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October payment deadline for GVK

World Coal,

GVK faces an October deadline to pay a final AU$ 560 million to billionaire Australian miner, Gina Rinehart, for coal assets the group bought in 2011 and has yet to develop in Australia’s outback.

The GVK Hancock project lies in the Galilee Basin, where massive reserves of coal remain untapped, due to the costs of building ports and rail lines to Australia’s east coast, nearly 500 km away, according to the Economic Times.

The undeveloped mine is one of three coal projects GVK took on in 2011, at the height of the coal boom, which industry experts now view as uneconomic.

Coal prices, mired at 5 year lows, mean the coal projects are likely to remain undeveloped for several years.

A senior GVK executive has confirmed the payment is yet to be paid to Ms Rinehart, and that it is due to be made next month.

"They will have to go to the banks and raise another loan," said Vibhor Singhal, an analyst at Phillip Capital. "The future of the project is not in jeopardy. However, nothing has started yet, so there is still a question over how they can raise the funds and when they will start mining." 

Given such circumstances, a number of analysts expect GVKwill need to renegotiate the payment deadline.

 "Any such payments are a commercial matter and will be dealt with accordingly," said Josh Euler, a GVK Resources spokesperson. 

Edited from various sources by Sam Dodson

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