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Australian miner, India Resources Ltd, to enter Indian coal mining industry

World Coal,

India Resources Ltd (IRL) has announced the signing of a Letter of Intent (LOI) with Bankura DRI Mining Manufacturers Co. Private Ltd. Bankura is a special purpose vehicle set up by six sponge iron manufacturers of the Bankura and Burdwan Districts to mine coal from the Anandapur Sector Biharinath block in the Raniganj coalfield, West Bengal, India.

Under the LOI, Bankura and IRL have agreed to mine and supply coal to Bankura at a rate/t of coal loaded onto Bankura’s trucks. The LOI also provides for annual adjustments in prices reflecting variations in labour and other relevant indices.

According to the agreed mine plan, IRL will deliver coal at a rate of 0.03 million tpa in the third year, ramping to 0.48 million tpa in the seventh year of operation.

Commercial terms agreed on the base price results in an IRR of 15%. IRL will also be provided an incentive to produce more coal with an upward revision in coal price. This presents an opportunity for IRL to further improve its return.

The Biharinath block lies approximately 120 km northeast of IRL’s Surda copper project in the neighbouring state of West Bengal. It is located 10 km south of Burnpur Steel City, across the Damodar river. The block is undeveloped and has been defined by 56 diamond drill holes for 27,072 m of core. Good continuity is seen in the flat to very shallow dipping (0 – 5°) coal seams.

Bankura will advance IRL a sum of AU$ 1.2 million to commence final design and initial mobilisation work. IRL has six months to establish funding for the infrastructure programme. The capital required for the project is to be finally determined and will be funded by a combination of current funding in place, with further capital raising and debt facilities. Both parties have agreed for a two month time frame to sign a final contract.

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