As part of the agreement, Gujarat will issue and allot a further 30 million fully paid ordinary shares to Jindal at 25c per share raising $7.5 million.

Based on the last traded data of the Gujarat scrip, this placement represents a premium of approximately 47% to the current market price, Gujarat said.

Gujarat executive chairman Arun Kumar Jagatramka said: “We are extremely pleased in negotiating the further offtake agreement and concluding the placement as it strengthens the existing relationship between the two companies.

“The securing strong offtake partners is important as we continue the expansion of our two mines to our planned levels of over 6Mtpa and the placement funds will be utilised in our expansion project.”

Last month Gujarat completed a $25 million placement to Jindal after receiving Foreign Investment Review Board approval.

The Illawarra-based company placed 100 million shares at $0.25 per share with Jindal, which also secured supply of coking coal with an offtake agreement.

Under this initial agreement Jindal would receive 500,000tpa of coking coal produced from Gujarat’s mines in New South Wales over 10 years. It will have an option to buy an additional 500,000tpa depending on production levels.

The deal has delivered Jindal Steel a 14% stake in the company.

New Delhi-based Jindal has an annual turnover of $US3.5 billion and is part of the $15 billion diversified OP Jindal Group. It has committed investments exceeding $15-20 billion in the future and has several business initiatives running simultaneously across continents.

The Indian government is proposing to create a sovereign wealth-type fund to buy overseas coal assets.

For some time the Indian government has been encouraging private and public entities to buy coal assets abroad and now it is prepared to put some skin into the game.

Indian coal minister Shri Sriprakash Jaiswal recently told a Confederation of Indian Industry round table that acquisition of coal properties abroad had become more important in light of domestic production constraints and the growing demand for coal from different consuming sectors, particularly steel and power.