In order to make comprehensive utilization of alumina-rich iron ore, a two-step three-vessel smelting reduction process is proposed, including the Rotary Hearth Furnace (RHF) for the pre-reduction of alumina-rich iron oxide pellet, the Smelting Reduction Vessel (SRV) with a thick slag bath for the final reduction and melting of pellet, and the Gas Reforming Furnace (GRF) for reforming the exhaust gas from SRV. A three-level lances arrangement is designed to improve the energy utilization and production condition of the SRV. An overall process model is established for the whole process to calculate the mass and heat consumptions of all sections of the process, and to investigate the effect of operation conditions on the process performance. With 80% heat transfer efficiency of post combustion, the recommended post combustion ratio (PCR) of the SRV gas is 55% and the pellet metallization rate (PMR) is 80%. A zoned model of the SRV is developed to calculate the mass and heat balances of each reaction zones and especially to optimize the operation conditions. The recommended PCRs in the upper slag and lower slag are 15% and 0% respectively. The coal-only injection method is recommended in the lower slag.