Tata Steel Canada arm inks deal for rail transportation of iron ore

| | Updated on: Feb 05, 2012

Tata Steel Minerals Canada (TSMC), the 80 per cent subsidiary of Tata Steel in Canada, has entered into a “life of mine” rail transportation contract with Quebec North Shore and Labrador Railway Company (QNS&L), a subsidiary of Iron Ore Company of Canada.

The deal, signed recently, allows for the transportation of iron ore from the Direct Shipping Ore (DSO) Project, owned by TSMC, from Emeril Junction, Newfoundland and Labrador, to Arnaud Junction in Sept-Iles, Quebec.

The rail cars will be provided by TSMC while locomotives will be provided by QNS&L, along with certain infrastructure development for which TSMC will provide funding. Confirming the development to Business Line , Mr Partha Sengupta, Vice-President (Raw Materials), Tata Steel, said the agreement was an important step towards delivering an assured supply of iron ore to Tata Steel Europe. “We've gone for the best of several options which were open to us,” Mr Sengupta observed. The “life of mine” contract provides cost and transport certainty over the life of the mines expected to be 15 years or more.

New Millennium Iron Corp (NML), which holds the balance 20 per cent stake in TSMC, controls the emerging Millennium Iron Range. Located at Labrador and Quebec, the range holds one of the world's largest undeveloped magnetic iron ore deposits. In the same area, the company is also advancing its DSO project to near-term production. The project contains some 64 million tonnes of proven and probable reserves.

Tata Steel is NML's largest shareholder, holding about 27 per cent of its stock, as well as a strategic partner. NML's primary goal is to expedite and develop its giant taconite resources, but Tata Steel preferred to first acquire operating experience in Canada through the DSO Project as a starter before considering the taconite project. Tata Steel signed an agreement with NML in September 2008 providing the option to jointly develop the project, based on the review of a feasibility study NML was to complete. Under the terms of the agreement, Tata Steel would fund up to $300 million for capital costs and purchase the entire production for the life of the mine. NML completed the feasibility study in February 2010 and the results demonstrated the economic viability of the project.

In September 2010, Tata Steel exercised its option to invest in the DSO Project. A joint operating company, TSMC, was formed for project implementation with Tata Steel holding the majority stake. AECOM Technology Corporation of Montreal, Québec, was appointed as an EPCM Contractor to undertake the construction of the project with production anticipated for the second half of 2012.

Published on February 09, 2012

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