Yahoo Finance Iamgold selling Suriname mines to China's Zijin to fund Ontario gold project
Iamgold Corp. shares rose to their highest price in a month on Tuesday as the Toronto-based miner announced it has agreed to sell its mining assets in Suriname to China’s Zijin Mining Group Co. Ltd. for US$360 million.
Iamgold owns 95 per cent of Rosebel Gold Mines NV, which runs two mines in Suriname with the remaining five per cent held by the South American nation’s government. The cash received from the sale will be used to build Iamgold’s Côté Gold project, which is located about 125 kilometres southwest of Timmins, Ont., and is currently under construction.
The company needs US$1.2 to US$1.3 billion of capital expenditure to complete the project and if the sale of its Suriname assets is completed early next year, the miner will narrow that need to about US$400 million, according to analysts.
“This sale represents a key first step in solving the funding gap to complete the construction of our flagship Côté Gold project,” Graeme Jennings, a company spokesperson, said.
The company said the deal will require “certain regulatory approvals” for it to be completed.
A parliamentary committee in March said Canada should launch a full security review for every investment by a company influenced by an “authoritarian state” since that meets the Investment Canada Act’s (ICA) threshold of potentially being “injurious to national security.”
The committee recommended the Minister of Innovation, Science and Industry invoke Section 25.3 of the act to launch a formal national security review in “all such cases.” The minister’s decision not to do so over Zijin Mining’s acquisition in January of Neo Lithium Corp., a mining company formerly listed in Canada that owned a lithium project in Argentina, led to some controversy.
Former Conservative party leader Erin O’Toole criticized the federal government for allowing Zijin Mining to acquire Neo Lithium since the demand for critical minerals such as lithium needed for electric batteries was rising. He said the government had not done a proper security review.
Industry minister François-Philippe Champagne said at the time that the deal was thoroughly reviewed and that it wasn’t going to be injurious to national security. He also said Neo Lithium’s project would not be mining for lithium hydroxide but lithium carbonate, which Canada would not be relying on to produce electric batteries.
Iamgold’s Jennings said there were “significant differences” between Zijin’s acquisition of Neo Lithium and its deal with Iamgold.
“First, this is simply an asset sale, not the sale of a listed company. This asset sale does not impact Iamgold’s status as a publicly traded company on the Toronto Stock Exchange,” he said. “Second, this is a sale of a gold mine and gold is not listed as a critical mineral in Canada.”
Laurie Bouchard, a spokesperson for the industry minister, said the ministry was aware of Iamgold’s intentions to sell its interest in Rosebel Gold Mines and the deal is subject to review under the ICA.
“In addition to reviews for likely net benefit for significant investments, all foreign investments regardless of value are subject to national security review under the act,” she said. “We currently can’t comment any further on the specificities of this transaction.”
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The Côté Gold project is expected to produce an annual average of about 365,000 ounces of gold for about 18 years upon completion in 2024. Iamgold owns roughly 65 per cent of the project, while Japan’s Sumitomo Metal Mining Co. Ltd. owns 28 per cent.
Tanya Jakusconek, an analyst at the Bank of Nova Scotia, said the deal was a “move in the right direction” for Iamgold as the Suriname mines received a higher bid than Scotiabank’s valuation of US$247 million.
“These proceeds are still not enough to complete the construction of the Côté Gold project,” the analyst said in a note on Oct. 18.
Jackie Przybylowski, an analyst at the Bank of Montreal, expects the deal will have a mixed impact on Iamgold. The sale provides the miner with the cash it needs, but it also cuts its cash flow and increases the company’s dependence on its Essakane mine situated in “volatile” Burkina Faso, where there was a coup in September.
Shares of Iamgold at 12:45 p.m. were trading at $1.71, up 24 cents, or 16.3 per cent. The company has a market cap of $819 million.
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