Mumbai, May 12: Ashapura Minechem, a mid-sized mining company, plans to set up a one-million-tonne alumina plant in Gujarat.

The first phase of the plant, to be set up in the Kutch district, will cost Rs 1,190 crore. Of this, Rs 850 crore will be raised as debt, while the remaining Rs 340 crore will be pumped in by promoters.

“It’s a big project and we are confident of completing it by 2008,” managing director Chetan Shah said today.

Ashapura Minechem is the largest mine-owner, processor and exporter of industrial minerals in India, company officials said.

The project is being set up in a 50:50 joint venture with Sichuan Aostar Aluminium Corporation, a wholly-owned subsidiary of Sichuan Electric Power Corporation of China.

The Ashapura groupm along with the Gujarat government and other associates, will hold 50 per cent while Sichuan Aostar will own the rest.

The investment will be a combination of equity and debt. The borrowings will be a mix of project finance and supplier’s credit from India and China.

Ashapura has received the Gujarat government’s approval. Once the alumina project takes off, Shah said Ashapura Minechem’s annual turnover will touch Rs 1,500 crore in five years.

Gujarat Mineral Development Corporation (GMDC), which has exclusive mining rights to an estimated 40 million tonnes of low-grade bauxite ore deposits in the Kutch region, will lease the mines to Ashapura.

The project had attracted several domestic and foreign firms because of its proximity to major ports, which would help reduce the cost of shipping alumina to domestic and foreign markets.

“The bauxite deposits in Kutch are almost at sea level. This means lower costs for putting the infrastructure in place for mining,” Shah said.

Ashapura mines bauxite and produces industrial minerals such as bentonite, barytes and bleaching clay.

Under the deal, Sichuan Aostar will buy back 75 per cent of the alumina produced at the Kutch plant over the next 30 years for its smelter. The surplus will be sold to firms in the Gulf and Europe.