UPDATE 1-Brazil's Bahia Mineracao starts production at iron ore mine - CEO

(Adds more chief executive comments)

RIO DE JANEIRO, Feb 2 (Reuters) - Brazilian miner Bahia Mineracao, a subsidiary of Kazakhstan’s Eurasian Resources Group, started production at a mine in northeastern Brazil with expected 2021 output of 1 million tonnes of iron ore, its chief executive said on Tuesday.

Bahia Mineracao plans to double output at the Pedra de Ferro mine in Bahia state to 2 million tonnes of iron ore by next year, CEO Eduardo Ledsham said in an interview.

The mine shipped its first cargo of ore in January, with first-quarter sales only to the domestic market, Ledsham said. Foreign shipments are expected to begin in April, he said.

The company plans to invest 4 billion reais ($746.41 million) to ramp up annual production capacity to 18 million tonnes within five years, he said.

“I see that we’re headed into a new cycle of high iron ore,” Ledsham said of demand for the metal, mainly from China.

As part of that planned capacity expansion, the company will rely on the first segment of the East-West Integration Railway (Fiol), which has yet to enter operation. On April 8 the government plans to auction off a 35-year concession to operate the railway which connects to the coast.

Ledsham said Bahia Mineracao plans to participate in the auction in a partnership with other investors, but declined to elaborate.

Fiol will connect to a port in the coastal city of Ilheus that is being constructed and will be jointly operated by Bahia Mineracao and the Bahia state government.

The initial iron ore shipments are being sent by road freight.

The Pedra de Ferro mine has reserves of 550 million tons of ore, about one-third of which is hematite that contains roughly 65% iron content. ($1 = 5.3590 reais) (Reporting by Marta Nogueira Writing by Jake Spring; Editing by Richard Chang)