India Resources has raised $95,000 after Chimaera subscribed to 6.333 million company shares at $0.015 in the second tranche.

The original facility was arranged by Empire Equity Limited, a London based private merchant bank.

The company entered into the funding facility with Chimaera in late February in order to fund some significant mine contracting opportunities in India.

As one of few foreign mining services companies to successfully operate projects in India, the placement and funding facility provide optimum flexibility to fund growth.

India Resources has some projects in the pipeline, and has announced the company’s intention to participate in several significant contracting opportunities presented by existing client Hindustan Copper (BOM: HINDCOPPER).

To support the company’s commitment to these projects India Resources has entered into an agreement with the large Polish mining services group, Kopex (WAR: KPX).

This strategic alliance between India Resources and Kopex positions the company perfectly for the expected rapid growth in the mine contracting business in India.

Added to this for India Resources are the two new long term coal mine development agreements secured at the level of preferred contractor status as this funding facility will provide the necessary security to underpin the growth of the company’s mining contracting division.

As one of few foreign mining services companies to successfully operate projects in India, the placement and funding facility provide optimum flexibility to India Resources to fund growth.

Under the terms of the facility, Chimaera EMN will subscribe for an initial placement of 31 million fully paid shares at $0.02 to raise $620,000, an 18% premium.

The placement will occur in two equal tranches, with the first tranche to be completed by 25 February 2011, and the second upon execution of definitive agreements.

Along with the initial placement, drawdowns under the facility are within the discretion of the company.

India Resources currently has some exciting projects in the pipeline, and recently announced its intention to participate in several significant contracting opportunities presented by existing client Hindustan Copper Limited (HCL).

To support its commitment to these projects the company has entered into an agreement with the large Polish mining services group, Kopex.

This strategic alliance between India Resources and Kopex positions the company perfectly for the expected rapid growth in the mine contracting business in India.

India Resources said Kopex shares a similar view on the outlook for mining services in the country, and therefore the parties have agreed to jointly pursue other opportunities, in addition to those presented by HCL.

Added to this for India Resources are the two new long term coal mine development agreements secured at the level of preferred contractor status, and the upcoming HCL contracts coupled with the established Surda Copper operation, this funding facility will provide the necessary security to underpin the growth of the company’s mining contracting division.

Andrew Kemp, the Investment Manager of Chimaera EMN indicated his strong support for the India Resources prospects, and said, “Its partnership with Kopex and the ever growing demand for raw materials in India puts the company in a unique position to grow beyond the rate of its peers in the next few years.

"We also see significant untapped value in connecting resource supply from Australia with increasing demand from India.”

The facility was arranged by Empire Equity Limited, a London based private merchant bank.

India Resources is well placed to benefit due to working relationships with Hindustan already in place, as Hindustan owns the Surdu Copper project which India Resources operates, with the new project bids in the vicinity of these operations.

The two companies will work as a consortium on a mutually exclusive basis for the preparation and submission of bids for Hindustan Copper development projects, with Hindustan inviting requests for qualification (RFQ) globally.

RFQ’s have been offered by Hindustan to develop and operate copper projects located in the State of Jharkhand.

KOPEX is the mining construction and engineering division of KOPEX Group, a large Polish mining supply company.

The country has an emerging mining and exploration industry; however its endeavours have been plagued by the lack of technology and investment in this sector.

The company saw the opportunity to combine Australian mining and exploration skills with the vast potential of India’s minerals industry.

Major Projects.

Surda Operation:

The impact of mining in higher-grade areas, along with ongoing production efficiency improvements, should lead to annual production levels of more than 4,000 tonnes of copper-in-concentrate. IRL is currently budgeting for strong positive cash flow of $0.4 million to $0.5 million per month, or ~$20m cumulative over the next four years.

Exploration Activities – Base Metals.

Aravalli Project:

The application process for the Mining Lease, applied for over the lead-zinc mineralisation defined at Sindesar Khurd-Rajpura Dariba, is complete. Intense lobbying of both State and Federal Governments is furthering the company’s application. Crown Mining Pvt. Ltd., a wholly owned subsidiary of IRL, has the preferential right to be granted the ML.

