U.S. mining giant Cliffs Natural Resources Inc. has "ring-fenced" its Bloom Lake iron ore mine under bankruptcy protection and no longer has any exposure to closing or clean-up costs, senior executives say.
After talks with potential buyers of the Bloom Lake assets over the past two months, it was decided the best action to take was to put them under protection of the Companies' Creditors Arrangement Act (CCAA), Cliffs chairman and chief executive officer Lourenco Goncalves said Tuesday.
That means Cliffs' Bloom Lake liabilities now stand at zero, he said on a conference call for analysts.
Bloom Lake – in northeastern Quebec – is "the cancer that we have to take out" as Cliffs retrenches to focus on its U.S. iron ore business, Mr. Goncalves said in a telephone interview Tuesday.
The company said in November that it was "pursuing exit options" for its Eastern Canada iron ore operations, estimating its maximum exposure to close the Bloom Lake site at between $650-million (U.S.) and $700-million.
"We were going through chemotherapy and that didn't do it. Now the [cancerous] limb has been cut off," Mr. Goncalves said in the interview.
The outspoken Mr. Goncalves said in November that his predecessors made a huge mistake pumping billions of dollars into Canadian iron ore and other assets.
Cleveland-based Cliffs, the biggest U.S. iron ore producer, has spent about $6-billion on the Bloom Lake project over the past three years but never made a profit, he said at the time.
And the company said it simply could not afford the $1.2-billion in additional funds needed to expand the high-cost Quebec mine and make it more efficient.
"Over the past two months we have worked with several interested parties and were approached by the provincial government through Investissement Québec to sell these assets and liabilities outside of CCAA," Mr. Goncalves said in the interview Tuesday.
"After considering several deal proposals, we concluded the best way to proceed with our exit strategy" was CCAA, he added.
Cliffs executive vice-president of business development Kelly Tompkins said on the call with analysts that the company will not be on the hook for any environmental cleanup costs, as a new corporate entity distinct from Cliffs has been created and is to assume all liabilities.
"As of the date of the [CCAA] filing, the Bloom Lake group has been effectively been ring-fenced," Mr. Goncalves said on the conference call with analysts.
Cliffs expects to complete the Bloom Lake asset sales and bankruptcy process by the end of this year, he said.
Among the Bloom Lake liabilities are more than $90-million owed as a result of a court decision in a lawsuit over contractual delivery obligations and $450-million over three years to be paid to a rail subsidiary of Iron Ore Co. of Canada, Mr. Goncalves said in the telephone interview.
Bloom Lake was acquired as part of a $4.3-billion takeover of Consolidated Thompson Iron Mines Ltd. in 2011, before Mr. Goncalves took over last August amid a wider board shakeup following a proxy fight.