Essar plans to spend up to $4 billion in constructing a steel plant to process iron ore from Zimbabwe's Mwanesi resource within the next five years, industry and Commerce Minister Welshman Ncube said on Wednesday.

This would be the largest single foreign investment into Zimbabwe's troubled economy.

Ncube said the plant would process 25 million tonnes of ore annually and create 500 jobs in a country with an unemployment rate of more than 85 per cent. It is the latest drive by investors from emerging market giant India into Africa.

Rivals China and Brazil are also keen on investing in Africa's resource sector but western firms have been luke-warm to Zimbabwe in recent years because of the policies of the government of President Robert Mugabe which include its current drive to have majority stakes of foreign mining houses turned over to local black investors.

The African unit of Essar Group in November agreed to buy 54 percent in the Zimbabwe Iron and Steel Company (ZISCO), with the government keeping 36 percent and 10 percent owned by minority investors.

Essar went on to form a mining company, NewZim Minerals, in which it owns 80 per cent and the remainder is owned by the government, which owns the Mwanesi resource in Chivhu, some 150 km south of Harare.

"The creation of NewZim Minerals will see the development of the Mwanesi resource. It's a vast resource ... which will provide iron ore for a 25 million tonnes per annum plant to be constructed to beneficiate the ore," Ncube said.

The plant will process ore to be fed into steel works.

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