The ore body is of a SEDEX style similar to Mt Isa.

We anticipate that the resource estimate will be upgraded substantially in terms of both tonnage and grade by further drilling, whilst higher-grade zones will follow.

Hindoli Project:

The Hindoli Reconnaissance Permit (RP) application has now been granted to Crown Mining and Crown is in the process of formally accepting the application, which covers some 3,754 sq km in the Bhilwara, Tonk and Bundi Districts of Rajasthan, located between large Anglo American, HZL and ACC Rio Tinto RP’s, to the east of Bhilwara.

The Hindoli RP structural geological map contains intense folding and shearing providing an ideal structural setting for copper mineralisation. There are numerous recorded instances of surface mineralisation, primarily copper, subordinate lead and zinc and silver, and one of gold.

Askot Project:

India Resources holds a strategic 10% shareholding in Pebble Creek Mining Limited (TSX-V: PEB), which owns 100% of the Askot project through a subsidiary Adi Gold Mining Pvt Ltd.

The project is a polymetallic volcanogenic massive sulphide deposit containing five metals of economic significance: gold, silver, copper, lead and zinc. The full extent of the mineralised system has not been defined and there is large anomalism.

Bonai project:

India Resources has maintained its portfolio of 15 applications in the states of Orissa and Jharkhand. These applications are being supported by Geomin Consultants of Orissa India who has a proven track record of success with the granting of mineral licenses.

A Major Corporate Transformation is Underway.

The appointment of Arvind Misra as managing Director of the company several years ago represented a pivotal moment in the company’s fortunes. Being highly experienced in the mining business, his operating and financial experience has led to a complete rejuvenation of IRL, albeit with a lot of sleepless nights.

One of the biggest achievements so far has been the reorganization of the company’s debt position, which has been cut from $3.0m previously to just $1.0m, whilst at the same time the company’s outstanding convertible notes have been cleared, eliminating the substantial overhang that previously dogged IRL’s stock and share price.

The company now has a solid financial footing, with around $0.75m cash on hand, which increased to around $1.5m during October.

In terms of upside, we will await further news with respect to the company’s two advanced coal ventures in India, where the potential work is worth around $800m to IRL.

Misra now holds 7,712,773 ordinary shares, 2,500,000 unlisted options expiring 30 June 2012, and 6,000,000 unlisted options expiring 31 December 2017.

Andrew Simpson, chairman, purchased an additional 1,000,000 shares for a consideration of $20,383, valuing each new share close to $0.02.

Simpson now holds 3,000,000 ordinary Indian shares.

Last week India announced it had completed a record breaking 855 tonnes of copper metal-in-concentrate production from the Surda Mine and Mosaboni Concentrator Plant in India, for the September 2010 quarter, 2% above the previous record.

The record is 2% above the previous record of 838 tonnes achieved in the March 2010 quarter, with the feed grade of 0.88% copper remaining constant, moving the company closer to achieving its production target.

Of interest, during the month of September the copper grade improved to an encouraging 0.95%.

Arvind Misra, managing director, said that this was a very pleasing all round performance for the Surda operations, and that the ongoing improvements were keeping the company on track to meet its production target of 340 tonnes of copper in concentrate per month.

The September quarter production included; processing 106,153 tonnes with a recovery rate of 93.2% and a concentrate grade of 25.4% copper.

India Resources currently has an order book of over $750 million, with a market capitalisation of $8 million.

The company is the first foreign owned company with a mining operation in India, setting the platform for the company to leverage this growth with additional mine contracting deals.

The mining sector is anticipated to become much more important to the Indian economy in the future.

The Indian mining market will undergo changes in the next 12-18 months following changes from the government based on recommendations from the Hoda Report, which looked into the regulations and obstacles of the mining industry in the country.

Misra now holds 7,462,773 ordinary shares, valuing his stake in the company at around $134,000.

Misra also holds 2.5 million unlisted options with a 2012 expiry, with a further 6 million unlisted options with a 2017 expiry.

