January 2015 | Priyanka Hosangadi
'Tata Steel navigates subarctic challenges'
Established in 2010, Tata Steel Minerals Canada (TSMC) is developing iron ore deposits in Québec, Newfoundland and Labrador. A joint venture between Tata Steel and New Millennium Iron (NML), the company’s objective is to boost raw material security for Tata Steel’s European operations. Its direct shipping ore (DSO) project involves mining and processing iron ore and exporting it to international markets through a complex logistics network. The beneficiated products — sinter and pellet fines — are transported by rail over a distance of 630 kms to Port of Sept-Îles for shipment to Tata Steel’s European facilities. Rajesh Sharma, CEO and MD, Tata Steel, Canada talks to Priyanka Hosangadi about the unique challenges of this project and how the team has endeavoured to overcome them.
What is the significance of Tata Steel Minerals Canada to Tata Steel? What are the expectations from this mining project in terms of secure ore reserves and cost savings?
This is perhaps Tata Steel’s single largest overseas greenfield investment. Tata Steel acquired Corus in 2007 and the strategy was — like in our Indian operations — to have backward integration in order to overcome issues of cyclicity and availability of good quality raw material for our European steel plants. In line with this thinking, the prime objective of Tata Steel Minerals Canada (TSMC) is to supply iron ore to Tata Steel Europe.
TSMC broke ground in 2010. When is the DSO project expected to go full stream?
TSMC commenced its operations in December 2010. The main processing facilities are expected to be commissioned by March 2015 and we will have a ramp up period over the subsequent two to three quarters. At steady state, we’ll be producing the planned capacity of six million tonnes per annum.
How do you see the DSO project benefitting Tata Steel Europe in the longer run?
The key benefits to Tata Steel Europe will be a secure supply of raw material, once operations have stabilised. Since Canada is geographically closer to Europe, it also has the advantage of proximity. TSMC will provide a natural hedge to the Tata Steel group during the up-swing iron ore market when prices will be high. This is because the ore used in our steel plants will be from our own mines. It will also provide an advantage in terms of consistency of feed to the sinter plant and the blast furnace.
The project involves several geographical challenges — it is spread across two provinces, the ore has to be transported by rail to the port, the site is in sub-zero temperatures. How did you handle these challenges?
We started off by leveraging Tata Steel’s experience of over 100 years in the area of mining and setting up large-scale projects. We have also endeavoured to complement our global capabilities by building a strong local team. Working in a tropical climatic region is very different from working in harsh and remote sub-arctic climatic regions where the temperature can go below -50 degrees centigrade and this requires experience and skills.
Secondly, we have developed very strong relationships with the communities and the governments. One of the important aspects of setting up such projects in Canada is building relationships with the First Nation communities, the native people of the region. Also, since mining is an extremely regulated activity, we have worked very closely and actively with the provincial governments in Québec and Newfoundland and Labrador, which are the two provinces where our mining deposits are located, in addition to the federal government.
Thirdly, we have developed processes for augmenting our ability to manage the remote subarctic location. Attracting talent to such areas is a challenge which we met by creating the right infrastructure and systems. We organised ‘fly in-fly out’ operations of the kind that are used in offshore oil drilling, so people can go to the site, work for two continuous weeks, and then they get two weeks off. And at the site, we provided all the amenities and facilities people expect in this part of the developed world.
Attention to safety requirements is also very crucial in such an environment. In Canada, the safety regulations are very tough and stringent and we have been continuously improving our safety management processes. Several measures have been initiated to provide the people working at our remote sites with proper tools for dealing with any emergency or eventuality.
There were many unforeseen challenges, but our team came up with innovative ideas and solutions for overcoming them. In several cases, we were able to reduce the cost or restructure the arrangements with various stakeholders for the benefit of the company.
Could you share some such experiences?
The feasibility study for the project had recommended an air-supported dome structure to house the processing plant. This would help maintain the temperature inside so that the processing operations could continue to run throughout the year, even in sub-zero temperatures. But when we went into advanced engineering and implementation, and took into account the conditions at the site and the building code regulations of the Newfoundland and Labrador government, we needed to review that approach. We tried to find alternative solutions and finally decided on a steel supported fabric dome.
