Calcutta, Jan. 25: Companhia Siderurgica Nacional’s (CSN) grand plan to acquire Anglo-Dutch steel major Corus seems to be in jeopardy because of the threat of a legal challenge from an unexpected quarter.

Companhia Vale Do Rio Doce (CVRD), the world’s largest iron ore miner which like CSN is based in Brazil, has questioned the steelmaker’s right to supply iron ore to Corus — a key component that makes CSN’s bid more attractive than the one by the Tatas.

At the centre of the dispute is Casa de Pedra, one of the largest captive iron ore mines in the world. While making the offer for Corus, CSN had promised to supply ore from Casa de Pedra.

Even though CSN owns the mine today, CVRD has the right over its production under the terms of a past agreement.

CVRD said it would make sure that its right over Casa de Pedra was maintained if CSN buys Corus.

While unwinding cross holdings among themselves in 2001, CSN and CVRD had agreed that the latter would have a pre-emptive right on the purchase of any iron ore surplus produced by the Casa de Pedra mines for 30 years. CVRD will also have the same right on leasing and acquisition of the mine and development of pellet plan supplied by iron ore from the mine.

CSN, however, denied that it was hamstrung by any agreement. “Should CSN acquire Corus, it will exercise its rights to supply iron ore from its Casa de Pedra mine to all its operations, including those in Europe,” a CSN spokesperson told The Telegraph, adding that there is no change in its position or commitment to acquire Corus.

Access to this high quality, low-cost iron ore deposit is expected to reduce steel-making cost at Corus, which does not own any mine.

Tata Steel, on the contrary, said it would look to supply intermediate products like slabs to reduce the cost of production.

Though Tata Steel has captive mines in India, they aren’t big enough to feed the need of Corus and meet the domestic need of the Tatas.

Experts had said CSN’s offer was more positive than the Tatas in the near term as Corus needs to undergo changes to use steel intermediates.

If CVRD puts CSN in a legal twist, it could blunt the immediate advantage that the Brazilian steelmaker has over the Tatas.

Goldman exits Corus

CSN’s adviser Goldman Sachs has exited Corus, the company informed the London Stock Exchange late tonight. CSN’s associates Goldman, UBS AG and Barclays along with CSN had scooped up over 20 per cent holding in Corus, posing a strong challenge to the Tata bid. Goldman’s exit would, therefore, come as a relief to the Tatas.