Last month India raised $592,500 through a private placement of 39.5 million shares  at a subscription price of $0.015, which included two attached unlisted options for every five shares subscribed for.

The options are exercisable at $0.025 each on or before 31 December 2014.

There are 2 attached unlisted options for every 5 shares, exercisable at $0.025 on or before 31 December 2014.

Settlement of the placement will occur in three tranches with an initial tranche of $347,500 (23,166,666 shares and 9,266,666 options) having been completed.

Settlement of the remaining two tranches will occur over the next two months.

India Resources (ASX:IRL) started as Exploration Company in 2007. It accumulated debt which has now been pared to negligible levels.  Now stabilised and re-positioned by Misra as a cash flow positive mining contractor, with a solid  order book, it has hallmarks of other early stage ASX-listed mining contractors like Macmahon Holdings (ASX: MAH). MAH has an order book of A$2.2 billion and a market capitalisation of A$495m.  IRL has an order book of $800m and market capitalisation of $5.0m.

It is the “first foreign owned company with a mining operation in India,” and it is poised to leverage this growth with additional mine contracting deals.

Recent Highlights

- Reduced debt from $3.0m to $1.0m
- $0.75m in cash
- Additional $0.85m to be received by Oct 2010
- Cash flow positive: operating cash flow of $4.0 - $ 5.0m per annum from Surda Copper Mine
- Retired convertible notes, cleared “overhang” of shares
- Placement to raise $0.6m
- Brought in experienced locals – reduced head office expense to $150k per month
- Commitment from a broker and a private investor to raise further money if required
- Signed the Bankura Coal Letter of Intent – making progress on final clearances
- Prism Coal Block contract - Preferred Contractor
- On track for delivery of net profit FY2011

As a mining contractor, IRL has been profitably operating the Surda Copper Mine, which has an order book of over A$70m. With announced deals to operate the Bankura Coal Mine (order book of A$450m) and the Prism Mine (order book of A$350m), IRL has undergone a metamorphosis.

Given the order book the market valuation is low at present. Given this, IRL is under the radar.  Yet India Resources will be operating some very substantial mining projects at attractive margins. 

Why India?

Year-on-year GDP growth has averaged 9% pa.  Impact of the GFC has been less than most. The government was re-elected in May 2009 with a mandate for much needed reforms.

Energy demand is outstripping supply in many areas, most notably: coal – a rapid increase in domestic demand for power generation IRL can claim to be a member of a very exclusive group, it is an Australian company that operates a producing mine in India and there is significant potential to gain additional mine contracts. India is the world’s largest democratic nation with an average GDP growth rate of around 9% per annum and rivals China for growth prospects and has massive mineral wealth available for exploration and development.

Management changes

With solid experience operating mines for Rio Tinto, Coal India Limited, Griffin Coal and Mt Isa Mines, managing director Arvind Misra was part of the turnaround at drill operator, Brandrill Ltd (ASX: BDL) in 2001 and at gold miner, Norseman Gold (ASX: NGX) in 2006.  When he arrived at IRL, Misra inherited a number of investments.  Since then he has re-positioned IRL as a mining contractor tapping Indian economic growth and developed a solid team at IRL in Australia and in India. IRL has significant scale with over 1,300 employees in India.

Contracting

Smart Management at Surda Copper Mine

IRL’s modus operandi is the small-medium project space in India.  At the Surda Copper Mine in India’s Jharkhand region, IRL has been able to operate the mine to greater effect than the former operator, India’s largest copper producer, Hindustan Copper Ltd.  IRL operates the mine in return for a fee. The project has been net cash flow positive since December 2009.

IRL operates the mine under long-term contract and sells copper concentrates back to Hindustan for refining. Surda has produced copper for several decades. IRL has spent AU$15 million introducing modern mine management and technology, buying new equipment, upgrading underground operations and installing new equipment to crush, grind, separate and concentrate copper ore.

