New Delhi, Dec. 31: Steel Authority of India Limited (SAIL) and Tata Steel are coming together to set up a 50:50 mining joint venture.

The heads of both companies are likely to sign a deal here later this week. SAIL and Tata Steel have jointly set up steel portals but have never come together to source raw materials or make steel. Rather they have been rivals in the domestic market.

“Initially this joint venture will take over coal blocks which are not being mined by Coal India,” senior SAIL officials told The Telegraph.

The two steel companies will have an equal number of directors on the board of the new joint venture.

Sources added that the mining joint venture could later look at joint mining of natural resources such as iron ore and manganese in “new mining areas”. Both SAIL and the Tatas currently operate their own captive mines and these are unlikely to be handed over to this new joint venture.

The tieup has taken many in the country’s steel sector by surprise. SAIL had earlier signed deals with other PSU companies to source raw materials and one with Korean major Posco to share expertise, personnel and information, but had not taken any steps to forge links with other steel companies here.

SAIL and Tatas have been trying to source raw materials from both within the country as well as abroad to feed ambitious expansion plans. However, in recent years they have often been pipped to the post by more aggressive domestic and global steel giants.

Both are trying to fend off challenges for raw materials from global giants such as ArcelorMittal.

Coal-rich Mozambique, for instance, had both the Tatas and Mittals buying or setting up coal mining companies in that country.

A special purpose vehicle floated by SAIL along with other PSUs is looking at snapping up coal mining ventures or rights in the African state.

Though officials of the two steel companies said they had no immediate plans to bid for global mining major Rio Tinto, which is on the block, sources said a joint venture between the two giants could look at such possibilities in the near future.

The Tatas need to source raw materials not only for Tata Steel but also for Corus, the European steel venture which they bought in 2007.

SAIL needs to source raw materials for fresh capacity it is trying to build to take its crude steel output to 26,000 million tonnes.