Calcutta, May 5: Jindal Steel & Power Ltd has decided to build a 2.5-million-tonne (mt) sponge iron plant in Bolivia, one of the largest in the world.

The Naveen Jindal-managed firm will utilise natural gas as the feedstock using the Midrex technology to produce both sponge iron (direct reduced iron) and hot briquetted iron to be used in steel making.

Jindal Steel Bolivia (JSB) will set up the plant, tipped to be the largest single module of any commercial direct reduction technology in the world, at El Mutun.

The contract for the plant was signed on March 30 but disclosed by the company to its investors today.

The project will be known as Naveen Ultra Mega Mod DRI and feature the latest Midrex shaft furnace innovations.

It will have the flexibility to produce both hot DRI and briquetted iron for use in a proposed greenfield steel plant.

Iron ore and pellets will be supplied from JSB’s EI Mutun iron ore reserves where it is also installing a pellent plant and a steel-making facility.

JSPL said the new facility was capable of producing more than the rated capacity. The output can go as high as 2.7mt of DRI.

This is the third time that JSPL is making use of the Midrex direct reduction process technology.

In 2009, the firm entered into a contract with Midrex Technologies for a 1.8mt per year coal gasification-based plant at Angul in Orissa.

In 2010, the company acquired the former Shadeed Midrex Hotlink plant at Sohar, Oman. Renamed as Jindal Shadeed Iron & Steel, the facility has been producing hot briquetted iron since December.

The new project comes after the company managed to convince the Bolivian government about the development of the El Mutun iron ore mine. JSPL bagged the mine after a competitive global bidding in 2007. It has low-quality reserves of 40 billion tonnes. JSPL has the right to mine half of the deposits over a period of 40 years.

The entire project will entail an investment of around $2.1 billion, or over Rs 9,000 crore, the company had said.

It had planned to start ore export from the El Mutun mines this calendar year and raise it to 10mt per annum gradually. The steel plant will be commissioned by 2014.

The JSPL stock closed at Rs 619.45, down 0.06 per cent on the Bombay Stock Exchange today.