'The end is in sight' to get embattled Wabush mine out of creditor protection, says spokesperson

Tacora Resources has secured court approval to proceed with the sale of its mine, and one of companies that is part of the bid is a global conglomerate that had squashed a previous attempt to sell the mine.

Tacora said a statement on Thursday that a bid to buy the mine, led by Boston-based investment management firm Millstreet Capital Management, had been approved in an Ontario court.

Spokesperson Graham Letto said the company is aiming to close the deal by Aug. 30.

"The end is in sight. You know, it's been a tough year for us. It's been a hard slog and a lot of people have worked very, very diligently and very, very hard to get us to this point today," Letto told CBC News Friday morning.

As soon as that transaction is closed, he said Tacora will be able to exit creditor protection, which began 10 months ago.

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.

New buyers — and one old

One of the new buyers is Cargill, a massive, privately owned U.S.-based global food corporation, which is already one of the companies that co-owns Tacora.

Earlier this year, Cargill objected in court to a previous investment bid for Tacora, alleging the process was being done too quickly and if the deal was approved it would financially hurt Cargill.

Letto said during court delays, that first group of investors — made up of private equity firm Resource Capital Fund VII LP and commodities traders Javelin Global Commodities — backed out.

As a result, he said Tacora reopened the bidding process in July and received one bid, put together by Mililstreet, Cargill and Minnesota-based investment firm O'Brien-Staley Partners.

Despite that, Letto said Tacora has a good reputation with Cargill.

"It shows that Cargill does have faith in this operation and they love the product that we produce. It's a world class product," he said.

CBC News asked Millstreet Capital Management, O'Brien-Staley Partners and Cargill for an interview but did not get a reply at the time of publication. 

Details of the deal

As part of the sale agreement, Tacora has a new 10-year off take agreement with Cargill for iron ore produced at the mine, said Letto.

"That gives us a much more competitive market terms and certainly more beneficial to Tacora, which will result in higher cash flow generation per ton of concentrate produced," he said.

Cargill was already the sole buyer for Tacora's iron ore and Letto said that will stay the same, adding the exact details of that arrangement are confidential.

Letto said there is also an additional $250 million US being invested by the new owners to help modernize the mine, which will bring its operation to six million tons per year production rate.

"It's a relief off everybody's shoulders for sure," said Letto.

Big news for town

Speaking to CBC News on Thursday, before the sale of Tacora was announced, Wabush mayor Ron Barron said he was optimistic about the future of the mine.

"Wabush mine is a big help to our community. It helps us do a lot of stuff that we normally wouldn't be able to afford unless we raise taxes and we're trying not to do that," Barron said.

He said when the mine prospers, it helps the town through a pre-arranged grant in lieu of taxes. But since the mine entered creditor protection, the town has had to reconsider the community's budget.

"We had to put a lot of those things on the back burner. We still budget it, but we wouldn't fully commit to going and getting that piece of equipment or doing a certain job in town until we knew that we were going to be safe," said Barron.

Within the last month, he said the town council has become more optimistic about Tacora's financial situation and they have started to move on some projects.

Letto said the relationship with Wabush is vital to the company, adding the five year grant in lieu of taxes deal expires in 2027.

"It's very important for the town, it's very important for our employees. I mean we have a workforce now of about 460 people who live in Labrador City and Wabush. So it's very important to the economy of the area," said Letto.

He said when the mine had shut down in 2014, then under Cliff Natural Resources, it was a blow to the region.

"Now that we're on safe footing again, it's a relief for everybody, for everybody in town, for the businesses, all our suppliers and vendors that we continue to work with. So it's a relief for everybody, really," he said.

The previous CEO Joe Broking resigned in June and Letto said his replacement will be announced in the coming weeks.

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