"This is a very preliminary step with the intention of exploring opportunities in SAIL’s plans for their steel manufacturing,” a BHPB spokesperson said.

Under the alliance SAIL intends to invest in BHPB’s coal mines as well as sourcing coal from BHPB under long-term supply arrangements.

With time SAIL will buy increased volumes of hard coking coal as well as iron ore to meet its plan of raising hot metal production from the current level of 13 million tonnes to about 20 million tonnes by 2011-12.

SAIL said BHPB would share its expertise in iron ore mining, including advanced technology for exploration, mining and ore beneficiation, while developing iron ore mines in India jointly with SAIL.

SAIL and BHPB have agreed to jointly finalise the investment plans for development of new iron ore mines in India as well as overseas coking coal mines.

Before finalising mining and project plans, both the companies will undertake due diligence, review of the assets and feasibility studies.