India's Tata Steel (TISC.BO), the world's 7th-largest producer, may face Chinese competition as it mulls a partnership with a junior Canadian explorer to secure alternative iron ore sources to help feed its European steel mills.
Tata has until Monday to sign a tie-up with New Millennium Capital Corp (NML.V) on the LabMag and KeMag projects cited as the world's largest undeveloped iron ore projects -- in Labrador, eastern Canada. The Indian company has a 27 percent stake in New Millennium, and has acquired an 80 percent stake in the direct shipping ore (DSO) project, which is also in Labrador, last September.
Tata, which bought Corus, Europe's No.2 steelmaker, in 2007, has until February 28 to exercise its first-right option to form a partnership with New Millennium. "There's a very high likelihood of this happening," said Peter Campbell, analyst at Jennings Capital.
"Tata's main interest in the DSO project was a 'beachhead' in Canada. What it really wants is control of the giant LabMag and/or KeMag projects."
Tata Steel declined to comment on the matter.
Analysts estimate Corus needs some 30 million metric tons of iron ore a year, and note the LabMag and KeMag projects combined have measured and indicated resources of more than 9 billion metric tons.
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