While India’s Tata Steel’s effort to sell its U.K. assets enters its second round of bids, there’s some good news for the company from the other side of the Atlantic.
The provisional government of Quebec in Canada has decided to invest $133 million (C $175 million) in Tata Steel’s iron ore project in the region between Quebec and Labrador.
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According to an announcement made by Tata Steel Minerals Canada (TSMC), the company’s Canadian subsidiary, it had been awarded the financial contribution to support the development of its Direct Shipping Ore (DSO) Project. The contribution included an equity stake of $95.72 million (C $125 million) through the Capital Mining Hydrocarbons Fund which supported mining activities in the northern region of Québec and a loan of $38.29 million (C $50 million) through Investment Québec.
Canada Supports Iron Ore
Analysts said the equity/loan assistance was aimed at fueling growth in the mining sector in the region and would also create jobs. TSMC, a joint venture, is developing the iron ore project in Quebec. Tata Steel holds a 94% stake in the JV while the remainder is held by the Toronto-listed New Millennium Corporation.
The DSO project involves mining, crushing, washing, screening and drying the run-of-mine ore, and is expected to produce 4.2 million tons of sinter fines and pellet feed a year.
The finished product will be transported to Sept-Îles, Québec, from where it will be shipped to Tata Steel Europe’s steelmaking facilities.
With the Canadian government’s equity infusion in TSMC, Tata Steel’s stake will come down though it’s not yet clear how much. The Quebec Government’s financial package is in line with a similar financial package proposal by the U.K. Government for Tata Steel’s Port Talbot operations, aimed at rescuing the British steel industry.
Port Talbot Still on the Block
Last week, CNBC TV 18 reported that Tata may keep the Port Talbot unit. Quoting unnamed sources, the report claimed Tata Steel is likely to sell off downstream units in Rostherham, Hartlepool and Stocksbridge, instead. Each of these operations have a 100-million-metric-ton production capacity and together employ about 3,000 workers. Management buyout firm Excalibur and Indian-origin businessman Sanjeev Gupta’s Liberty House are said to be in the fray for the assets of the other operations.
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Tata had written down the value of its U.K. steel assets to almost zero and was also exploring a merger of its European business — including its profitable assets in the Netherlands — with German peer ThyssenKrupp.