AML Steel to set up plant in Jharkhand
Phase 1 of the Rs 1,944-crore project to become operational by next Jan
| The first phase of the project, which would require an investment of Rs 114 crore, is expected to become operational by January 2007. In this phase, the production capacity would be 42,000 metric tonne of steel billets and 1.10 lakh tonne of sponge iron. |
| Ashok Agarwal, managing director of AML Steel, who presented the plans at a press conference here, said a key element of the whole project was the mining lease (for iron ore) which had been awarded to the company by the Jharkahnd government. The 20-year lease is for 384 acre mine site that has 25 million tonnes of reserves . |
| Iron ore is the basic raw material in steel making. Access to cheap iron ore is the key to cost-effective production. AML Steel officials said that the cost of mining ore from their mines would be Rs 500 a tonne, while the market price of the same is Rs 2,500 per tonne. AML will have to pay a royalty of Rs 25 a tonne for its mining lease. |
| AML Steel, which recorded a consolidated turnover of Rs 157 crore in April-December 2005 period, would have to raise a huge sum of money to finish the project. In the first phase, when Rs 114 crore would be required, the promoters plan to contribute Rs 20 crore. |
| Banks are expected to contribute Rs 50 crore, while the balance would come through a public issue, the details of which are yet to be worked out. |
| AML Steel's project cost is close to Rs 1,000 crore for every million tonne of steel, a cost that is considerably lower than the Rs 2,500 crore-plus investment per tonne that has been projected by other recent steel projects. |
| AML plans to make products that are primarily used in infrastructure projects. The company also plans to use the sponge iron route to make steel. Consequently, it can use cheaper coal, something that cannot be done in projects that use the blast furnace route. |