Last week, two major developments took place in India which are likely to impact global ore production and maybe even prices.
Vedanta announced it has begun to export iron ore from the Indian province of Goa for the first time since mining was halted there about two years ago. Shipments started to China, one of the biggest buyers of Goa ore. India’s overall ore mining had ground to a halt over three years ago after a Supreme Court imposed ban that was subsequently lifted in phases.
Iron ore has averaged about $60 per metric ton this year. Depressed iron ore prices stabilized recently at about $55 per mt, after a long period of volatility. But Vedanta leadership is of the opinion that iron ore prices were in “freefall.”
Export Duty Falls
For some Indian miners, at least, restarting ore mining may become profitable again following India’s reduction of its export duty from 30 to 10% earlier this year on lower-grade exports of the commodity.
The other, more important development, though, is that India’s Tata Steel is reportedly reaching an agreement with New Millennium Iron Corp., its Canadian iron ore joint venture partner, to hike its stake in the JV to 94% from its current 80%.
New Millennium declined to make further investments in the JV’s projects at this time, something that Tata Steel accepted. Tata Steel will invest $401.39 million ($524.5 million Canadian) to continue as the lead investor in the JV, Tata Steel Minerals Canada Ltd.’s (TSMC). After the deal, New Millennium will end up holding only a 6% stake.
TSMC is pursuing a direct shipping ore project (export of iron ore fines) in Canada’s sub-arctic region. Shipments from the DSO project began supplying Tata Steel’s European facilities in 2013. The project has yet to be fully commissioned, but its capital cost has already increased beyond the $428 million ($560-million Canadian) announced in October 2012. Tata Steel entered into an entire off-take agreement with TSML at the project’s outset. The initial production for the DSO project was aimed at 1 million tons.
The DSO project license area contains 64.1 million metric ton of proven and probable mineral reserves at an average grade of 58.8% iron (Fe).
Tata Steel is also reviewing its future commitment on developing New Millennium’s two other inferior grade (taconite) projects – Lab Mag and Key Mag – in Canada.