Mumbai, March 12: Tata Steel Ltd has entered into an arrangement with Labrador Iron Mines Holdings Ltd (LIM) of Canada under which the latter will transfer 51 per cent in an iron ore deposit to a Tata Steel subsidiary for Canadian $30 million.

The arrangement is part of Tata Steel’s efforts to ensure raw material security.

Tata Steel Minerals Canada Ltd (TSMC) entered into a strategic relationship with LIM under which the two companies will co-operate in various aspects of their respective iron ore operations in the Labrador Trough. The Labrador Trough is a 1,100-km long, 160-km wide iron ore bed in the Labrador-Quebec region in Canada.

LIM will transfer a 51 per cent interest in the Howse deposit to TSMC. The Howse deposit is estimated to contain 28 million tonnes (mt) of iron ore resources. A statement from Tata Steel said LIM would receive up to Canadian $30 million. TSMC will also transfer its Timmins 4 deposit having a resource of 1.7mt to LIM at a consideration of a Canadian $3 million recoverable from sales.

TSMC also has an option to increase its ownership of the Howse deposit to 70 per cent for an additional Canadian $25 million.

The strategic relationship will also include multi-part co-operation agreements in logistics and various ancillary mutual support and potential off-take arrangements. It includes the development of a rail line that will pass through LIM’s rail yard facilities and connect TSMC’s processing plant with the main rail line and further exploration of the Howse deposit, Tata Steel added.

The Labrador Trough has delivered more than 2 billion tonnes of ore in the past 50 years and has attracted mining investments of $15 billion from leading global companies. It is estimated that the annual iron ore production of this region would increase to about 65mt from 35mt by 2015.

Tata Steel established its presence in this region by picking up a 19.9 per cent stake in New Millennium Iron Corporation (NML) in 2008.

Tata Steel subsequently raised its stake to 27 per cent and also chose to exercise its option to participate in NML’s DSO project in 2010. Tata Steel holds 80 per cent in the DSO project through TSMC.

TSMC was formed as a joint venture between NML and Tata Steel to develop the direct shipping ore (DSO) project that involves mining and shipping the sinter and pellet fines to Tata Steel’s units. The DSO has 125mt of resources spread over 25 deposits. While the mine has commenced production in September and produced 3 lakh tonnes of ore, the construction of the processing plant within a mega-dome is in full-swing, it said.

The TSMC facility, when fully commissioned, is likely to roll out 6mt of sinter fines. LIM and TSMC operate adjacent DSO iron ore projects over the provinces of Newfoundland & Labrador and Quebec.