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| Tata Steel enlarges, extends exclusivity deal for Canadian ore mines |
| Ishita Ayan Dutt / Kolkata Jul 13, 2010, 00:24 IST |
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Tata Steel’s exclusive option to participate in the massive iron ore projects of its Canada-based partner, New Millenium Capital Corporation, has been extended to December 31.
NMCC is trying to develop the exploitation of taconite (ore-bearing rock) in the provinces of Newfoundland & Labrador (LabMag project) and Quebec (KeMag), estimated to have 5.6 billion tonnes of iron ore reserves. Tata Steel holds 27.4 per cent in NMCC and 80 per cent in the company’s Direct Shipping Ore (DSO) project.
In an intimation to the stock exchanges, NMCC has informed that the KeMag project, which has reserves of around 2.1 billion tonnes, has been included in the exclusivity agreement with Tata. The LabMag project, with 3.5 billion tonnes, was part of the exclusivity agreement signed in 2008 and the KeMag project has now been included as well.
Tata Steel is looking to expedite production from DSO and would be investing $300 million (Rs 1,400 crore) in the project. Around four million tonnes of sinter fines is expected from the third quarter of 2011.
 Tata Steel’s move to increase raw material security is aimed at buffering its European operations against volatility in the market. Its India operations have 100 per cent iron ore and 50 per cent coking coal security, while Corus, the European arm, which accounts for around 65 per cent of the group’s production capacity, has no captive mines.
Raw material for steel companies has seen major changes over the past few years, the most dramatic being changing the 40-year old annual benchmarking contract for a quarterly mechanism. What made such a strategy shift possible was an oligopolistic scenario, where the industry became dominated by just a handful of companies.
Of the $200 billion iron ore industry, BHP Billiton, Rio Tinto and Brazil’s Vale control about two-thirds. Iron ore accounts for around 35 per cent of the raw material cost for steel, while coking coal is about 50 per cent. Coking coal is controlled by BHP, Rio, Anglo American and Xstrata.
As part of its initiative to secure coal security, Tata Steel has also increased its stake in Australia’s Riversdale Mining to 21.8 per cent. Some production from Mozambique is also expected to flow in next year.
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