Kolkata: Tata Steel Ltd has secured equity interest in an iron ore deposit in South Africa, from which it expects to mine 2 million tonnes of ore a year starting 2010.
“The Sedibang mine (in South Africa) is a small one, which has a reserve of about 50 million tonnes,” Tata Steel’s managing director B. Muthuraman said at a press conference in Kolkata on Friday. Tata Steel will be sharing the reserves of the deposit with other partners, whom the company didn’t name.
The ore it mines in South Africa will be exported to the manufacturing units of Corus, Tata Steel’s subsidiary in Europe.
Tata Steel also expects to mine 4 million tonnes of iron ore in Canada and 5-6 million tonnes of coal in Mozambique starting next year, Muthuraman added.
In the current year, Tata Steel expects to save up to a $1 billion (Rs4,991 crore) at the manufacturing facilities of Corus by reducing manpower, cutting bonuses and restructuring operations. In fiscal 2009, Corus managed to cut $650-700 million in costs, according to Muthuraman.
Capacity utilization at the European units, however, is expected to be at 67% in the current fiscal, slightly lower than fiscal 2009 in which it was 75%. The first two quarters are going to be difficult, during which capacity utilization could be as low as 54-65%, Muthuraman said.
In India, Tata Steel has placed orders for installing a new furnace, which will raise the production capacity at its Jamshedpur factory by 3 million tonnes to 10 million tonnes a year.
The new furnace, which would be commissioned in April 2011, would cost around Rs15,000 crore. The company will pay for it fully out of its own cash flows. “We have fully provided for it… it is expected to be a 40% EBIDTA (earnings before interest, depreciation, taxes and amortization, which is a measure of operating cash flow) project,” said Muthuraman.
Speaking about his company’s much delayed Orissa project, Muthuraman said work at the project site was expected to start after general elections. Tata Steel had already started conducting soil tests, and had also installed a fabrication unit at the factory site. Admitting that the project has been delayed by over two years, Muthuraman claimed he was sure iron ore mines would be allotted to his company for the Orissa unit soon.
Though he refused to reveal his outlook on steel prices in the current fiscal, Muthuraman said for integrated steel plants, production cost could go down by $200 (Rs9,982) per tonne in 2009-10. But that might not benefit Tata Steel, which mines iron ore from captive deposits, as much as it would other players that do not have iron ore linkage. To be sure, coking coal has become cheaper, and that is likely going to shore up Tata Steel’s margins.