Ruias-led Essar Steel plans to start the first phase of production from its proposed USD 1.1 billion steel plant at Minnesota in the US by 2011, company sources said.

The activities being pursued by Essar Steel Minnesota LLC (ESML), part of Essar Steel Holdings Ltd, far enable the project to be on schedule and produce iron ore pellets in 2011, they added.

"Since the ground break, Essar has accomplished several milestones relating to the project such as site survey, soil investigation, commencement of de-watering of mine pits and site grading related activities," Essar Steel Minnesota President and CEO Madhu Vuppuluri said.

Besides iron ore mining and production, the proposed project will have a 4-million tonne pellet plant, a DRI (direct reduced iron) unit and steel making facilities. In the second phase, a slab-making unit would also come up.

The steel major plans to consume iron pellets and other allied products from its Minnesota unit for the Algoma plant in the US.

So far, the company has invested in the project from its internal accruals, but is now looking at finance options from institutions in Canada, US and Europe.

"Essar does not fear the market risk for its products, which makes ESML project financially viable for banks to provide project finance," a senior company official said.

ESML is confident of securing financial tie-ups for the project by end of the year and is believed to be working out the details of the amount to be borrowed. After getting environmental clearances and acquiring over 8,000 acres, the company did ground breaking for the project in September 2008.

It has already awarded multi-million dollar contracts over the last one year for basic engineering works and developing the site.

Essar had acquired Minnesota Steel in 2007 end for an undisclosed amount. Post-merger, ESML is endowed with long-term lease of over 1.4 billion tonnes of iron ore resources that will support both pellet and steel operations.

At full production, ESML will employ nearly 500 people and up to 2,000 construction workers over the course of the project.