Fresh drilling has also confirmed a JORC resource of 13.1 million tonnes of ore grading 1.1% containing approximately 144,100 tonnes of copper with excellent exploration potential for more resources. At current copper prices and planned production at a rate of 4,500 tonnes per year this could produce annual revenues approaching AU$25 million per year for at least 30 years. All of the drives, shafts and ore resources are now digitally mapped in three dimensions allowing for more efficient extraction of copper ore and plans for further production increases.

IRL has an off take agreement with HCL until 2014. The Surda Copper Mine and Mosaboni Concentrator are located in close proximity to HCL’s copper smelter.  As a measure of the turnaround under Arvind Misra, IRL is producing at 275 – 300 tonnes copper per month with 850 employees compared to HCL’s historical average of 215 tonnes per month with 1,200 employees.

Mine upgrades have already increased production by over 30% with 25% less manpower. Current monthly production has reached a record of 300 tonnes and is planned to reach 350 tonnes. The mine employs 900 miners, 250 at the process plant and 150 in administration. IRL are smart enough to know that it makes good economic sense to mix modern technology with a trained pool of low cost labour.

IRL has a production target at Surda of 4,500tpa of copper (Cu) building to 9,000 tonnes per annum. How? IRL intends to negotiate with HCL for an enhancement. IRL has recently secured the services of a recently retired director of Hindustan Copper Limited whose primary role is to expand IRL’s copper business in India.

Management provides training programs for the underground workforce which contains 82% of new hires who have never worked in a mine before. They can deploy large numbers of miners at multiple mine faces and get more ore at lower cost while maintaining safety standards that are recording accidents at half the rate of modern Australian mines.
 
Surda Copper is now operating profitably even though the refiner imposed a 16.6% revenue deduction against Indian excise duty which is under legal challenge. In the last two quarters revenue has jumped in rupee terms from 102,000 million to 123,000 million. This number is reflected in the Australian GAAP accounts for the recent March quarter showing revenues of approximately AU$3.2 million. Ore production is slated to increase by another 10-15% so profitability will jump higher and cash flow growth will feed further development.

With IRL reliably and profitably operating the Surda mine, IRL has turned to add other mine contracting projects.

Biharinath Coal Mine (Bankura DRI)

IRL has signed a Letter of Intent with Bankura DRI Mining Manufacturers Company Private Ltd. for a 30 year contract worth A$450 million to IRL to develop and operate the Biharinath Coal Mine.  IRL has agreed to mine and supply coal to Bankura at a rate per tonne of coal, loaded onto Bankura’s trucks.

Commercial terms agreed on the base price results in an IRR of 15%, however this return could be boosted as IRL will also be provided an incentive to produce more coal with an upward revision in coal price.

The Biharinath block lies approximately 120 kms north-east of IRL’s Surda Copper Project in the neighbouring state of West Bengal. 

IRL plans to develop a new underground mine that will build up to a full annualised production rate of 480,000 tonnes per annum.

The Letter of Intent with Bankura was extended to December 2010 to allow for sufficient time to obtain final environmental clearances from the Indian government.  IRL is making progress on the outstanding matters.

The deal provides a low-risk entry point for IRL to enter and participate in India’s booming coal mining industry.

Prism Coal Block

The tender for operating the Prism Coal Block was submitted during the previous quarter and a number of discussions have since been held with Prism Cement, as well as a site visit by the Prism Senior Project Management to the Surda operations. Awarding of this project is expected in the coming months. IRL is optimistic that it can secure the tender to operate the Prism coal block. News is expected in H2 2010. The value of the order book is in the vicinity of A$350 million.

The Coal Block is held by Prism Cement and requires approximately 300,000 tonnes per annum of coal to be mined once two declines and a vertical ventilation shaft have been sunk.

IRL’s strategy is to develop a positive cash flow generating contracting order book that can support mine development and exploration by IRL in its own right.

Aravalli Project – Base Metals

A subsidiary of IRL, Crown Mining Pvt Ltd has completed the application process for the Mining Lease, applied for over the lead-zinc mineralisation defined at Sindesar Khurd-Rajpura Dariba. Representations have been made to the Indian State and Federal Governments to progress the approval of the lease. Crown Mining has the preferential right to be granted the Mining Lease.

