Big Daddy.
"However, obtaining control of Big Daddy would enable Cliffs to develop the most appropriate integrated long-term mine plan for moving this new mining district forward," Cliffs said.
The company said that the three deposits could become North America's only ferrochrome production operation. The planned mine is expected to produce 1 million to 2 million tonnes of high-grade chromite ore annually, which will be further processed into 400,000 to 800,000 tonnes of ferrochrome, the company said.
Cleveland-based Cliffs gained a 47-percent interest in the Big Daddy deposit as part of the Canadian $240-million ($227 million) purchase of Montreal-based Freewest Resources Canada Inc. earlier this year.
Junior miners KWG Resources Inc. and Spider Resources Inc. each own 26.5 percent of Big Daddy and have the option to earn in up to 30 percent each.
Cliffs said it intends to offer to acquire KWG at a price of C13 cents (12.2 cents) cash per KWG common share, which represents a premium of 62.5 percent over the closing price of the common shares of KWG on the TSX Venture Exchange on May 21. This offer price implies a total value for KWG of C$100 million ($94 million), Cliffs said.
Cliffs intends to offer Spider a price of C13 cents in cash per Spider common share. This represents an identical 62.5-percent premium and has a total value for Spider of C$86 million ($81 million), Cliffs said.
"While we intend to provide each company's shareholders the opportunity to receive a significant cash premium, we only need to acquire either KWG or Spider in order to satisfy our strategic objectives with respect to the Big Daddy deposit," William Boor, president of Cliffs' ferroalloys business unit, said in a statement. "It would be a satisfactory outcome for Cliffs if either proposed acquisition were successful, leaving Cliffs as majority owner and operator of Big Daddy with one junior partner."
Cliffs also acquired a 100-percent interest in the adjacent Black Thor and Black Label chromite deposits via the previous Freewest purchase. Cliffs' current plan is to develop Black Thor and Black Label first because preliminary estimates for those deposits are larger and wider, making it more amenable to open-pit operations than Big Daddy.
"However, obtaining control of Big Daddy would enable Cliffs to develop the most appropriate integrated long-term mine plan for moving this new mining district forward," Cliffs said.
The company said that the three deposits could become North America's only ferrochrome production operation. The planned mine is expected to produce 1 million to 2 million tonnes of high-grade chromite ore annually, which will be further processed into 400,000 to 800,000 tonnes of ferrochrome, the company said.
