Consolidated Thompson Iron Mines Limited
TSX : CLM

Consolidated Thompson Iron Mines Limited

June 09, 2009 07:04 ET

Consolidated Thompson and WISCO Sign Definitive Agreement for US$240 Million Strategic Investment

TORONTO, ONTARIO--(Marketwire - June 9, 2009) - Consolidated Thompson Iron Mines Limited (TSX:CLM) ("CLM" or the "Company") is pleased to announce that it has signed a definitive subscription agreement (the "Definitive Agreement") with Wuhan Iron and Steel (Group) Corporation ("WISCO") in respect of the previously announced strategic investment of US$240 million by WISCO into CLM (the "Transaction"). The parties have also agreed upon the terms of all other material definitive agreements that will be executed at closing.

The Definitive Agreement provides for WISCO to subscribe for 38,681,023 common shares of the Company at a price of C$2.72 per share for an aggregate subscription price of C$105,212,382.56, which shares represent 19.99% of the issued and outstanding CLM shares post-transaction. In connection with this subscription, WISCO will be entitled to nominate a director to the Board of CLM. In addition, CLM has granted WISCO a pre-emptive right to maintain its proportionate interest in CLM in certain circumstances.

CLM and WISCO will establish a limited partnership, of which WISCO will hold a 25% interest, and to which CLM will contribute the Bloom Lake property. WISCO will contribute the balance of the previously announced US$240 million investment, after the payment for the common shares of CLM pursuant to the Definitive Agreement, to the limited partnership in exchange for its interest therein. CLM will be the manager of the Bloom Lake project and, once Bloom Lake is in commercial production, CLM will receive a management fee on a per tonne basis. WISCO is entitled to a minimum annual distribution from the partnership equal to not less than the profits from the annual sale of 1.6 million tonnes of iron ore concentrate.

Under an offtake agreement with the limited partnership, WISCO will be obligated to purchase, at fair market value, a percentage of iron ore production during each year of the life of the Bloom Lake project that is equivalent to its percentage interest in the limited partnership. WISCO will also be entitled, upon certain conditions, to other long-term off take rights to purchase, at fair market value, both additional amounts of initial production and amounts resulting from future expansion of the Bloom Lake project, as well as from CLM's Lamelee and Peppler Lake projects.

CLM is entitled to terminate the Definitive Agreement in order to pursue a superior proposal (including a financing transaction) upon payment of a US$2,000,000 break fee. Should the Company receive a superior proposal (including a financing transaction), WISCO will have the right to match it. CLM has agreed not to solicit such a proposal.

WISCO is required to pay a break fee of US$2,000,000 to CLM in the event the transaction does not close by July 20, 2009 by virtue of WISCO not satisfying the conditions precedent for which it is responsible for satisfying.

Richard Quesnel, the President and CEO of the Company, said "Signing of the Definite Agreement with WISCO is a major catalyst for Consolidated Thompson as the Bloom Lake project is further "de-risked". It is expected to provide us with the financial flexibility to reach the commissioning stage while remaining debt free. This partnership with one of China's largest and most technologically advanced integrated steel groups also strengthens Consolidated Thompson's potential to expand from the current mine plan of 8 million tonnes per year to 16 million tonnes of annual production of iron ore, if such expanded scenario is deemed economic, and we believe that it positions us as a significant future iron ore producer with quality, low cost assets in Quebec."

Brian Tobin, Co-Chairman of the Company, said "In this time of global economic uncertainty, China remains one of the strongest and most dynamic economies of the world. CLM is delighted to build this new partnership with WISCO, one of China's most important steel groups. CLM now has both the capital and the China market access to build a world class company. We are debt free and strongly positioned to grow as opportunities arise."

The agreement is conditional on approval by the Chinese Government as well as approval of the Toronto Stock Exchange. It is a condition to the transaction that closing occur no later than July 20, 2009.

The Balloch Group is acting as financial advisor to WISCO for this transaction. Cassels Brock & Blackwell LLP acted as legal counsel to CLM and McCarthy Tetrault LLP acted as legal counsel to WISCO.

About Consolidated Thompson Iron Mines Limited

Consolidated Thompson Iron Mines Limited is an exploration and development mining company. The Company believes that its updated positive Feasibility Study, based on the current understanding of the quality and size of the Bloom Lake deposit, reflects the potential to expand and advance the project and exploit other opportunities in the iron ore industry. The Company has approximately 155.0 million shares outstanding and trades on the TSX under the symbol "CLM".

Forward-Looking Information

Except for statements of historical fact relating to the Company, certain information contained herein constitutes "forward-looking information" under Canadian securities legislation. Forward-looking information includes, but is not limited to, statements with respect to the terms of the agreement; receipt of all necessary approvals; the negotiation and execution of the definitive agreements; benefits from the agreement; capital required to complete the development of the Bloom Lake mine and the timing of such requirements; the conclusions, parameters and assumptions underlying current mine plans, the development potential and timetable of Bloom Lake project; capital and operating expenditures; iron ore prices; permitting time lines and permitting; government regulation of mining operations; environmental risks and the impact of management appointments. Generally, forward-looking information can be identified by the use of forward-looking terminology such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved". Forward-looking statements are based on the opinions and estimates of management as of the date such statements are made. Estimates regarding the anticipated timing, amount and cost of mining at the Bloom Lake Project are based on assumptions underlying mineral reserve and mineral resource estimates and the realization of such estimates as are set out in CLM's feasibility study. Capital and operating cost estimates are based on extensive research of the Company, purchase orders placed by the Company to date, recent estimates of construction and mining costs and other factors that are set out in CLM's feasibility study.
Production estimates are based on mine plans and production schedules, which have been developed by the Company's personnel and independent consultants. Forward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of Consolidated Thompson to be materially different from those expressed or implied by such forward-looking information, including but not limited to risks described in the annual information form of the Company posted under the profile of the Company on SEDAR at www.sedar.com. Although management of Consolidated Thompson has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking information. Consolidated Thompson does not undertake to update any forward-looking information, except in accordance with applicable securities laws.

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