Shares in India Resources have closed 30 per cent higher after the company signed a 30 year agreement, potentially valued at $500 million, to develop and operate a coal mine in India.
India Resources today signed a letter of intent with Bankura DRI Mining Manufacturers Company Private, a special purpose vehicle set up by six sponge iron manufacturers to mine coal in the Biharinath block in West Bengal.
Under the agreement, India Resources has agreed to deliver coal at a rate of 30,000 tonnes each year before ramping up to 480,000t each year in the seventh year of operation.
India Resources said the commercial terms agreed on the base price will provide for an internal rate of return of 15 per cent, with provisions to increase this in reply to higher coal outputs.
Bankura has agreed to advance $1.2 million to start final design and initial mobilisation work.
India Resources has six months to establish funding for the infrastructure program.
"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," India Resources said.
Both parties have agreed to a two-month time frame to sign a final contract.
Shares in India closed up 1.1 cents, or 29.7 per cent, to 4.8c today.
