Tata Steel to hold 75% in JV for African mine
Tata Steel will hold a 75 per cent stake in the joint venture company set up for developing Mount Nimba, the iron ore deposit in Ivory Coast (West Africa), entailing a total investment of around $1.5 billion to be borne by the joint venture.
According to the contours of the arrangement, the deal is a joint venture with Sodemi, a state-owned mining company.
In a conference call in the early hours today, B Muthuraman, managing director, Tata Steel said, the mining rights for the iron ore mine would be with the joint venture. Besides Tata Steel’s 75 per cent stake, the remaining stake would be held by Sodemi and the government.
“The joint venture will make an investment of close to $1 billion to $1.5 billion over the next 3-4 years,” he said. The joint venture was signed late Tuesday night.
Some initial studies conducted by Sodemi have ascertained that the deposit could have reserves of 700 million to 1 billion tonne of iron ore per year.
The deal was expected to result in huge benefits for Corus, acquired earlier this year for $12 billion. Corus requires around 28-30 million tonne of iron ore per annum.
Industry analysts said, depending on the iron ore grade, if Mount Nimba has reserves of 700 million tonne to 1 billion tonne, then it could cover Corus’s entire needs over a 30-year period.
It may be mentioned that while Tata Steel originally had 100 per cent iron ore security, with Corus, it has now dropped to 20 per cent. The company has set a long-term target of achieving a raw material security of 60-80 per cent.
When asked how much of the target had been achieved with the iron ore joint venture, Muthuraman said, “It is difficult to put a number to this. It also really depends on how much we mine, but I can certainly say that we are well on our way to achieve this target.”
The Tata Steel group currently has an aggregate crude steel production capacity of around 28.1 million tonne.
Muthuraman said, price competitiveness of Corus would improve significantly. He however could not put a number to it, at this juncture.
Tata Steel had earlier envisaged Tata-Corus synergies at $450 million. Muthuraman said, “We expect this to be accentuated over a period of time, it will only increase. As regards the synergies, in reference to this joint venture, it will take 3-4 years to start mining, so it may be difficult to say.”
However, Tata Steel may not stop at Ivory Coast. Muthuraman said, “We will continue to look out for strategic partnerships. I have no specifics now. It may not be possible to achieve 100 per cent security but we are targeting 50-60 per cent security over the next 5-6 years.”
Earlier this month, Tata Steel signed a joint venture agreement with Australia’s Riversdale Mining to set up a special purpose vehicle to develop a hard coking and thermal coal project at Riversdale’s key exploration tenements in Mozambique.
On the coal front, with Corus, Tata Steel has a security of around 15 per cent from a standalone of 60 per cent security.
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