Chicago, USA: Essar Global Ltd., the owner of India''s third-biggest steel maker Essar Steel, has agreed to buy Minnesota Steel Industries LLC for an undisclosed price. The acquisition will add 1.4-billion tons of iron-ore reserves and a steel mill in North America to Essar''s assets.

According to Minnesota Steel officials, Essar Global will invest about $1.65 billion to build the 2.5-million-ton-a-year mill in northern Minnesota. They said that the reserves are enough for about a century''s steel production. Talking about the synergies, analysts point out that it takes two tons of iron ore to make one ton of steel, and so, building a steel mill next to an iron mine can result in significant savings in costs.

The acquisition is the second announced by Essar this week. Earlier on April 15, Essar Global, which owns 88 per cent of Mumbai-based Essar Steel, agreed to buy Canada''s Algoma Steel Inc. for $1.63 billion to supply U.S. carmakers such as General Motors Corp. Algoma had shipped 2.42-million tons of steel last year.

The price of iron ore, the main material used in steelmaking, has almost tripled in the past five years, which ahs prompted companies, including Arcelor Mittal, to seek greater control over supplies. Indian steelmakers, in particular, are expanding abroad to secure access to raw materials and more profitable steel-production facilities.

Minnesota Steel, based in St. Paul, Minnesota, is building North America''s first complex that will include iron-ore mining, processing and steelmaking on a single site, according to the company''s Web site. Accordingh to the company, construction of the plant near Nashwauk is expected to start in the third quarter, with production beginning in 2009.

Minnesota Steel said its new mill will use electric arc furnaces to produce semi-finished steel slabs that will be shipped to clients in the US Midwest for finishing. The plant''s costs to produce steel may be as much as 20 per cent lower than for competing mini-mill operators, such as Nucor Corp. or Steel Dynamics Inc., the company also said.

Shares of Essar Steel have climbed 15 per cent this year.