Omai bauxite sale: IAMGOLD hopes for amicable solution
Guyana Chronicle
February 2, 2007
CANADIAN mining company IAMGOLD, which has announced that it is selling its majority shares in Omai Bauxite Mining Inc (OBMI) to Bosai Minerals Group Company Limited of China (BOSAI), yesterday said it is hoping for an amicable solution to concerns raised by the Guyana Government on the development.
IAMGOLD, which acquired OBMI from the other Canadian mining company, Cambior, said it will sell its shares in OBMI to Bosai for US$46M.
But President Bharrat Jagdeo last week said his government had expressed concerns that the deal moved forward without it being fully aware of all the details.
However, he said the government is seeking further information and will state its position on the issue by February 12.
At a press conference at the Office of the President, Mr. Jagdeo said the government wants assurances from Bosai that it will not scale down operations here or if the market changes, shut down operations to the advantage of its company in China.
“We want to make sure that whoever gets our ore body is not moving just to produce bauxite, but to go to an aluminium plant or an aluminium refinery. That is our interest in utilising our ore body - to stimulate some agreement with one or the other party to get processing done here,” he said.
Mr. Jagdeo said the government’s interest is in safeguarding the thousands of jobs that depend on the bauxite industry.
In a press release yesterday, OBMI said that on December 22nd, 2006, IAMGOLD Corporation, as corporate successor to Cambior Inc., provided formal notification to the Government of Guyana that it had entered into a conditional share purchase agreement with Bosai on December 18, through which Bosai will acquire IAMGOLD’s 70% interest and shares of OBMI.
“This agreement is subject to the conditions of the Shareholders Agreement between Cambior Inc., National Industrial and Commercial Investments Limited (NICIL) and OBMI”, it said.
It said that on behalf of the government, NICIL is required under the Shareholders Agreement to either exercise its Right of First Refusal (ROFR) and elect to purchase the Offered Shares within thirty (30) days of the receipt of notice of the conditional share purchase agreement, or to waive this right.
“A formal response from NICIL, based on IAMGOLD’s notice of December 22nd, 2006, was required to be submitted by NICIL on or before January 22nd, 2007.
The Government has, however, contended that NICIL has not been provided with sufficient information to allow it to arrive at a considered decision.
All of the parties concerned, IAMGOLD, NICIL and BOSAI have, therefore, agreed to extend the deadline to February 12th, 2007 for NICIL’s decision to waive or exercise its Right of First Refusal”, OBMI said.
It added that IAMGOLD, while still operating as Cambior, informed the government through NICIL in June 2006, of its intention to dispose of its interests in OBMI because of the substantial losses it incurred.
“OBMI acquired a financially troubled operation at Linden. Subsequently, OBMI invested approximately US$70 million in plant and working capital in this operation, which continues to incur operational losses. When the sale to Bosai is concluded, IAMGOLD will still record a loss in excess of US$30 million after the assumption and transfer of OBMI’s outstanding debts”, the company said.
It stated that the government and NICIL were kept fully informed of the worldwide search conducted by the investment bank of BMO Capital Markets for an investor ready to continue the operations of OBMI. “Government and NICIL were also kept fully aware at all times of the bidding process finally entered into with the six interested parties leading to a conditional agreement with BOSAI.”
According to the company, NICIL and the government have had access to the same information that was made available to companies to facilitate due diligence in the bidding process. “This process was at all times transparently conducted, with full disclosure and publicly reported in the media”, it said.
It noted that the government through NICIL has raised an issue with regard to the future productive utilization of the bauxite reserves held as Block 37 for which OBMI has a valid Prospecting License (PL).
“While IAMGOLD understands the government’s concern with regard to the ongoing productive use of Block 37, it should be noted that Block 37 is an integral part of the Shareholders Agreement between CAMBIOR and NICIL and is a part of the share purchase agreement with BOSAI.
OBMI has complied with its obligations regarding Block 37 PL. Further, CAMBIOR had relinquished, to the government, rights held for two other properties at Bamia-Moblissa and Tiger Jump”, the press release said.
It said it is IAMGOLD’s understanding that Bosai has given the government every assurance of its intention to fully utilize Block 37 in accord with its obligations under the Prospecting Licence.
“IAMGOLD has advised the government that its primary expertise and focus is on the development of its gold assets in Guyana. IAMGOLD is prepared to commit further resources to the development of those assets. IAMGOLD, however, has no interest in funding the continued operations of the bauxite assets held through OBMI”, the company said.
“IAMGOLD, in good faith, entered into the transaction with BOSAI and looks forward to the government, through NICIL, either waiving its Right of First Refusal and consenting to the purchase of OBMI by BOSAI, in keeping with the provisions of the Shareholders Agreement between CAMBIOR Inc., NICIL and OBMI or exercising this right by matching the offer received from BOSAI.
We have noted that BOSAI has issued a press release committing to a feasibility study and the possible investment of US$1 Billion to develop and integrate the bauxite operations.
IAMGOLD is seeking an amicable and honourable solution to the present situation, which will inure to the good of Guyana”, the press release said.