Tata Steel to Secure Canadian Iron Ore for European Operations

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Researched by Industrial Info Resources (Sugar Land, Texas)--Tata Steel Limited (BSE:500470) (Mumbai) has announced that it will exercise the option to acquire 80% of its joint venture with Canada's New Millennium Capital Corporation (TSV:NML) (NML) (Westmount, Canada) to secure supplies of iron ore for its European steelmaking arm, Corus (London, England).

Tata and NML are partners in the Schefferville direct shipping ore (DSO) project, which has the capacity to produce up to 4 million tons of iron ore annually, beginning in 2012. NML holds 80% of the Millennium Iron Range, which is estimated to contain reserves of about 100 million tons in Newfoundland, Quebec and Labrador and is reported to be one of the world's largest undeveloped magnetic iron ore deposits.

Tata will exercise the option to acquire 80% of the project with a payment of almost $292 million in capital costs for the project, reimbursing NML for 80% of the project costs to date and agreeing to take 100% of the iron ore produced by the project at world market prices for the entire life of the mining project.

By exercising this option, Tata has successfully secured high quality iron ore supplies. In a statement issued by the company, H.M. Nerurkar, Tata Steel's managing director, said: "We are pleased to take the investment decision to advance the DSO project. The project's location, infrastructure and ore quality ensure a reliable and consistent source of supply for Tata Steel."

The Tata decision was also welcomed by NML, which said in a statement: "We are delighted that Tata Steel has made a positive investment decision to advance the DSO project to production. It will result in a significant increase in the company's cash position, provide capital to build the requisite infrastructure and ensure a sales output for all the mine's output."

The iron ore from the DSO project is destined for Tata's European operations, the Corus Group. Corus is Europe's second-largest steel producer and has major steelmaking facilities in the United Kingdom and the Netherlands, as well as minor operations in Germany, France and Belgium. Together, the facilities produce more than 20 million tons of crude steel each year, which is about 65% of Tata's total production.

Tata and NML also are partners in the so-called Taconite project, a combination of two properties near the DSO resources: the KeMag property near Lac Harris in Quebec and the LabMag property near the Howells River in Newfoundland and Labrador.

The Taconite project calls for concentrate from the KeMag property to be pumped 750 kilometers to the port of Sept-Iles in Quebec, where it will be pelletized and sold as concentrate. Concentrate from the LabMag property will be pumped through a slurry pipeline to Emeril, Newfoundland, where it will be pelletized and then sent 390 kilometers via rail to the port of Sept-Iles.

In June 2009, NML and Tata negotiated an extension to Tata's exclusivity to the Taconite project, originally announced in October 2008, until December 31, 2010, to allow both parties to focus on the DSO project. With Tata exercising its option on the DSO project, Robert Martin, the president and CEO of NML, said, "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."

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