Iamgold Corp said on Friday it has agreed to sell its niobium mine in Québec to a group of companies led by investment firm Magris Resources Inc for US$500 million in cash, to focus on its core gold mining business.
The long-planned sale of the Niobec mine, located some 200-km north of Québec City, includes an adjacent rare earth metals deposit.
The deal is one of a handful of private equity investments in the mining sector, and indicates that these firms are still keen on finding bargains in an industry that has been battered by a broad slide in metal prices.
Toronto-based Magris Resources, led by former Barrick Gold Corp‘s chief executive Aaron Regent, is one of a few private equity-backed firms scouting for deals in the sector.
Magris is acquiring the niobium asset in partnership with Singapore’s Temasek Holdings and CEF Holdings Ltd, a Hong Kong-based investment company owned by Canadian Imperial Bank of Commerce and billionaire Li Ka-shing‘s Cheung Kong Holdings Ltd.
The Niobec mine, acquired by Iamgold in 2006 as part of its purchase of Cambior Inc, is one of the world’s three producers of niobium, a metal with superconductive properties. Niobium is used to make alloys for jet engines. It is also used in medical devices, mobile phones and to strengthen steel.
Iamgold, which also owns assets in Canada, South America and Africa, will stand to get a further US$30 million when commercial production begins at the adjacent rare earth site.
The deal is expected to close in the fourth quarter of 2014, subject to regulatory approvals. It is being financed in part by a term loan from National Bank of Canada and the Bank of Nova Scotia.
“The sale of Niobec greatly improves Iamgold’s balance sheet,” noted Dundee analyst Josh Wolfson in a note to clients, stating it would likely take it from a net debt position of over US$365 million to a net cash position of about US$135 million.
The miner’s shares, which have fallen over 35 percent in the past 12 months due to weak gold prices, closed at $3.04 on the Toronto Stock Exchange on Thursday. Its shares were up 3 percent in trading before the morning bell in New York on Friday.
By Euan Rocha and Ashutosh Pandey
(Additional reporting by Susan Taylor in Toronto; Editing by Kirti Pandey and Chizu Nomiyama)
Photo courtesy of Magris Resources Inc