LONDON, Dec 2 (Reuters) - London-listed Kolar Gold expects the Indian government to finalise details for the tenderto run the historic Kolar mine before the end of 2013, it saidon Monday, paving the way for what it hopes is the revival ofIndian gold mining.
Kolar, listed on London's AIM growth market, works in Indiawith local junior exploration partner Geomysore Services India(GMSI), which was awarded the mining lease for the Jonnagirigold project in central India last month.
But the company's highest-profile target - key to its plansto "dominate" Indian gold mining - has been the Kolar mine it isnamed after. It hopes to turn a deep, now-flooded, miningoperation into a modern project that will include an open pitand a shallow underground mine, and also tap historic wastewhich alone could include 750,000 ounces of gold.
The Kolar district, about 100 km (60 miles) from thesouthern Indian city of Bangalore, has been a gold mining centrefor centuries. But the Kolar mine has been at a standstill forthe past decade.
Colonial-era operations taken over by the Indian state afterindependence closed in 2001, leaving thousands unemployed,following years of underinvestment and rising costs.
A string of potential investors are now eyeing the globaltender for Bharat Gold Mines (BGML), the state-run firm now incharge of the mine - part of the government's drive to increaseinvestment in Indian mining in order to reduce imports and helpshrink the country's current account deficit.
India competes with China for the title of world's largestgold consumer and is home to the world's largest market forjewellery: Indians buy as much as 2.3 tons of gold - or theweight of a small elephant - every day, on average. Production,though, is negligible, despite significant reserves.
A Supreme Court decision this summer approved plans forglobal tenders to revive the Kolar mine, and investors includingKolar Gold are preparing to bid.
Other expected suitors include Indian family-controlledheavyweights which have until now concentrated on mining base orferrous metals, including Vedanta.
Kolar Managing Director Nick Spencer described the SupremeCourt decision in July as a "major milestone".
"We are just finalising our consortium, we are preparing toraise the funds - it will be a considerable acquisition,"Spencer told Reuters on the sidelines of a London conference.
The company, which is working on the bid with former minersand 17 local unions, could use a combination of equity, debt andeven a potential offtake agreement - selling production upfrontto large jewellers - to fund the acquisition and development.
It expects the tender process to last three months, afterwhich the workers and Kolar should get a right of first refusal.Elections next year, however, could delay the process.
Spencer estimated development of the mine and constructionwould take between two and two-and-a-half years after the tenderis awarded.
Kolar's largest shareholders include Sun Group, an Indianmining investor with assets in Kazakhstan and Russia, and BakerSteel, a specialist investment manager.