"We have made advance payment for 2,880 acres of land with the Karnataka government for the project. The source of water is also being identified for the mill with Karnataka government," Som said.

The Karnataka plant will be NMDC's second steel unit in India after its 3-million tonne project in Chhattisgarh.

As far as the pact with Sunflag is concerned, it is a part of NMDC's plan to invest in coking coal and iron ore assets overseas to ensure raw material security for its upcoming steel projects.

NMDC, which is looking more and more overseas for raw material supplies, had, last week, entered into a deal to acquire 50 per cent in Australia's Legacy Iron Ore for A$18.89 million. It is also looking to acquire mining assets in the US.

Besides the two steel plants, NMDC is also setting up a 1.2 million tonne pellet plant in Donimalali, in Bailadila sector in Chhattisgarh and the Kumaraswamy mine in Karnataka.

Union minister for steel Beni Prasad Verma expressed satisfaction over the performance of the company in the first quarter of the financial year 2011-12.

NMDC has been consistently showing excellent results. During the year 2010-11. Production of iron ore rose to 25.16 million tonnes during the year against 23.80 million tonnes during the previous year, showing a growth of about 6 per cent. Sales turnover of the company during 2010-11 stood at Rs11,367.42 crore against Rs6,229.54 crore during the previous year, recording an increase of about 82 per cent. The company earned profit before tax of Rs9,727.17 crore during 2010-11 against Rs5,207.32 crore during previous year. Profit after tax during 2010-11 was Rs6,499.22 crore against Rs3,447.26 crore during previous year.