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Global steel producers are joining the rush to feast on Canadian resources, tapping vast reserves of iron ore in a race to secure much-needed supply.

India's Tata Steel is the latest steel giant to tie up Canadian iron ore properties, signing a deal with a small upstart to advance a project in Quebec and Labrador set to cost as much as $4.9-billion.

Top iron ore producers are enjoying record prices for the once-unheralded commodity, an important ingredient for producing steel, as construction booms in fast-growing emerging economies. But steel makers are fighting back against the increasing pricing power held by leading iron ore producers.

Tata's preliminary development deal with Montreal-based New Millennium Capital Corp. follows the same strategy as rival steel producer ArcelorMittal SA, which recently won control of a promising iron ore deposit in Nunavut.

The jockeying by steel companies to tie up iron ore properties illustrates the competition for scarce resources as countries such as China and India strive to meet fast-growing infrastructure demands. The moves cast attention on remote regions of Canada, rich with iron ore deposits that were barely noticed for decades.

Steel producers are investing heavily in production of iron ore and coal as a way to lessen their dependence on supply controlled and priced by the world's big-three producers: Vale SA, Rio Tinto PLC and BHP Billiton Ltd.

Tata's European steel operations are without a so-called captive iron ore supply, and the potential mines in eastern Canada would fill that gap. China's Wuhan Iron & Steel Group Corp. is making similar forays in northern Quebec.

New Millennium believes the Quebec/Labrador mine project could ship 22 million tonnes of iron ore a year to Tata's European mills once production begins later this decade. Tata and New Millennium last September agreed to develop a smaller iron ore deposit at a cost of $300-million. Located in the same region, production of four million tonnes of iron ore is set to begin in 2012.

Tata has agreed to fund about two-thirds of a $50-million feasibility study for the new project, with New Millennium paying the rest. The study, which will take about 20 months, will conduct a detailed analysis of the potential of two iron ore deposits that straddle the border of Quebec and Labrador. Building the mines is expected to cost between $3.8-billion and $4.9-billion, depending on whether one or both are developed.

Foreign steel producers are structuring joint ventures with local firms in order to keep local expertise.

"A lot of these companies, especially companies like Tata and Chinese companies, they need Canadian management. We are used to dealing with the Canadian government, we are used to dealing with aboriginals, we are used to working in the north," Robert Martin, chief executive officer of New Millennium, said in an interview.

Like many in the industry, he's convinced commodity prices will stay high, even if they fall back from current lofty levels.

"China and India, the standards of living are increasing, so the need for infrastructure and the need for products is such that steel is very much in demand," Mr. Martin said.

While there's been a rush of deals in recent months, it's a phenomenon that has developed slowly over several years. New Millennium first began talking with Tata in 2006. Mr. Martin himself first spotted the potential of the iron ore deposit when he was studying geology in university in the early 1960s.

Should the larger mines proceed, production could start in early 2017, according to analyst Tom Meyer of Raymond James.

Tata owns 27.2 per cent of New Millennium's shares, which are traded on the TSX Venture Exchange. After trading around $1 for much of last year, they have surged recently. On Monday, they closed at $4.15, down 7 per cent.

On Friday, two days before the deal was announced, a frenzy of trading saw the stock spike to a record high of $4.96 during the trading session and end with a record close of $4.48.

New Millennium raised $87-million in a financing in February at $3.50 a share.

Tata's deal is similar to ArcelorMittal's $590-million takeover of Baffinland Iron Mines Corp., another upstart junior miner that controls a deposit on Baffin Island. ArcelorMittal, the world's top steel maker, did the deal with a private equity firm, after the two players fought each other in a hostile takeover of Baffinland.

The iron ore deposit, about 1,000 kilometres northwest of Iqaluit, could cost $4-billion and deliver Arcelor 18 million tonnes of ore a year for two decades, feeding its mills in Europe. ArcelorMittal aims to double its iron ore production to 100 million tonnes annually by 2015.

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