IAMGOLD seeking ‘amicable’ solution to bauxite sale

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