Chennai: The Chennai-based Rs106-crore turnover AML Steel Limited will set up a 2-million tonne integrated steel plant in Jharkhand to manufacture sponge iron and mild steel billets used by steel re-rolling mills.

To be implemented in three phases, the company would initially spend Rs114 crore to build a 1.10-lakh tonne capacity sponge iron plant, a 42,000- tonne mild steel billets plant and a 9.6mw waste heat recovery power plant at an outlay of Rs30 crore.

According to the Ashok Agarwal, managing director, AML Steel Limited, the company has obtained the mining rights for iron ore and coal in jharkand. "The iron ore mining lease is for 20 years. As per the geological estimates the 384-acre mine site has reserves of 25-million tonne while the plant requires just 1.76-lakh tonne per annum for the first phase."

He also said that AML Steel is not interested in selling the iron ore to outsiders though it would fetch around Rs2,500 per tonne.

Speaking about the funding pattern for the expansion, Agarwal said that the company has tied up debt to the tune of Rs50 crore. The promoters would put in around Rs20 crore and balance would be tapped from the public through an initial public offering.

To a question as to how the Rs7.5 crore equity based AML Steel is going to find money to implement the second and third phases of the project that would require another Rs1,830 crore executive director, finance, Viswanathan P said the entire project would take another six years to complete. By that time he expects the company to have grown to a sufficient size to raise debt and further equity.

Going forward, AML Steel also plans to set up rolling mills at its Pondicherry and Karikal units.