Since a large structure was needed for the project, we selected Big Span Structure Inc, which had worked with NASA on building similar large span structures. They designed and fabricated the dome, which to the best of our knowledge, is one of the largest structures used in any kind of industrial processing unit in the world. Another challenge was dealing with the five First Nation communities and signing the Impact Benefit Agreements (IBAs). IBAs are comprehensive agreements which include financial, social and environmental benefits, contracts, job opportunities, as well as a commitment to respecting First Nation’s culture and heritage. In the initial phase, when Tata Steel took over the project, we faced several challenges in our efforts to conclude the agreements. Our experience in India helped us to make subtle changes in the complexion of the negotiations and make significant progress. Finally, the First Nation communities accepted the solutions and through a formal process of almost two years, the IBAs were signed. Without these, the project would not have progressed to the next stage.
The company’s alliances and agreements with the First Nation communities are considered a landmark of sorts. Can you explain the local cultural complexities and how the company has achieved collaboration?
There are several dimensions with respect to local cultural complexities. We are obliged to increase First Nation employment in our project, the target being 40 percent. This is a very tough target to achieve mainly because of special skillsets required for our operations. So there is a lot of effort on building capacity, enhancing and up-grading skills. Despite the challenges, we make continuous and conscious efforts to provide employment to as many First Nation members as possible, and if a particular skill is available, we give preference to First Nation members. We also give preference to First Nation-related businesses and contractors. We have awarded contracts worth about C$200 million to the First Nations affiliated businesses, which is a big boost to the communities.
First Nation community members are very different in terms of their background and spiritual beliefs. They also have a feeling of being left out of the economic development of the region. So we have to deal with their specific cultural sensitivities extremely carefully and ensure economic benefits are shared with them. We sensitise each and every employee who joins our company and works on the site on how to interact with First Nation community members.
We also help contribute to infrastructure development. For example, Tata Steel along with the government of Québec spearheaded the setting up of an arena to play ice hockey. This struck an emotional chord with the local community because they had such an arena in the 1980s when other mining companies were operating in that region. This helped us to gain some of their confidence in terms of being a good corporate citizen. Our corporate social responsibility activities are also driven by the IBAs. Our project site is near Schefferville which has two First Nation communities — Naskapi and Innus. As per the IBAs, we are committed to share financial benefits which accrue from the project with them. The company helps them by contributing funds for their training, capacity building and other cultural activities.
Apart from mining equipment, the dome, housing, rail and the port, what are the other infrastructure-related investments that Tata Steel has made in the region?
What you listed are the main investments but I can highlight some others which come to mind. Our product has to go through four different rail operators to reach the port at Sept-Îles. One of these is the TSH rail line which is owned by three Québec First Nation communities who did not have the necessary capital for improving their infrastructure. So Tata Steel, along with another mining company, contributed C$20 million for the rehabilitation of the line — which created over 100 jobs for First Nations.
We have also invested C$45 million with our partners Genesee & Wyoming and constructed the KeRail Line which connects our mine site to the main rail line. We also participated in a public-private initiative and invested around C$50 million in the development of a new multi-user deep sea port terminal along with our JV Partner NML, which created 1,000 jobs during the peak period of construction. Once completed, the terminal has potential to trigger economic development and exports of iron ore from eastern Canada.
What are the competencies and strengths that your partner, New Millennium Iron Corp, brings to the table?
The foremost contribution of the joint venture partner NML was to bring the mining deposits — the DSO mining claims were owned by NML and subsequently transferred to TSMC. NML has a team of experienced professionals with expertise in handling projects up north in subarctic conditions. In addition, NML had built a good network and relationships with the community and other stakeholders, including the government. This proved extremely useful to us in the initial period. NML has been an extremely responsible partner and the relationship is going quite strong.
Fact file: Tata Steel Minerals Canada