Tata Steel ties up Canadian ore supply project

Tata Steel has decided to exercise its option of acquiring an 80 per cent interest in the direct shipping ore project of New Millennium Capital Corp, Canada (NML).

Tata will reimburse 80 per cent of NML’s cost to date on the DSO project and arrange funding up to C$300 million ('1,350 crore) of capital costs for the project. It will also commit to take all the project’s iron ore products of specified quality, at world market prices, for the life of the mining operation.

The JV will produce four million dry tonnes of iron ore products per year, commencing in 2012. Incidentally, Tata Steel has a 27.4 per cent stake in NML.

“We are pleased to take the investment decision to develop the DSO project. The project’s location, infrastructure and ore quality ensure a reliable and consistent source of supply for Tata Steel. This agreement with New Millennium is a clear demonstration of our strategy and we continue to analyse opportunities to increase the percentage of raw material security. We are hopeful that along with our partner, we would be able to move forward on various aspects of the project, including training activities, and commence construction with a view to commission the Project in 2012,” said Tata Steel’s managing director, H M Nerurkar.

“Now that we have set a course for DSO production, we can look forward to working with Tata Steel on the much larger Taconite project,” said Robert Martin, president and chief executive officer of NML.

Taconite comprises the KeMag and LabMag projects. The KeMag project — reserves of around 2.1 billion tonnes, in Canada’s Quebec province — has been included in the exclusivity agreement with Tata Steel. The LabMag project, with 3.5 billion tonnes (Labrador and Newfoundland provinces), was part of the exclusivity agreement signed in 2008; the KeMag project has now been included, too.

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.