Wabush mine has found new bid to save business, could inject $250M US

Tacora Resources haslanded another possible lifeline to save the iron ore minepotentially paving a way for the company to emerge from creditor protection.

On Tuesday, the company announced it had selected a bid from Boston-based investment management firm Millstreet Capital Management LLC, which is leading the bid on behalf of other companies.

In a statement, Tacora executive vice-president and chief financial officer Heng Vuong called it a positive development for the company and its stakeholders.

"The transactions will allow Tacora to emerge from the CCAA proceedings as a much stronger and better-capitalized business focused on achieving the full potential of the Scully mine," he said in the statement.

Tacora, which owns the Scully Mine in Wabush in western Labrador, obtained creditor protection from Ontario's Superior Court in October.

In documents, it cited a volatile market, raging forest fires and unexpected maintenance at the mine as contributing factors that led to a dire year financially.

Vuong's statements Tuesday were identical to what former president CEO Joe Broking said in February, speaking about another bidder that was lined up to invest in the Wabush mine one that later fell through.

Vuong added the deal will be good news for Labrador West by providing jobs "for generations to come."

Tacora spokesperson Graham Letto declined an interview request but said someone would be available next week. CBC News has also asked Millstreet Capital Management for an interview.

Details of the deal

Tuesday's statement said Tacora and its investors have entered into an agreement that would have the investors inject $250 million US into the company. In addition, the investors will repay some of Tacora's debt and keep all current Tacora employees.

Cargill, a massive, privately owned U.S.-based global food corporation, is one of the companies that own Tacora and is the sole purchaser of the iron ore produced at the Scully Mine.

The statement also said there was a possibility that Cargill could get a new offtake agreement for iron,which would free it up to be sold to other buyers, bringing in more money.

"The transactions contemplated by the subscription agreement will allow Tacora to significantly deleverage its balance sheet," said the statement.

The deal will also provide new capital Tacora will use as part of its long-term plans to upgrade the mine and reach its objective of producing more than six million tonnes of high-grade iron ore concentrate per year.

According to the statement, Tacora representatives were scheduled to be back in court Friday to try to get approval for the subscription agreement. Tacora is aiming for an Aug. 30 closing date.

Rocky road

While speaking at the Future of Labrador West Summit an economic development forum with mining as one focus in February, then Tacora president Joe Broking said he was optimistic about the company's future. Broking has since left the company.

This is Tacora's second attempt to secure new investment and get out of creditor protection.

In February it announced it had accepted a bid from a group of companies made up of private equity firm Resource Capital Fund VII LP and commodities traders Javelin Global Commodities, along with a group of bond holders.

Soon after the deal was announced, Cargill said it planned to oppose the deal. According to documents filed with Tacora's court-appointed monitor FTI Consulting, on Feb. 5 Cargill wrote, "There are also serious concerns about the sale process."

It also voiced concerns the process was moving too quickly.

The deal with the group has since been abandoned.

In documents, Tacora alleges Cargill used delaying tactics to drag the court process out for so long that its deal fell apart as the price of iron ore dropped.

"The delay resulted in the need for additional borrowings under the DIP facility and Tacora being unable to satisfy a net debt condition in the successful bid," Tacora wrote.

"As a result, the investors' successful bid was terminated and, to date, Tacora has been unable to achieve a going-concern solution that will allow emergence from these CCAA proceedings and the required investment into the Scully mine."

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