Tata Steel Ltd is picking up 19.9% stake in Canadian mining company New Millennium Capital Corp for $22.6 million to set up a joint venture to source iron ore for Corus operations.
Rs 106-cr deal meant to source iron ore for Corus
MUMBAI: Steelmaker Tata Steel Ltd is picking up 19.9% stake in Canadian mining company New Millennium Capital Corp (NMCC) for $22.6 million (Rs 106 crore) to set up a joint venture to source iron ore for Corus operations.
The steel major’s wholly-owned indirect subsidiary Tata Steel Global Minerals Holdings on Wednesday entered into a binding agreement with the Canadian firm to become a strategic investor in it, a statement released by Tata Steel said.
The Indian firm also has the option of acquiring 80% equity interest in New Millennium’s Direct Shipping Ore (DSO) Project, located in the province of Newfoundland and Labrador, and the province of Quebec, the statement added.
A Tata Steel official said the DSO Project has over 100 million tonne of iron ore and a feasibility study is underway. “If the feasibility report is positive, then Tata Steel will have an option for a 180-day period to acquire 80% stake in the JV to be set up to develop and operate the DSO project. We will also have a 100% offtake right on the DSO Project’s iron ore production as long as the mining operation lasts,” added the official.
The agreement gives Tata Steel exclusivity with respect to both DSO Project and the LabMag taconite iron ore property in Labrador, in which New Millennium owns 80%. The rest is held by Naskapi Nation of Kawawachikamach.
The LabMag project has total mineral reserves of 3.5 billion tonne, both proven and estimated. Tata Steel’s exclusivity for the LabMag project would be valid till June 30, 2009, the statement said.
The official said that the Rs 106 crore would be used to develop iron ore mines. “We will pump in more money after the feasibility report is released by the second quarter of 2009,” he said, adding that Tata Steel was looking at producing 4mt of iron ore after two years from these mines.
B Muthuraman, MD, Tata Steel, said subject to the study of their economic viability, these projects may help source part of the raw materials requirements of the Tata Steel-Corus combine. “Due to its geographical proximity, Canada is a good location to source raw materials for our European operations.
Corus, which doesn’t have captive iron ore mines, produces 20 million tonne of steel every year and is Europe’s second largest producer of the metal. Tata Steel acquired it last year for $13 billion.
“Tata Steel is also entitled to a right of first refusal in future placement of equity securities conducted by New Millennium and a pre-emptive right in connection with other offerings of equity securities,” the statement said. (With Agencies)
shubhashish@dnaindia.net
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