By: Dylan Sikes - AllPennyStocks.com News

Monday, March 23, 2015

The slowdown in China, combined with increasing supplies, has led to a sharp pullback in prices of several industrial metals. The “commodity supercycle” which was driven by China’s appetite for resources has come to an end. Not surprisingly, metals and mining companies that had expanded during this boom period are now looking to streamline their operations and focus on core areas. Several major mining companies have already sold a number of non-core assets. Recently, BHP Billiton (NYSE:BHP) announced a demerger (A demerger is a form of corporate restructuring in which the entity's business operations are segregated into one or more components. It is the converse of a merger or acquisition.) BHP though is in a reasonably strong position and is only divesting some of its non-core assets to streamline operations. There are, however, several mining companies that have been under pressure due to weak prices of industrial metals and are now forced to sell some of their assets.

Cliffs Natural Resources (NYSE:CLF) is one such company. CLF is a producer of iron ore and metallurgical coal. Both markets though have been struggling. Iron ore prices have been under pressure since last year due to the slowdown in China. It is not surprising that CLF is now looking to divest some of its non-core assets.

This morning CLF announced that it will sell its chromite assets as part of its strategy to focus on becoming a major supplier of iron ore pellets in the North American steel industry. The company that will be buying these assets is Canada-based Noront Resources Ltd. (TSX-Venture:NOT), which is engaged in the development, exploration and acquisition of properties prospective in base and precious metals.

NOT has entered into an agreement to acquire shares of Cliffs Chromite Ontario Inc. (CCOI) and Cliffs Chromite Far North Inc. (CCFNI), which are indirect wholly-owned subsidiaries of CLF.

CCOI and CCFNI hold mining claims in the Ring of Fire mining district. NOT has made the acquisition for $20 million. Under the terms of the agreement, the Canadian company will acquire approximately 103 claims owned by CCOI and CCFNI. The claims include a 100% interest in the Black Thor chromite deposit and a 100% interest in the Black Label chromite deposit. On completion of the acquisition, NOT will hold around 360 mining claims.

Commenting on the acquisition, Noront Resources President and CEO Alan Coutts said that the purchase consolidates the world-class discoveries made in the Ring of Fire and also underscores NOT’s long-standing belief and commitment to the region.

NOT will fund the acquisition with a loan from Franco Nevada Corporation. The company is borrowing $22.5 million for a seven-year period at a 7% interest rate. Shares of NOT are up over 38% on the news on heavy volume.

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