India has had its first coal deal signed with an overseas company – a move that will help the local coal sector develop its exploration potential.

Australia’s India Resources Limited (IRL) signed a letter of intent with Bankura DRI Mining Manufacturers Company for A$500m ($450m) to mine coal in India’s West Bengal State.

Under the 30-year contract, IRL will be responsible for the development and operation of the Biharinath coal mine and will provide coal at a rate per metric tonne loaded on to Bankura’s trucks.

The undeveloped block is defined by 56 diamond drill holes for 27,072m of core.

According to the agreement, in the third year IRL will deliver 30,000t of coal per annum, which will increase to 480,000t in the seventh year.

For final design and initial mobilisation activities Bankura will shell out A$1.2m ($1.08m), while IRL will have six months to arrange finance for the infrastructure programme.

IRL and Bankura have decided to keep a two-month time frame before signing the final contract.