Tata Steel to foray into merchant mining

Tata Steel is looking to foray into merchant mining, a move that could mark the emergence of a new metals and mining powerhouse

Tata Steel’s century-old mining operations have been solely put to the company’s use. But, with assets becoming more and more capital-intensive, the steel major is now charting out options to extract maximum value. “Sure, the vision is to be a mines and metals company. It will be either through

Tata Steel or Tata Steel with some other group company. But it will happen in the future,” managing director, H M Nerurkar said in response to a query from Business Standard.

For instance, Tata Steel, is in the process of completing a feasibility study on New Millennium Iron Corp’s Taconite Project, which is potentially the largest mining project in Canada. The capital cost of the project, which includes significant infrastructure cost, will be to the tune of $4.4 billion. A power transmission line will have to be built and the fine concentrate is expected to be pumped via a 700-km slurry pipeline to the port.

“This Taconite is a huge deposit and the infrastructure spend is so high, you can’t mine just two-three million tonnes. We will have to do 10-15 million tonnes. So, if we are able to market it, we will have to look at merchant mining,” Nerurkar explained.

If the merchant mining business materialises, Tata Steel will join the likes of the Anil Agarwal group, that is well ensconced in the metals and mining space.

Tata Steel has a century of experience in sourcing raw material mainly in iron ore, coal and chromite. Company-owned and operated mines and collieries have since its inception met most of the raw material needs of the company’s steel works. The raw materials division raises 14 million tonnes of ore from its captive collieries, iron ore mines and quarries spread over the states of Jharkhand and Orissa.

Though the long-term strategy of the company has been greater control of raw material assets for security of its facilities across the globe, Nerurkar explained the easy assets had all been taken. “Valuations are very high,” he said.

The rationale behind teaming with a group company is that they too have a common interest in raw material.

“Tata Power imports coal, so why can’t we work together?” cited Nerurkar, as an example.

Tata Steel also has a broad understanding with public sector miner, NMDC, for examining proposals in the mining and metals sector.