Valuation

IRL currently has 370 million shares on issue.

Taking a line through other mining contractors, such as Macmahon Holdings (ASX: MAH) and their valuations, allowing for risk factors such as: sovereign risk, delays in approvals, financing could place a market capitalisation valuation on IRL of $15m of 4.2 cents per share (cps).  If IRL can provide further time-lines on Bankura and Prism this would lift valuation closer to 6.5cps.  While not without risk in terms of volatility in share price, current market valuation would seem to have factored in the past and not the future prospects.

Why the low market valuation?

IRL was hampered by a substantial investment in a legacy gold project that went awry but is now getting back most of its investment and expects to receive A$1.7 million.  The company has also taken longer to re-vamp and turnaround.  There has been an overhang of shares due to the convertible note issue; this is now no longer a factor.

With mining projects and cash flow opportunities coming its way, it may pay to follow IRL. The wait may be worth it for the market to re-value this under followed minnow.

The La Jolla facility was entered into in September 2009 and provided for the issue of up to four convertible notes, each with a face value of US$1,500,000.

To date, two convertible notes have been issued and after voluntary conversions by La Jolla, the current combined principal balance outstanding of the notes amounts to US$470,169.

Under the terms of the settlement and mutual release agreement, India  will make a US$150,000 payment to La Jolla, and the principal balance of the second convertible note will be increased by US$250,000.

The agreement should be of significant benefit to IRL as it would assist to stem the flow of shares to be issued for conversion of the notes into ordinary shares, which act as an overhang of shares on the market.

Other key terms include:

- The maturity date of the two notes will then be extended to 31 December 2014;
- Subject to compliance with ASX Listing Rules and shareholder approval (if required), the  Company will grant one option for every five shares issued to La Jolla upon the conversion of the existing convertible notes. The option entitlement applies to each US$100,000 of conversions by La Jolla up to US$546,490. The options will be exercisable at 2.5 cents each on or before 31 December 2014;
- A daily limit applies to the number of shares able to be traded by La Jolla.
- Upon the date that the combined principal balance of the notes is less than US$250,000, the interest rate of the notes will be reduced from 4.75% to nil. In addition, the conversion price of the notes shall be the lesser of A$0.026 or 85% of the average of the 3 lowest volume weighted average prices of the Company’s shares in the 21 trading days prior to the election to convert; and
- The rights and obligations of La Jolla to purchase additional convertible notes is cancelled.

The Province is known to produce over 60 million tonnes of iron ore annually.

Under the terms of the deal, IRL will undertake legal and technical due diligence on the tenement over the coming months. Subject to the satisfactory due diligence, IRL will enter into various formal agreements to secure the mining and marketing rights from the vendor. The term of the option is for a period of six months.

The purchase consideration will comprise a total of A$9.5 million (INR 37.5 Crores), payable by the Company over a period of two years. The purchase instalments will be linked to various milestones as described below:

− 25% at the time of signing of the Acquisition Agreement
− 55% at the time of execution (finalisation of documentation) of the Mining Lease
− 20% upon the commencement of iron ore mining on the Mining Lease

The area is analogous to the Pilbara iron ore province of Western Australia, IRL said.

In the region, there are many sponge iron plants and blast furnaces in the district.  Infrastructure is already in place with rail, roads and mining services in close proximity.

Regionally the prospect is located on highly prospective ground of the Bonai Iron Ore Group rocks. The prospect contains several types of iron ore, float, kanga and in-situ haematite iron ores. Rock chip samples were taken from the surface outcrop of the in-situ haematite, giving an average of 63.2% Fe and low values for contaminates.

There are numerous outcrops of in-situ haematite at surface and in small pits on the prospect, which are overlain in places by float and kanga ores and alluvium/laterite.

The outcrop area within the mining lease is approximately 500m x 450m and occurs on the top of a small hill. This has allowed an estimation of dip (approximately 30 degrees to the south east) and thickness (15m). Hence the project has considerable potential to provide a significant mining project with accessible mineralisation at or near surface.

