Tacora announces investors waiting in the wings to inject cash into Wabush mine

The owners of the Scully Mine in Wabush, Tacora Resources, obtained creditor protection from the Ontario Superior Court in October. (Darryl Dinn/CBC)

A group of investors has come together to inject cash into Tacora Resources' iron ore mine in Labrador, potentially paving a way for the company to emerge from creditor protection.

Tacora, which owns the Scully Mine in Wabush in western Labrador, obtained creditor protection from Ontario's Superior Court in October. In documents, it cited a volatile market, raging forest fires and unexpected maintenance at the mine as contributing factors that led to a dire year financially.

Last week, company spokesperson Graham Letto hinted to CBC News that good news was on the way for Tacora. Days later, the company announced it had chosen a promising bid to keep the mine operating.

According to a statement dated Feb. 2, a new group of companies is interested in investing in the iron ore mine, made up of private equity firm Resource Capital Fund VII L.P. and commodities traders Javelin Global Commodities, along with a group of bond holders.

Tacora president and CEO Joe Broking said in a statement that this is a "successful outcome for Tacora and its stakeholders of the strategic process completed through the CCAA Proceedings."

"CCAA" refers to the Companies' Creditors Arrangement Act. As part of the creditor protection process, the court appointed FTI Consulting Canada as Tacora's monitor, which provides an online creditor portal for case updates and court-filed documents for insolvency cases.

"The transactions will allow Tacora to emerge from the CCAA Proceedings as a much stronger and better-capitalized business focused on achieving the full potential of the Scully Mine," added Broking.

The tentative agreement comes after a bidding process, which closed on Jan. 19.

The statement added that this deal would enable the company to focus on its long-term plans for the Scully Mine and invest approximately $300 million US over four years, going toward upgrades and modernization at the site. It added Tacora's goal is to produce more than six million tonnes of high-grade iron ore concentrate per year.

The statement also gives some details about the agreement Tacora is interested in accepting.

The subscription agreement — which was entered into on Jan. 29 — includes details like the companies investing $225 million US into Tacora and debt financing to the tune of $45 million US. It will also handle Tacora's secured debt as well as continue to employ its workforce.

The agreement would also allow "entry into a marketing agreement and product purchase and sale agreement and a secured working capital facility of up to US$100 million with Javelin."

Tacora is aiming for a March 22 closing date and the company intends to get this agreement approved by the courts as soon as possible.

Letto declined an interview request, saying over email that the company isn't going to comment during the creditor protection process.

The Minnesota-based Tacora has operated the iron ore mine since 2019.

Previous owner Cliff Natural Resources closed the mine in 2014 before Tacora took over operations, which saw the loss of hundreds of jobs along with lost benefits for workers.

CBC News reached out to Wabush mayor Ron Barron for comment but did not hear back by publication time.

Around the same time Tacora entered creditor protection, it secured a $75-million agreement to keep the mine operating for the next 20 weeks, or until the end of February.

On Jan. 25, according to FTI Consulting's Tacora CCAA website, Tacora obtained an order extending its credit protection period until March 18, giving it more time to restructure its finances.

In the meantime, four companies — Nova Scotia-based MacGregor's Custom Machining, Crane Supply, Newfound Roofing and JSM Electrical — have filed mechanic's liens on Tacora for work they claim they did but weren't paid for.

The amount is approximately $4 million, combined.

In an earlier email, Letto told CBC News that mechanics' liens are a "normal part of the CCAA procedure" and the company is not in a position to comment on anything filed on the Tacora CCAA website.

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