Essar Steel plans to bid for Canadian ore firm

Essar Steel is in the process of bidding for Millennium Iron Ore Range, one of the largest known undeveloped magnetite iron ore deposits in the world, owned by Canadian company New Millennium Capital Corp (NML).

The Millennium Iron Ore Range comprises the KeMag Iron Ore project in Quebec, wholly owned by NML , and the LabMag Iron Ore project, in which the Canadian company holds 80 per cent.

The range has measured mineral reserves of 3.7 billion tonnes, indicated mineral resources of 2.171 billion tonnes. In addition, it includes inferred mineral resources of 2.143 billion tonnes.

Sources said the total project cost of developing just the KeMag Iron Ore project was around $3.6 billion.

An Essar spokesperson said, "As a group, we keep looking at growth opportunities in the sectors that we are in. However, we would not like to comment on any specific proposal."

The sources said NML had appointed merchant bankers to scout for strategic partners for the project. However, the extent of stake on offer is not known.

Last year, Essar acquired Minnesota Steel, a US-based company with estimated reserves of 1.4 billion tonnes of iron ore located on the Mesabiiron range. Essar's initiative to go for raw material cover was necessary for its expansion plans. Essar is targeting a capacity of 20-25 million tonnes across its facilities "� in the domestic and international markets "� by 2012.

Essar's capacity across its plants is nine million tonnes.

NML is keen on roping in investors as it wanted to commence production from the Millennium Range in the shortest possible time.

A preliminary assessment study for the KeMag project was completed and the next step was to go for the feasibility study and project financing.

The preliminary study for the KeMag project revealed that the indicated mineral resource was 1.349 billion tonnes and the inferred mineral resource was to the tune of 992 million tonnes.

However, industry sources said other Indian steel players could evince interest in the project. The merchant bankers were understood to be currently in discussions with a number of major mining, steelmaking and trading companies. The project could also see some major global steel players expressing interest.

The sources said with iron ore prices going through the roof, more and more steel players are rushing for captive raw material resources to maintain competitiveness.

Iron contract prices for the new year is expected to increase around 50 per cent. "It makes more sense to buy magnetite iron ore." KeMag ore has around 30.8 per cent iron content, which could be beneficiated and increased.