Managing Director, Arvind Misra said today, the option agreement provides IRL with an opportunity to acquire a substantial project and for IRL to establish a foothold in the world class iron ore district of the Bonai region in India.

The purchase consideration for the project would be funded by a combination of equity and debt facilities.

India Resources is the only foreign-owned company with a mining operation in India.

It operates the Surda copper mine; under IRL's management the mine achieved record copper production during the month of March 2010.

The Surda Copper Project has a JORC resource estimate of 13,095,000 tonnes of indicated and inferred resource at 1.09% Cu.

Managing director of IRL, Arvind Misra said the La Jolla deal is a part of a larger business relationship that has enabled the company to reduce corporate debt and to continue development of its proposed coal mine activities and to advance exploration programmes.

The company is strengthening its balance sheet with the increased revenue flows from Surda and a significant reduction in debt planned by the end of 2010.

Under the proposed deal with Bankura, IRL would be appointed the sole and exclusive contractor to develop and undertake underground coal mining operations from Bankura's Biharinath Block in the Raniganj Coalfield, located in the state of West Bengal, India.

IRL would develop two declines of 2 km each, sink two shafts of 170 and 490 metres in depth and undertake underground coal mining operations.

IRL would, as per the agreement, deliver coal to the pit head as per the approved mine plan. The current mine plan envisages first delivery of coal (30,000 tonnes) in the third year of operation and ramping up to reach a target production of 480,000 tonnes per year in the seventh year of operation.

Bankura is a special purpose vehicle established by six sponge iron manufacturers to mine coal from their Anandapur Sector, Biharinath Block.

The Biharinath Coal Block is part of the Raniganj Coalfield, located in the state of West Bengal, India.

The Block contains 9 workable coal seams of non-coking coal with the majority of coal falling between the useful heat value (UHV) of between 4,200 to 5,600 K.Cal/kg.

Arvind Misra, managing director of IRL said negotiations between Bankura DRI and the relevant Indian Government departments are continuing to obtain final approval for the commencement of excavation activities at the site and establishment of surface infrastructure.

Also, IRL is identifying potential equipment suppliers.

Coal Project (Prism Cement)

The Company has submitted an offer to Prism Cement for the development of an underground coal mine including surface infrastructure.

Negotiations with Prism Cement commenced last week, resulting in a  revised offer being submitted by IRL. Prism Cement is currently evaluating various offers and is likely to award the development contract during the current quarter. Prism Cement is also in discussions with several other parties in relation to the awarding of this contract.

The development contract will require the mining of approximately 300,000 tonnes of coal per annum once two declines and a vertical ventilation shaft have been constructed.

Project Financing

The majority of the funding requirements for current projects can be funded under the IRL’s existing arrangements, including internal cash flows and further project specific debt funding from Indian banks.

Although IRL said, given the significant number of additional mine development opportunities, available to the company over the next few years, it is also in discussions with several international financial institutions in relation to funding programmes.

Surda Operations

Operations at the Surda mine have been impacted by workers stopping work in support of a demand for wage increases. This work stoppage occurred without giving reasonable notice to the Company and has been declared illegal by presiding State authorities.

While the strike currently continues, essential services employees returned to work last week and IRL anticipates the remaining workers will return to work shortly.

Negotiations between the parties are being chaired by the Regional Labour Commissioner, a Government of India department who carry necessary powers in such matters.

The company said in a statement it has communicated a No Work and No Pay decision to the workers.

This has significantly reduced any financial impact of the stoppage to the company. Copper production for the months of April and May have been affected to date by approximately 30%. Assuming that operations re-commence shortly, the majority of lost production is expected to be recovered during the current quarter.

The strike falls under the definition of Force Majeure under the Surda contract, as per the works order with the owners of the mine, Hindustan Copper Limited.

The works order also has provisions for extension of the contract term by an equal number of days lost due to the strike.

Cash at the end of the quarter included the balance of a working capital overdraft facility of $2,914,000 which is used specifically for the day to day operations at the Surda copper mine.

