Champion Iron's Bloom Lake mine near Fermont, Que., in May, 2016.STAFF/Reuters
Champion Iron Ltd. CIA-T, owner of the Bloom Lake mining complex in the Labrador Trough, is making a takeover offer for Norway’s Rana Gruber ASA as it stretches across the Atlantic to bolster its iron ore assets.
The Sydney, Australia-based miner, whose entire operating base is in Canada, said late Sunday it struck a deal to buy Rana Gruber, a supplier to European steelmakers, for US$289-million or US$7.79 a share in cash.
Champion wants the Mo i Rana, Norway-based exploration and mining services company in part for its access to renewable power, which Champion says gives Rana Gruber one of the lowest carbon-emissions footprints in the industry.
Pension fund manager La Caisse de dépôt et placement du Québec is backing the transaction with a US$100-million private placement purchase of Champion stock, while Bank of Nova Scotia is providing a US$150-million loan. Champion will fund the balance of the purchase with cash on hand.
Rana Gruber is “very well run” with a similar culture to Bloom Lake, Champion Iron chief executive David Cataford told analysts on a conference call Monday. “This is us aligning ourselves with a great team with a great asset that’s operated for decades in a noninterrupted way through all economic cycles.”
The agreement highlights Champion’s push to build greater scale in the face of rising competition. And it shows that Canadian institutional investors are willing to support that effort despite the sector’s historic volatility. La Caisse will hold a stake of about 8.5 per cent when the transaction is finalized, according to the details provided.
Champion operates Bloom Lake, an open-pit operation with two concentration plants located about 13 kilometres north of Fermont, Que., that sources most of its energy from hydropower. The miner ships high-grade iron ore concentrate from the site by rail to the port in Sept-Iles.
Rana Gruber controls five iron ore deposits located in the Dunderland Valley in northern Norway, specifically around the areas of Storforshei and Ørtfjell. It processes the ore and transports it from facilities in Gullsmedvik, which is near Mo i Rana. Like Champion, it has access to hydroelectric power.
The Norwegian company has the capacity to produce roughly 1.8-million tons a year of iron ore concentrates, including a magnetite, high-purity iron-oxide product used in sectors outside traditional metallurgy, such as water purification and industrial chemical applications. Champion said that specialty product has typically commanded a higher premium to the P65 Iron Ore Index, a global pricing benchmark for high-grade iron ore concentrate, because it’s not tied to steel industry dynamics.
Iron ore is the primary raw material used in steelmaking.
Speaking on the conference call, executives for the two companies expressed confidence in their combined future in the face of heightened competition and changing regulations. And they said they have a shared vision to decarbonize the steel industry.
One particular challenge has been the sheer volume of steel from China flowing into the European market in recent years. The European Union will start imposing a fee called the Carbon Border Adjustment Mechanism (CBAM) next month on imports of high-emission goods, including steel, aluminum, cement and fertilizers.
The world’s first carbon border tariff, the CBAM, is designed to shield European industries against cheaper imports from countries with weaker climate rules. But it has irritated trading partners such as China and India, which say it unfairly penalizes their economies.
“Having two of the lowest CO2-intensity iron ore mines in the world in the high-grade space, Bloom Lake and Rana Gruber, we do feel that we’ll be able to benefit from that new regulation coming into Europe,” Mr. Cataford said. Regulatory efforts to support more steel production in Europe will also help, he added.
Rana Gruber’s executive management and board of directors are backing the deal and investors holding just over half of the company’s stock have agreed to tender their shares, Champion said in a release. The companies expect the deal to close in the second quarter of 2026.
Champion Iron is a publicly traded company listed on the Toronto Stock Exchange and the Australian Securities Exchange. It employs nearly 1,400 people in Quebec.
With a report from Reuters