Tata Steel's wholly-owned subsidiary in Singapore, Tata Steel Global Holding Pte Ltd, has entered into a binding agreement with New Millennium Capital Corporation of Canada to pick up a 19.9-per cent stake in the company for $22.6 million (Rs106 crore).
Tata Steel Group, the world's sixth largest steel producer, is consolidating its requirement of raw materials although its own raw material requirements for its 5-million tpa domestic capacity has been secured locally, its international unit, Corus is dependent on imported ore and coal to produce 18 million tpa.
To meet this, Tata Steel has been acquiring stakes in coal mines in Mozambique and Australia and an iron ore miner in Ivory Coast, which it has now enhanced with its latest acquisition move, as it also has the option to buy all the ore that is mined by New Millennium. The Canadian miner owns 80 per cent of the mine and is estimated to have reserves of around 100 million tonnes.
Tata Steel will acquire 19.9 per cent of the common shares of the expanded capital base of NML for $22.6 million. It has the option to acquire 80 per cent equity in NML's Direct Shipping Ore (DSO) project in the province of Newfoundland and Labrador and the province of Quebec.
The agreement provides exclusivity to Tata Steel with respect to both the DSO Project and the LabMag taconite iron ore property located in NL, which is 80 per cent owned by NML and 20 per cent owned by the Naskapi Nation of Kawawachikamach.
NML will use the proceeds of the private placement to primarily develop the DSO project through a definitive feasibility study to be completed in the second quarter of 2009.
The agreement also enables Tata Steel, to appoint two nominees on the board of New Millennium, a publicly-owned company listed on the TSX Venture Exchange.
Tata Steel's managing director, B Muthuraman said, ''Tata Steel Group is pleased to have signed this binding agreement with New Millennium, which gives Tata Steel Group the opportunity to work closely with New Millennium on the DSO and LabMag properties to develop these as a world-class project.''
He added that ''Subject to the establishment of their economic viability, these projects may prove to be a source for part of the raw materials requirements of Tata Steel Group. In view of its geographical proximity, Canada is a favourable location to source raw materials for Tata Steel Group's European operations''
Robert Martin, New Millennium president and CEO, said, ''The agreement with Tata Steel, the world's sixth largest steel producer, is a decisive corporate event for New Millennium. It is also a definitive recognition that New Millennium offers significant sources of supply of high quality iron ore products for the global steel industry from a country rated highly for mining investment.''