Quarterly production at Surda was 838 tonnes of copper during the quarter, a record quarter since the commencement of the project, a 10% increase in copper production over the previous quarter. Ore milled was 4.3% higher than the last quarter and feed grade increased to 0.88% Cu compared 0.85% Cu last quarter.

Ongoing cost efficiencies and increases in copper production at Surda has resulted in a significant milestone, with the operation achieving an unaudited operating profit result, net of amortisation and depreciation charges, in recent months.

In Indian Rupee terms, the normalised revenue from Surda for the March 2010 quarter was the highest yet achieved (INR 123 million), and an approximate 20% improvement on the normalised revenue from the previous quarter (INR 102 million).

The new management team put in place at Surda has made progress in developing the lower side of the northern part of the mine which has the highest grade.

Continued improvement in production coupled with ongoing cost optimisation has resulted in Surda achieving a net operating profit result during the quarter.

The company expects production to increase further during the June quarter as the contribution from higher grade area increases.

In addition, increased hoisting tonnages are also forecast, due to upgrades in the winder and shaft being completed during the June quarter.

The Surda Copper Project has a JORC resource estimate of 13,095,000 tonnes of indicated and inferred resource at 1.09% Cu.

Work is ongoing to convert, in part, the resource into a reserve using detailed mapping, channel sampling and diamond drilling.

Surda Mine

Record copper production was achieved despite lower than expected tonnages and grade during the month of March 2010. The grade for January 2010 was 0.92% Cu, February 2010 was 0.89% Cu and March 2010 was 0.81% Cu while milled tonnes for the these months were 36,000, 33,000 and 35,000 tonnes respectively.

Production from a new block (B 19) commenced during the quarter. Preparatory work in Block 63 continued during the quarter with production during the current quarter.

New Projects

Biharinath Coal Project

A Letter of Intent was signed with Bankura DRI Mining Manufacturers Company Private Limited. Bankura is a special purpose corporate vehicle set up by six sponge iron manufacturers of the Bankura and Burdwan Districts to mine coal from the Anandapur Sector Biharinath block in the Raniganj Coalfield, located in the state of West Bengal, India.

The Biharinath block lies approximately 120 kms north north-east of the Surda Copper Project in the neighbouring state of West Bengal. It is located 10 kms south of Burnpur Steel City, across the Damodar River. The block is undeveloped and has been defined by 56 diamond drill holes for 27,000 metres of core.

Under the deal, Bankura and the India Resources have agreed to mine and supply coal to Bankura at a rate per tonne of coal loaded onto Bankura’s trucks. The agreement also provides for annual adjustments in prices reflecting variations in labour and other relevant indices.

Commercial terms agreed on the base price results in an IRR for the Company of 15%. The Company has made good progress in organising funding for this project and is now awaiting final government clearances to be obtained by Bankura, before making formal progress to close the financing.

Land has been purchased by Bankura for the decline shafts, mine offices and workshop areas and further discussions are underway for other areas like the vent shaft and accommodation sites.

Various funding options are being canvassed with some of the leading banks in India. Based on these discussions, the Company is confident that it will be able to raise sufficient working capital to fund site infrastructure requirements as part its obligations under the contract.

These funding options will be used in conjunction with surplus cash flows generated from the Surda project.

Future Prospects

The Company has identified an opportunity to develop another Coal Block and has submitted a tender during the current month. There are a number of other bidders and the final award is expected during the current quarter.

The coal block is owned by Prism Cement and requires approx 300,000 tonnes per annum of coal to be mined once two declines and a vertical ventilation shaft have been sunk.

The Company is also investigating further opportunities in the copper sector of India. Pre Qualification of these projects is expected to take place during the current calendar year.

Aravalli Project – Base Metals

The Company is in joint venture with RBG Minerals Industries Ltd (RBG), a subsidiary of Binani Zinc Limited, a large Indian conglomerate.

RBG is investing 5.144 crore Rupees (US$1.1 million) to earn up to a 51% interest in IRL’s subsidiary, Crown Mining Pvt. Ltd. Currently, RBG is assisting the grant process of the Mining Lease (ML) applied for over the lead-zinc mineralisation defined at Sindesar Khurd-Rajpura Dariba with plans for further drilling towards JORC resource status.

