February 2013

Investment Opportunity
Project Incubator
Opportunity to take a strategic stake (between 26% and upto 50%) in a coal mining company (the Company) possessing mining rights for 3 coal blocks (the Blocks)and having an aggregate reserves of ~40 million ton (mt) for utilizing the mined coal in an end use plant, viz., thermal power plant / sponge iron plant / cement plant.

Background, location and specifics of the 3 Blocks

Dating back to 1920, the land and the mining rights for the 3 Blocks belonged to Her Majesty, the Maharani of Pandra Pargana (being the original lease holder and the then Government of 1920) and the original lease deed is dated 21 January 1920

The said mining rights of the 3 Blocks including the responsibility of its supervision and collection of cess, royalty, etc. on behalf of the then Government were given to one Mr. Rabindra Narayan Roy

Subsequently, Mr. Rabindra Narayan Roy had given the mining rights to one Mr. Banarasilal Bajaj & Others (Bajaj & Others) and due to nonpaymen t of cess, royalty and mining lease rent by Bajaj & Others, a case for this dispute was filed in the Court of law during the year 1953

The final settlement and the Solonama decree during the year 1957 granted

the judgment in favour of Mr. Rabindra Narayan Roy on behalf of the original lease holder, where the competent Court allowed another 3 months time to Bajaj & Others to clear the unpaid cess, royalty and lease rent and if they further failed, then the 3 Blocks / lease hold mining properties were liable to get disposed off through an open auction sale process to recover the unpaid government cess, royalty and lease rent but would not attach or takeover any personal property of Bajaj & Others except the 3 Blocks / lease hold mining properties

In the year 1958, through the process of open auction sale, Mr. Kamala Kanta Roy purchased the 3 Blocks, being the highest bidder. The open auction process was conducted by the Honble Court and the lease period provided was for 999 years.

This entire process of ultimate devolvement through open auction of the 3 Blocks to Mr. Kamala Kanta Roy was an exceptional case because the property was subject to the auction rules, which supersedes all other rules & regulations including

government notifications to this effect

Subsequent to the coal nationalization process, Mr. Kamala Kanta Roy had to stop all mining operations in the Coal Blocks due to restriction of coal sales in the open market

Later, he entered into a partnership with Mr. Rudra Sankar Roy in the year 2000 for opening and running the 3 Coal Blocks where the latter will arrange for investors in the nature of captive end users, or a Government PSU, who would invest capital to run the Blocks as per the prevailing policies laid by the Govt. of India

The partnership firm appealed to the local District Court of Asansol to grant permission for commencement of coal mining. The final Court Order is detailed in the section below

Following table shows the details of the 3 Coal Blocks and the coal specifications: Name of the Block Hashi Pahari Al Kusha Chagalia Area 72 acres 189 acres NA Type of mine open cast open cast under ground Est. reserves 5 million ton 20 million ton 15 million ton Ave. GCV ~ 5400 5800 Kcal/Kg

1 2 3

The grade of coal found in the open cast mines are of thermal grade (as there are existing operating mines on the adjacent boundaries of both these mines) while that of the underground mine, the coal is of coking nature

Hashi Pahari and Al Kusha are both explored and open cast mines and the average stripping ratio is 1:2.15 with a mineable deposit of 25 mt while the 3 mine is an unexplored underground virgin mine where detailed core drilling and boring needs to be done for confirming the stripping ratio and its depth, direction and reserves. However, it is expected to have an approximate reserve of another 15 mt
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Present status and the Opportunity

Asansol Court in its Order (Court Order) dated 9 January 2013 has declared that as per the present government norms and the directives issued by the Ministry of Coal including the eligibility criteria fixed by it for private coal mining entities, they can do coal mining in either of the two ways:
Mining for own captive use: Any company engaged in the production of either

cement or iron & steel and/or generation of power is allowed to use the coal for captive purposes provided the said company takes a minimum of 26% stake in the mining entity; or
Mining for merchandise coal: A joint venture company can be formed with any

government / PSU and such government / PSU must take a stake of minimum 51% in that joint venture company for merchandize mining.

Further, the Honble Court has also directed the following offices

The Secretary, Ministry of Coal, Govt. of India The Secretary, Government of West Bengal The Chief Mining Officer, Asansol, Government of West Bengal The Director, Mines & Minerals, Government of west Bengal

to provide a suitable NOC within 15 days from the date of receipt of the Court Order and instructed for extending their full cooperation and assistance for continuing with the mining operations of the said Blocks

In this connection the Company is looking for an experienced, competent and resourceful Mine Developer and Operator cum End User, who would have the financial strength to independently kick start the coal production after getting the required clearances and NOC, the cost of which shall get built in with the MDO price as agreed upon on a mutual basis.