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Canada invests $133 million in Tata Steel Quebec-Labrador iron ore project

DSO screening and drying facility near Schefferville. (Image courtesy of Tata Steel Minerals Canada Limited)

The Canadian province of Quebec will spend $133 million (Cdn$175 million) in an iron ore project majority owned by Tata Steel Minerals Canada (TSMC), a subsidiary of Indian giant Tata Steel.

The investment will advance development of the Direct Shipping Ore (DSO) property, which straddles the border between Quebec and Labrador, with mineral deposits on both provinces.

The deal could see more than $400 million invested in the French-speaking province in the next two years, as iron ore deposits are tapped on that side of the border.

The financing includes equity stake of Cdn$125 million through Capital Mining Hydrocarbons Fund and a loan of Cdn$50 million from Investissement Quebec, acting as an agent of the government, TSMC said in a statement.

Deal comes at a time of improved steel demand from China and mimics an effort by the UK government to rescue Tata Steel’s Port Talbot operations to save jobs.

It comes at a time of improved steel demand from China, the world largest iron ore consumer, which has taken the commodity prices well above all-time lows of around $37 a tonne the commodity hit in December.

Following the Canadian government’s equity infusion in TSMC, Tata Steel’s stake is set to come down. However, the parties did not quantify how much each of them will hold after the completion of the transaction.

Shipping to Europe

According to the company’s website, the DSO project involves mining, crushing, washing, screening and drying the run-of-mine ore at a facility near Schefferville, Québec, and it is expected to produce 4.2 million tonnes of sinter fines and pellet feed a year.

The processing facilities will be housed under a large steel supported fabric structure to enable year round operations, and it is expected to meet its power requirements entirely by its own generators.

The finished product will be transported by rail to Sept-Îles, Québec, from where it will be shipped to Tata Steel Europe’s steel making facilities.

Tata Steel has invested more than Cdn$1 billion on the project to date.

Tata Steel Group has invested more than Cdn$1 billion on DSO to date. The company is carrying out an exploration program that could further increase the life of the project, which holds a resource potential of 122 million tonnes.

Tata Steel Minerals Canada (TSMC) is a joint venture established in October 2010 by Tata Steel and New Millennium Iron Corp. (TSX: NML). Tata Steel owns 94% and NML owns 6% of the company.

Canada’s financial assistance for the Quebec – Newfoundland and Labrador iron ore project follows a similar aid proposal by the UK government for Tata Steel’s Port Talbot operations to rescue the British steel industry and to protect jobs.

Tata has written down the value of its UK steel assets to almost zero and is exploring a merger of its European business — which also includes profitable assets in the Netherlands — with German peer ThyssenKrupp.