ET reported that Essar Americas, a unit of Essar Steel, will invest USD 1.60 billion to build a pellet plant in the US, capitalizing on its recent find of more than 2 billion tonnes of low grade iron ore reserves at its mine in Minnesota region.

The company has tied up the finances for the project, about 35% equity and the remaining USD 730 million in debt. The plant will start commercial production in the first quarter of 2013.

Mr Madhu Vuppuluri president & CEO of Essar Steel Minnesota said that "The total project cost for the first phase of 4.1 million tonnes per annum pellet plant is about USD 1.1 billion, which is financed through traditional long term project finance and equity. As we do have sufficient reserves and are close to receiving additional permits, we could increase the capacity to 7 million tonnes per annum soon."

Mr Vuppuluri said that the Essar Group currently has about 20 million tonnes of pellet making facility and with production of 7 million tonnes in the US will become the world's fourth largest pellet maker after Vale, Cliffs Natural and Sweden's LK AB. The company also has coal reserves of 210 million tonnes in Minnesota mine.

Speaking about use of 7 million tonnes of pellets, Mr Vuppuluri said that about 4 million tonnes would be for Essar Algoma, the group's steel plant in Canada. The remaining would be sold in commercial market. He added that "We are talking to various consumers in America, Canada and China for off take agreements. We can also ship some of the pellets to India. But the group is self sufficient in India through its long term off take agreements with NMDC."

Essar Steel currently operates a global steel making capacity of 14 million tonnes after completion of its recent expansion of steel capacity to 10 million tonnes at Hazira.

(Sourced from ET)