The contract is to develop and operate Biharinath coal mine in the Indian state of West Bengal.
Under the LOI, IRL will mine and supply coal to Bankura DRI at a rate per tonne of coal loaded onto Bankura DRI's trucks. The LOI also provides for annual adjustments in prices reflecting variations in labour and other relevant indices.
IRL will deliver coal at a rate of 0.03 million tonnes per annum in the third year and ramping to 0.48 million tonnes per annum 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.
The Biharinath block is undeveloped and has been defined by 56 diamond drill holes for 27,072 metres of core. Good continuity is seen in the flat to very shallow dipping (zero to five degrees) coal seams.
Bankura DRI Mining will advance IRL a sum of AUD1.2m 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 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.
Bankura DRI is a special purpose vehicle set up by six sponge iron manufacturers of the Bankura and Burdwan districts of West Bengal to mine coal from the Anandapur sector Biharinath block in the Raniganj coalfield.