TATA Steel in talks to buy coal mines in British Columbia in Canada
TATA Steel has initiated talks with the government of British Columbia in Canada to acquire coking coal mines.
An official close to the development told Business Standard that TATA officials and ministers of the BC province met in Canada two weeks earlier, where the latter offered to sell coking coal mines to the company.
The official said that "The ministers made a proposal to sell virgin coking coal mines and TATA Steel is fairly interested."
The official said TATA was keen to acquire a coking coal mine for its European operations, which have zero raw material integration.
He added that “The various projects in Canada and Mozambique that could integrate TATA Steel Europe's raw material by up to 25% will not come before 2012-13. The company needs to find more mines as coking coal prices continue to go up, pressurizing the margins for the company."
Another official close to the talks said the British Columbian government is very keen on TATA Steel investing in the province. The official said that "TATA Steel is very aggressive with buying coking coal assets for its European operations and was ready to pay an upfront amount at the meeting if the ministers were ready to offer a mine right there. That's how serious the company is."
British Columbia is the western most of Canada's 10 provinces and is very rich in coking coal. The website of the government said that "There is estimated to be an ultimate coal resource available for surface or shallow underground mining of over 20 billion tonnes in the province. The coal resource to a depth of 2,000 metres that is of interest for coalbed methane exploration is over 250 billion tonnes."
TATA Steel expects tight supply of iron ore for years
It is reported that TATA Steel feels that the global iron ore market looks incredibly tight and like many of their competitors they also needs to secure a reliable source of supply.
Mr HM Nerukar MD of Indian giant TATA Steel Ltd said that “It appears at least for the next five or seven years, there’s going to be a difficult situation in iron ore because we don’t see any big new sources coming onto the market.”
Mr Nerurkar said that TATA Steel looked to Canada, South Africa and Ivory Coast for iron ore investments but Canada is the most secure of the three.
He added that “Unfortunately, right now you have two presidents in Ivory Coast. They have to solve these problems.”
The company this month signed a landmark agreement with Canadian miner New Millennium Capital Corp to develop the Taconite iron ore deposit in Labrador and Quebec.
The USD 4.9 billion project, which holds a mind-boggling 9.2 billion tonnes of resources, is expected to be the largest mine in Canadian history. It would be almost impossible for such a large project to go ahead without financing from a major steel company like TATA.
The output from Taconite will go straight to TATA Steel’s European steelmaking operations, which it acquired in 2007.
While the company’s flagship Indian operations are fully served by domestic supply, it needed a source for Europe, and Canada provides just that.
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