Tata, Labrador tie up for Canada project

Tata Steel has entered into a partnership with Labrador Iron Mines (LIM) Holdings of Canada to develop a rail and port network for movement of iron ore from mineral-rich Labrador Trough region in that country.

Under the deal, Tata Steel would get 51% access to 28 million tonne (mt) of iron ore from LIM’s Howse development-stage project in the Labrador Trough for C$30 million. It has an option of raising stake to 70% for a further C$25 million.

The deal includes multi-part co-operation agreements in the areas of logistics and potential off-take arrangements, including development of a railway line that will pass through LIM’s rail yard facilities and connect Tata Steel’s Canadian subsidiary Tata Steel Minerals Canada Ltd’s (TSMC) processing plant with the main rail line, and further exploration of the Howse deposit.

Also, TSMC will transfer ‘Timmins 4’ deposit having resource of 1.7 mt to LIM for a consideration of C$3 million recoverable from sales.

TSMC is a joint venture between Tata Steel and New Millennium Iron Corporation. Tata Steel holds 27% stake in New Millennium.

The rail network will also help TSMC transport its ore from the Direct Shipping Ore project, also situated in the Labrador

Trough, in which TSMC has an 80% stake.

Labrador Trough is a 1,100 km long, 160 km wide iron ore bed in the Labrador-Quebec region, which has delivered more than 2 billion tonne of ore in last 50 years and has attracted mining investments of $15 billion from leading global companies.

It is estimated that the annual iron ore production of this region would increase from current 35 million tonne (mt) to about 65 mt by 2015.

Since this project is expected to have a gestation period of over two years, analysts are currently not giving too much importance to the development.

They, however, said anything that ensures more access to raw material is good for Tata Steel’s European plants (in the UK and the Netherlands), which are currently facing a shortage of captive iron ore and coking coal.

Tata Steel MD H M Nerurkar said Tata Steel’s raw material strategy focuses on adding value accretive assets to its portfolio to increase its raw material security.

   “We have large investments in the Labrador Trough area and this transaction with LIM further reinforces our presence in the region. The proposed arrangement with LIM is expected to enhance the raw material security for the group and streamline the logistics of the DSO Project, which is expected to come on stream in 2013,” he said.

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