CALGARY — New Millennium Capital Corp. and the steel division of Indian conglomerate Tata Group have agreed to jointly develop iron ore deposits in Labrador and Quebec, in the latest deal to capitalize on growing global hunger for steel.
The deal centres around the Taconite project, which consists of two iron ore deposits that together hold over nine billion tonnes of reserves and resources that could produce 22 million tonnes per year of concentrate.
“The Taconite project is truly a company builder for New Millennium,” said chief executive officer Robert Martin on a conference call Monday.
Initially, Tata will take a 64 per cent stake in the project and help pay for a $50-million feasibility study and arrange for financing if the two deposits, called KeMag and LabMag, are developed. New Millennium (TSXV:NML) will fund the rest.
Once the Taconite project moves into the development stage, Tata will have an 80 per cent stake and New Millennium will have a 20 per cent free-carry equity interest. However, New Millennium may choose to increase its stake to as much as 36 per cent by helping fund the project.
The project is expected to cost $4.85 billion to build if both deposits are developed.
Tata Steel holds a 27.2 per cent stake in New Millennium, which has offices in Montreal and Calgary.
As one of the top-10 steel makers in the world, Tata is a well-matched partner for New Millennium, Martin said.
Since Tata’s European steel-making subsidiary currently has no captive supply of iron ore, a stake in the Taconite project is crucial, he added.
“In choosing Tata steel as our partner, we are convinced that we have a credible partner with the financial and management resources and the motivation to step up and finance this project,” Martin said.
“There are many potential parties out there who might take another year or more to make a decision about our project. No other partner would be as credible and no other partner is ready to move forward today. We look forward to working closely with Tata steel for many years to come.”
New Millennium’s shares dropped about 1.8 per cent to $4.40 around mid-day Monday on the Toronto Stock Exchange.
The announcement Monday comes on the heels of other transactions in Canada’s iron-ore sector.
In January, Consolidated Thomson Iron Mines Ltd. (TSX:CLM) agreed to a $4.9-billion takeover by Cliffs Natural Resources Inc. (NYSE:CLF).
Around the same time, ArcelorMittal, the world’s largest steelmaker, and private equity fund Nunavut Iron Ore Acquisition Inc. teamed up to take control of Baffinland Iron Mines. The two had been in a bidding war, but ultimately called a truce in a deal that valued Baffinland at $590 million.