Cliffs shows signs of growing taconite marketCliffs Natural Resources on Monday demonstrated its faith in the future of demand for taconite, perhaps a good sign for its operations in Silver Bay and other Minnesota cities.
By: News-Chronicle news services, Lake County News Chronicle
Cliffs Natural Resources on Monday demonstrated its faith in the future of demand for taconite, perhaps a good sign for its operations in Silver Bay and other Minnesota cities.
North America’s largest producer of iron ore pellets announced plans to become the sole owner of the Wabush Mines, with operations in Newfoundland, Labrador and Quebec. Cliffs will pay about $88 million to buy out partners U.S. Steel Canada and ArcelorMittal Dofasco, which own 44.6 percent and 28.6 percent shares of Wabush, respectively. Cliffs already holds a 26.8 percent stake in Wabush.
Consolidated Thompson offered Friday to buy Wabush for $120 million and was poised to complete the acquisition, but Cliffs announced Monday it will exercise its right of first refusal, meaning it will complete the transaction under the same terms negotiated by Wabush.
Tony Robson, an analyst for BMO Capital Markets, views Cliffs’ decision to buy Wabush as a sign of industry confidence.
“Especially since it’s a relatively high-cost producer versus the Minnesota mines, you need a pretty positive price environment to make Wabush work,” he said.
Peter Kakela, a professor at Michigan State University and a taconite industry expert, referred to Cliffs’ announcement Monday as “a pretty strong statement.”
Robson saw Cliffs’ plans to purchase Wabush as “somewhat surprising,” given its prior attempts to sell its stake in the Canadian mine operations.
Kakela noted that while Wabush is the smallest Canadian taconite operation, it enjoys special access to the European market because of its location at the far eastern end of the St. Lawrence Seaway.
Cliffs has been a managing partner at Wabush since it began operating in 1965. Wabush employs about 770 people.
In Minnesota, Cliffs owns United Taconite Co., with operations in Forbes and Eveleth; and Northshore Mining Co., with operations in Silver Bay and Babbitt.