London-listed Kolar Gold expects the government to finalise details for the tender to run the historic Kolar mine before the end of 2013, it said on Monday, paving the way for what it hopes is the revival of Indian gold mining.
Kolar, listed on London's AIM growth market, works in India with local junior exploration partner Geomysore Services India (GMSI), which was awarded the mining lease for the Jonnagiri gold project in central India last month.
But the company's highest-profile target - key to its plans to "dominate" Indian gold mining - has been the Kolar mine it is named after. It hopes to turn a deep, now-flooded, mining operation into a modern project that will include an open pit and a shallow underground mine, and also tap historic waste which alone could include 750,000 ounces of gold.
The Kolar district, about 100 km (60 miles) from Bangalore, has been a gold mining centre for centuries. But the Kolar mine has been at a standstill for the past decade.
Colonial-era operations taken over by the state after independence closed in 2001, leaving thousands unemployed, following years of underinvestment and rising costs.
A string of potential investors are now eyeing the global tender for Bharat Gold Mines (BGML), the state-run firm now in charge of the mine - part of the government's drive to increase investment in mining in order to reduce imports and help shrink the country's current account deficit.
India competes with China for the title of world's largest gold consumer and is home to the world's largest market for jewellery: Indians buy as much as 2.3 tons of gold - or the weight of a small elephant - every day, on average. Production, though, is negligible, despite significant reserves.
A Supreme Court decision this summer approved plans for global tenders to revive the Kolar mine, and investors including Kolar Gold are preparing to bid.
Other expected suitors include Indian family-controlled heavyweights which have until now concentrated on mining base or ferrous metals, including Vedanta .
Kolar Managing Director Nick Spencer described the Supreme Court decision in July as a "major milestone".
"We are just finalising our consortium, we are preparing to raise 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 miners and 17 local unions, could use a combination of equity, debt and even a potential offtake agreement - selling production upfront to large jewellers - to fund the acquisition and development.
It expects the tender process to last three months, after which 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 construction would take between two and two-and-a-half years after the tender is awarded.
Kolar's largest shareholders include Sun Group, an Indian mining investor with assets in Kazakhstan and Russia, and Baker Steel, a specialist investment manager.