Tata Steel Limited (Tata Steel), through its subsidiary Tata Steel Minerals Canada Limited (TSMC), has entered into a framework arrangement with Labrador Iron Mines Holdings Limited (LIM) to establish a strategic relationship between TSMC and LIM whereby the two companies have agreed to co-operate with each other in various aspects of their respective iron ore operations in the Labrador Trough.
The Labrador Trough is a 1,100-kilometre long, 160-kilometre wide iron ore bed in the Labrador-Quebec region in Canada. The trough has delivered more than 2 billion tonnes of ore in the 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 will increase from the current 35 million tonnes to about 65 million tonnes by 2015.
Tata Steel established its presence in this region through the acquisition of a 19.9% stake in New Millennium Iron Corporation (NML) in 2008. Tata Steel subsequently increased its stake in NML to 27% and also chose to exercise its option to participate in NML’s DSO Project in 2010. Tata Steel holds 80% in the DSO Project through TSMC.
TSMC was formed as a joint venture between NML and Tata Steel to develop the DSO Project. The DSO has 125 million tonnes of resources spread over 25 deposits. The mine commenced production in September 2012, since when it has produced 300,000 tonnes of ore, and the construction of the processing plant within a mega-dome is in full swing. The TSMC facility, when fully commissioned, will be able to produce 6 mtpa of sinter fines.
LIM and TSMC operate adjacent DSO (Direct Shipping Ore) projects spread over the Provinces of Newfoundland & Labrador and Quebec. The two companies have decided to work together to exploit the significant scope for synergies in operations and logistics they have identified, and have plans potentially to utilise the same infrastructure.
LIM shall transfer to TSMC its 51% interest in the Howse deposit, which is estimated to contain 28 million tonnes of iron ore resources. Additionally, the strategic relationship will include multi-part co-operation agreements in areas of logistics; various ancillary mutual support and potential off-take arrangements, including development of a rail line that will pass through LIM’s rail yard facilities and connect TSMC’s processing plant with the main rail line; and further exploration of the Howse deposit. In consideration of all of the above, LIM shall receive up to C$30 million.
TSMC will also transfer its Timmins 4 deposit, which has a resource of 1.7 million tons, to LIM at a consideration of C$3 million recoverable from sales. TSMC also has an option to further increase its ownership of the Howse deposit to 70% for a consideration of C$25 million.
Hemant Nerurkar, MD of Tata Steel, 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 of the group and streamline the logistics of the DSO Project, which is expected to come on stream in 2013.”
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