Tata Steel Ltd said on Wednesday its Singapore-based unit has agreed to buy 19.9 percent in Canadian miner New Millenium Capital Corp for $22.6 million.
Tata Steel said it has an option to acquire 80 percent in a joint venture that will develop New Millenium's Direct Shipping Ore (DSO) project, and also hold rights to the entire iron ore output from the project, which is expected to have annual production of 4 million tonnes from 2010.
The DSO project is estimated to hold reserves in excess of 100 million tonnes of direct shipping quality ore, Tata Steel said in a statement to the stock exchange.
“These projects may prove to be a source for part of the raw materials requirements of Tata Steel Group,” Managing Director B. Muthuraman said.
Tata Steel will also have exclusivity until June 2009 to negotiate a transaction for New Millenium's LabMag iron ore property, which holds 3.5 billion tonnes of proven and probable mineral reserves.
Tata Steel holds a right-of-first refusal in future equity placement by New Millenium and a pre-emptive right for other equity offers by the company.
Tata Steel group has been scouting for mines as only a fifth of its iron-ore needs and 15 percent of its coal requirements come from its own fields, a Citigroup report said.
Ahead of the announcement, Tata Steel shares closed at 438.65 rupees, up 3.1 percent in a Mumbai market that rose 1.5 percent.
Source:Reuters