Tata Steel, New Millennium Capital and LabMag to Jointly Develop Canadian Direct Shipment Ore Project

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Researched by Industrial Info Resources (Sugar Land, Texas)--India's leading private sector steelmaker, Tata Steel Limited (BSE:500470) (Mumbai), has signed an agreement with New Millennium Capital Corporation (CVE:NML) (Westmount, Quebec) and the LabMag Limited Partnership to form a joint venture to develop the Direct Shipment Ore (DSO) project in Canada. New Millennium holds a majority stake in LabMag Limited Partnership. The agreement has been signed by Tata Global Mineral Holdings (Singapore), a fully owned subsidiary of Tata Steel. The deal is expected to guarantee ore supplies for Tata Steel's European operations.

Discussions regarding project financing are in progress. Tata Steel is expected to take a stake of 80% in the project and make full arrangements for the $287.3 million investment required for the project. Officials have indicated that feasibility studies on the DSO project are under way and that the final decision about investment would be made within 180 days of submission of the report. The technical team involved in the study also includes technology experts from Tata Steel. Tata Steel is likely to reimburse about 80% of the costs of the feasibility study to New Millennium.

The DSO project consists of iron ore mines located in Quebec, Newfoundland and Labrador in Canada. The project is estimated to have resources of direct shipment grade ore of 100 million tons. New Millennium has indicated that initial production will be around 4 million tons per year, which is scheduled to begin during the second quarter of 2011. Established in 2003, New Millennium owns the Millennium Iron Range, which is considered the largest underdeveloped iron ore deposit in the world. The company is presently working on two projects: the KeMag mine, which consists of 2.3 billion tons of measured reserves, and LabMag, which has indicative reserves of 4.6 billion tons. Each mine has inferred reserves of about 1.1 billion tons.

Tata Steel recently announced that the revival of global demand will help European subsidiary Corus Group Limited (London, England) attain full capacity production by the end of this fiscal year. Last year, slumping demand forced Corus to cut production about 50%. With the recovery of the global steel market, Corus is confident of utilizing 85% of its capacity by the end of this month and attaining 100% capacity utilization by March 2010.

In a related development, after a delay of almost two years, Tata Steel's joint venture steel project in Vietnam has received land allocation. The company is proposing to develop a 4.5 million-ton-per-year integrated steel plant with an investment of about $5 billion. Tata Steel holds a stake of 65% in this venture, while Vietnam Cement Industries Corporation (Hanoi, Vietnam) and Vietnam Steel Corporation (Hanoi, Vietnam) hold stakes of 5% and 30%, respectively. According to reports, sea-facing land has been allocated in the central province of Ha Tinh for the project. Company officials indicate that of the allotted land, 725 hectares will be utilized for construction, while 37 hectares will be set aside for development of facilities, and the remainder for creation of a township. All formalities have been completed and licenses and approvals are awaited from the Vung Anh economic park authorities. The first phase of production is scheduled for 2012, with plans to begin the second and third phases by 2013-14 and 2017-18, respectively. A cold-rolling mill is also planned to be developed in the same location.

Tata Steel has been focusing on acquiring global iron ore and coal assets. The company recently signed a joint venture agreement with Riversdale Mining Limited (ASX:RIV) (Sydney) to develop the $270 million first phase of the Benga coalmine project in Mozambique. The project, which is expected to yield 1.7 million tons per year of coking coal and 300,000 tons per year of thermal coal, will begin operations by 2011. Tata Steel has a stake of 35% in this venture. The company has also formed a joint venture with NMDC Limited (BSE:526371) (Hyderabad, Andhra Pradesh) to jointly explore and develop ore assets globally. The joint venture is expected to help India fulfill its growing demand for steel. By 2015, India's demand for steel is expected to reach 120 million tons.

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