Corporate

The Company is improving the strength of its balance sheet with increased revenue flows from Surda and a reduction in debt in 2010.

IRL also expects to receive approximately $3.1 million from Swan Gold in three instalments up to February 2011, following the Deed of Company Arrangement for Monarch Gold Mining Company.

In accordance with the terms of the convertible notes, 12,437,810 ordinary fully paid shares have been issued to Alexandra.

A further one convertible note with a face value of $125,000 remains on issue to Alexandra.

Alexandra has purchased Territory’s shareholding in the IRL (19,019,000 shares) and will acquire the loan of $1.5 million due by IRL to Territory in four tranches, with transfer of the first tranche of $750,000 having been completed.

The company has allotted and issued 14,307,516 ordinary fully paid shares to Alexandra in satisfaction of $375,000 of the outstanding debt.

In addition, three unsecured convertible notes each with a face value of $125,000 have been issued to Alexandra in satisfaction of a further $375,000 of the loan balance.

Alexandra has advised that it considers its shareholding in the Company to be a long term strategic investment.

Managing director, Arvind Misra said today the conversion of the loan to equity and convertible equity forms part of the company’s strategy to reduce debt levels and strengthen the Company’s balance sheet.

"Coupled with the ongoing debt reduction and improved profitability at the Surda operations, the Company is laying the platform for continued growth in 2010 on the back of the booming mining sector in India," he said.

Payment for the balance of the Territory loan will occur in three further tranches of $250,000 each over the next three months.

Recently, India Resources successfully turned around the Surda Copper Mine in India, through achieving on-going cost efficiencies and increases in copper production.

The mine achieved an unaudited operating profit result, inclusive of amortisation and depreciation charges, in recent months.

For the month of January, the Surda Mine produced over 305 tonnes of metal-in-concentrate for delivery to Hindustan Copper Limited’s (HCL’s) nearby smelter.

Cash flows from the Surda Mine will contribute to the funding for the development of the Bankura coal project.

As production ramps up, for the months of December 2009 and January 2010, Surda mine set several new production records.  For the month of January, Surda Mine hoisted 36,973 tonnes and tramming for the same month was 39,404 tonnes, which set new records.

For the month of January, the Surda Mine produced over 305 tonnes of metal-in-concentrate for delivery to Hindustan Copper Limited’s (HCL’s) nearby smelter.

IRL Managing Director, Arvind Misra, said that it is a significant step for IRL to grow the business in the 2010 year which began with the signing of a coal mine development Letter of Intent with Bankura DRI.

The increase in broken tonnage capacity, was achieved by to efficiency improvements, will be further enhanced by the addition of new higher grade areas on the lower northern end of the mine.

The impact of mining in higher grade areas and ongoing production efficiency improvements are expected enable the Surda Mine to achieve a targeted production level of 340 tonnes metal in concentrate per month.

The Surda Copper Project is owned by Hindustan Copper Limited (HCL) and now operated by India Resources Limited in the state of Jharkhand.

The mine is one of several older mines on the Singhbhum Copper Belt which have hundred’s of years of mining history but were progressively abandoned due to low copper prices between 1998 and 2004.

IRL started refurbishing the mine and the concentrator plant at the abandoned Mosaboni site in July 2007. Production is now at record levels due to the efficiencies and techniques brought to the project by the Australian operators as well as the local experience and knowledge.

Cash flows from the Surda Mine and other proposed facilities available to IRL will contribute to the funding for the development of the Bankura coal project and other exploration projects.

 The payment has been made by Stirling Resources (ASX: SRE) in advance of completion of the Deed of Company Arrangement, which is now expected to occur by 31 December 2009.

IRL’s portion of the Monarch shares allocated is approximately 32.158 million shares at a deemed issue price of 5 cents per share on completion. The value of the share consideration assumes the average sale price of the shares issued is not less than the deemed issue price of 5 cents per share.