IAMGOLD seeking 'amicable' solution to bauxite sale
-says will incur US$30M loss
Stabroek News
February 2, 2007
Amid signs that the government is unhappy with a proposed deal and is trying to attract Russian investors to take over, IAMGOLD yesterday said it wants an "amicable" resolution to the sale of the Linden bauxite operations and argued that it will incur a loss of over US$30M on conclusion of the transaction.
In a press release issued yesterday through Omai Bauxite Mining Inc (OBMI), IAMGOLD which acquired 70% of the entity when it took over Cambior Inc last November, said Cambior had informed government of its intention since June 2006 to dispose of its interest in the loss-making operation.
Canada-based IAMGOLD said that when OBMI's proposed sale to Bosai Minerals Group Co Ltd of China was made known to government through the National Industrial and Commercial Investments Ltd (NICIL) late last year, the government said it was not provided with sufficient information to arrive at a considered decision.
As the 30% shareholder in OBMI, government is required, under the shareholders' agreement it signed with Cambior, to either exercise its right of first refusal and purchase the 70% within 30 days or waive the right. It has done neither as yet having asked for an extension to the January 22 deadline to February 12 to which IAMGOLD and Bosai have agreed.
"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," the release said.
"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," explained the release.
Apart from OBMI, IAMGOLD also acquired Omai Gold Mines Ltd, where underground exploratory work is ongoing. Omai Gold officially closed its operations in 2005, but still has some 100 employees on site for exploration.
The release further noted that since June 2006 the government was informed that the company was preparing to sell its interest because of the losses incurred. "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."
The release added that at all times NICIL and the government had access to the same information, that was made available to the 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."
The government has expressed concern with regard to the future productive use of Block 37, an ore reserve. And IAMGOLD said while it "understands the government's concern… 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 Minerals."
In addition, the release explained that OBMI has complied with its obligations regarding the Block 37 Prospecting Licence (PL) and Cambior relinquished to the government, rights held for two other properties at Bamia-Moblissa and Tiger Jump.
"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 PL."
The release also explained that BOSAI has issued a press statement committing to a feasibility study and the possible investment of US$1 billion to develop and integrate the bauxite operations. There are concerns locally that Bosai, whose output has competed against Guyana's bauxite on the international market, could simply sit on Block 37 so that its production outside of Guyana garners a higher price.
The release said, "IAMGOLD is seeking an amicable and honourable solution to the present situation which will inure to the good of Guyana."
Bosai Minerals told Stabroek News on Saturday that it was committed to conducting feasibility studies toward an alumina refinery or aluminium smelter in two phases.
Currently, President Bharrat Jagdeo and Head of NICIL, Winston Brassington are in Russia and have held talks with RUSAL the aluminium giant on its plans to put up an alumina plant here. The government had insisted in a press conference before leaving for Russia that whichever company takes over OBMI must utilize Block 37 for not only producing bauxite but for alumina production. RUSAL had made a bid for OBMI but was not selected as the preferred bidder by IAMGOLD. This Russian aluminium company operates in Guyana through its subsidiary Bauxite Company of Guyana Inc in Berbice. It is believed that during Jagdeo's trip efforts would be made to mobilize a counter-offer to Bosai.
IAMGOLD's disclosure that OBMI had invested US$70M in plant and working capital in the financially troubled operations at Linden will also be viewed with great interest locally. This was the first time that a specific investment figure was publicized. There had been concerns that IAMGOLD was on the verge of making a windfall from the sale of the 70% stake to Bosai. Cambior had acquired the 70% stake from government for US$5M in cash, US$5M in equipment and the promise of significant investment. IAMGOLD intends to sell the 70% stake to Bosai for US$46M.