01.07
Outperform, Above Average Risk
CLM announced that it has entered into a US$50 million credit and offtake agreement with SK Networks (SKN), a subsidiary of the third-largest Korean conglomerate, SK Group. RBC CM views both the credit facility and offtake agreement as positive developments. The new credit facility has very reasonable terms, replaces an inferior undrawn credit facility that expired at the end of 2009, and based on its analysis ensures that CLM has sufficient liquidity over the near term. In addition to locking in future sales, the new offtake agreement suggests to RBC CM that management is confident in its ability to successfully ramp up production at Bloom Lake to 8 million tonnes of iron ore concentrate in the near term, setting the stage for a further expansion to 16 million tones per annum. RBC CM continues to believe that CLM provides a compelling iron ore growth story in the North American market.
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