Tata Steel to acquire 19.9% stake in Canadian firm

Tata Steel Ltd. | Steel & Iron Products | Metals & Mining | BSE: 500470 | NSE: TATASTEEL

03 Oct 2008 Evaluate

Tata Steel Global Minerals Holdings, an indirect wholly-owned subsidiary of Tata Steel, has entered into a agreement with Canada’s New Millennium Capital Corporation (NML), one of the world’s largest undeveloped magnetite resources, for a strategic investment.

As per the agreement, Tata Steel would acquire 19.9 per cent of the common shares of the expanded capital base of NML, which controls 9.1 billion tonnes of iron ore, for $22.6 million (Rs 106 crore). It will also buy an 80 per cent equity interest in NML’s Direct Shipping Ore project (DSO project) located in the province of Newfoundland and Labrador and the province of Quebec.

These projects may prove to be a source of the company's raw material requirements. Further in view of its geographical proximity, Canada is a favourable location to source raw materials for Tata Steel's European operations.

After completion of the feasibility study, Tata Steel will get a 180-day period to acquire 80 per cent equity interest in the joint venture to be set up for developing the DSO project. It will also have a 100 per cent offtake right on the DSO project’s iron ore production for the life of the mining operation.

Subject to completion of a positive study, regulatory approvals and project financing, NML expects to produce 4 MT of iron ore products from the DSO project commencing in 2010. The Tata Steel Group including Corus has a crude steel capacity of 28 million tonnes with an iron ore security of 22 per cent.

Tata Steel would also have exclusivity to negotiate and settle a proposed transaction in respect of the LabMag project until June 2009. The LabMag deposit has 3.5 billion tonnes of mineral reserves that contained in 4.6 billion tonnes of measured and indicated resources and 1.2 billion tonnes inferred resources.

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