Presentation by Rajesh Sharma of Tata Steel Minera A presentation was held by Rajesh Sharma of Tata Steel Minerals Canada in Sept-Îles today. A large number of local business people and First Nations groups were in attendance, as well as representatives from New Millennium and Labrador Iron Mines. The purpose of this PR session was to reiterate Tata’s long term goals for the Labrador Trough and to reassure the business community in the wake of a negative shift in momentum in iron-ore related investment in the area.
Clearly, this has not been a good quarter for the Trough. Cliffs’ spectacular postponement of the Bloom Lake Phase II project was preceded by the announcement of a significant quarterly loss by Labrador Iron Mines. In the past year, Arcelor Mittal has scaled back its expansion projects, most notably in Port Cartier, but is nonetheless completing rail infrastructure projects and expanding the Mt. Wright operations. Budgets for smaller operational projects have also been slashed. Even IOC is slowing down its Genesis project, which would supposedly have doubled its production. They are also implementing a large-scale cost-cutting strategy.
In this context, the business community was anticipating the Tata Steel presentation with cautious pessimism. M. Sharma was unfazed by the doom and gloom climate, and delivered a positive and credible speech, underlining Tata Steel’s long term growth strategy. Already a mining and steel-making giant in India, Tata Steel is seeking to secure a stable source of iron ore to supply its European steel mills. Captive iron ore and coal mines in Canada, England and Africa could shield Tata from market fluctuations.
M. Sharma acknowledged the falling iron ore prices, and the current difficulties of its competitors. Nevertheless, they believe that the demand for steel will continue to rise in the years to come, and seem satisfied with current iron ore prices, implying that production would be profitable, even given the current market conditions.
In referring to LIM, M. Sharma used the words “our very own Labrador Iron Mines”. This, of course, referred to LIM as being small a local producer. But I couldn’t help to wonder if it meant something more. LIM seems like a logical acquisition for Tata Steel and/or New Millennium. With trains already running down the tracks, and trained employees hard at work near Schefferville, Tata could jump start its production, and start shipping the stockpiles it already has using some of LIM’s existing infrastructure and resources. Whether Tata choose to acquire LIM, partner with LIM, or wait till LIM starves to pick up the pieces, LIM’s assets would be a bargain for Tata given the current LIM share price.
A few weeks ago, NML and Tata Steel had given a similar presentation to the ICM Côte-Nord. I thought that Tata’s English-only Powerpoint and shoddy verbal translation was outrageous give the French-speaking crowd. Today’s presentation was much more interesting, with up-to-date data and a credible response to worries about the market conditions. Moreover, M. Sharma spoke in English but professional simultaneous translation services were used and two screens were used to display the Powerpoint in French and English. This sign of respect was no doubt appreciated by the local community. Tata Steel also announced an important financial contribution to L’Élyme des Sables, a local palliative care center. This announcement was greeted by a warm applause.
In sum, this was a refreshing and uplifting presentation, which reminded the crowd that the iron ore market in the Trough is cyclical, but certainly viable in the long run. There was once a small company called CLM who built an iron ore mine in the midst of a recession. They controlled construction costs and delays, and ended up selling the company to Cliffs for a huge profit. Perhaps it’s Tata’s turn. But this time, they will be keeping the mine for themselves.
NOTICE : All of the above is stated in my humble opinion, and is subject to errors, omissions and misinterpretations. I hold a small LIM position at the moment.