Photo: Lee Nicholson at Stikeman Elliott was part of Tacora’s CCAA team
In 2023, Tacora Resources Inc. filed for protection under the Companies' Creditors Arrangement Act.
The move was the culmination of years of struggle that began after the mining company bought and successfully revived an iron ore mine in Wabush, Newfoundland and Labrador, in 2017. Plagued by operational challenges in the years that followed – including Quebec wildfires that prevented Tacora from shipping its main product, iron ore concentrate – the company eventually found itself with minimal capital, making it hard to invest in initiatives that would help ramp up production and leaving it scrambling to secure financing to keep operations running.
By July 2023, Tacora had $427.5 million in liabilities, and its net value was approximately $360.6 million.
But by September of the following year, the company’s fate had taken a different turn. That month, Tacora announced it had closed a sale to an investor group, allowing it to emerge from the CCAA process with a US$250 million equity injection and what the company described as “an improved business plan.”
The deal also left the company with new competitive advantages, including what it called a “significantly advantageous amended rail agreement” for transporting its iron ore concentrate, as well as substantial cash to support the company’s future investments and expansion plans.
Tacora’s impressive turnaround can be credited in large part to a legal team at Stikeman Elliott. In May, the Stikeman team, which represented the company in the CCAA proceedings, was honoured for its feat at the Canadian Law Awards. Along with the teams that represented the other parties in Tacora’s insolvency proceedings – which included lawyers from Bennett Jones LLP, Cassels Brock & Blackwell LLP, Davies Ward Phillips & Vineberg LLP, Goodmans LLP, McCarthy Tétrault LLP, and Osler, Hoskin & Harcourt LLP – the Stikeman team took home that night’s award for facilitating the most significant insolvency and restructuring deal of the year.
However, the road towards that transaction was far from smooth. And the stakes were high.
The Scully mine, which first started operations in 1965, is in the so-called Labrador Trough, a region known for its iron ore that runs through parts of Quebec and western Labrador. At the time that Tacora filed for CCAA protection, the company was the second-largest employer in the town of Wabush.
Those proceedings did not mark the first time the Scully mine had fallen on hard times. When Tacora acquired the mine in 2017, it had been closed since 2014 under a previous owner who went on to commence restructuring proceedings under the CCAA. The mine’s 2014 closure resulted in the loss of hundreds of jobs.
“I think the original shutdown of the Scully mine had a dramatic impact on the community in terms of employment and investment in the area,” says Lee Nicholson, a partner at Stikeman and part of Tacora’s CCAA team. “So, keeping the mine open and operating was very important to the community, and ensuring that people had jobs through the restructuring was always a focus of the company.”
“It was their livelihood,” Nicholson adds. “The whole community depends on ensuring that the iron ore mines continue to operate in that area.”
According to Nicholson, the biggest challenge arising out of the CCAA proceedings was managing the competing interests of Tacora’s two major groups of stakeholders: the company’s bondholders and the US multinational food company Cargill. Cargill had been buying 100 percent of the iron ore concentrate coming out of the Scully mine since 2017, in accordance with an offtake agreement with Tacora.
The two groups of stakeholders disagreed over who would provide debtor-in-possession financing to Tacora as the company worked through the CCAA process, which led to litigation. Both groups wanted to provide the DIP financing under different terms; in October 2023, a Commercial List judge sided with Tacora and Cargill, authorizing the former to borrow up to $75 million from the latter.
The judge determined that a plan that included financing from Cargill was “fair and reasonably necessary for the continued operations of Tacora in the ordinary course of business to provide stability for the company and to allow it the breathing room that it needs to try to restructure its affairs so that it can continue as a going concern.”
That October decision was “ultimately a big milestone for the case,” Nicholson says. Following the decision, Tacora ran a sales process, ultimately landing on a bid by the bondholders and a different offtake provider. That led to more litigation with Cargill. However, the night before a hearing, the successful bidders said they no longer wanted to move forward with the deal, due to a steep drop in iron ore prices that left Tacora unable to fulfill a condition of its agreement with the bidders.
More litigation ensued over the sales process, but discussions between the parties ultimately paved the way for Tacora’s exit. In September 2024, Tacora was sold to a group that included certain significant bondholders and Cargill, in a deal that gave the company another 10-year offtake agreement.
“The bondholders and Cargill both spent an enormous amount of resources fighting to try to preserve their interests,” Nicholson says. “Ultimately, it led to them getting to the negotiating table to ensure that the mine survived and [that Tacora] got out of the CCAA and got on to the actual work of building out [the] capacity of the mine.”
Looking back, Nicholson describes the crux of the case as “a large fight between these two very important stakeholders, but we didn't want the company to get crushed in the middle of the fight between them.” Stikeman’s team used several strategies – including a reverse vesting order, quick sales processes, and a negotiation cliff – to steer Tacora through the process.
“The goal of the case was to preserve Tacora as a going concern and get that new investment that it needed to try to ramp up production,” Nicholson says. “Ultimately, it was a windy road to get there, but it got there for the company.
“They are out of CCAA, still operating, and still trying to develop the Scully mine into its full potential.”
