Kolar Gold may get stake in Deccan Gold Mines

Kolar Gold Ltd, which aims to develop the historic gold fields after which it is named, is considering a complex deal that could give it a slice of an enlarged Mumbai-listed exploration and development company.

The Kolar district, about 100 km from Bangalore, has been a gold mining centre for centuries. However, the Kolar mine has been at a standstill for the past decade.

Under a deal between its 30 percent-held Indian partner Geomysore Services India (GMSI) and Mumbai-listed Deccan Gold Mines Ltd, Kolar could end up with a stake in Deccan, which it says would give it access to more projects.

"Should we agree to the share exchange ratio with GMSI and DGM, indirectly that gives us a listing in India," Chief Executive Nick Spencer said.

"India is unfortunately a very, very difficult country to develop gold projects but this would diversify and spread that project risk because it is a larger portfolio," he added.

Kolar said on Tuesday that GMSI's key shareholder, Australian Indian Resources, had received an offer from Deccan, a smaller exploration firm, which was also considering buying out other GMSI shareholders with an all-paper offer.

Kolar would end up with a substantial stake in the enlarged company, which would have more than 100 gold licence applications, if the deal goes through.

Colonial-era operations at the Kolar mine were taken over by the Indian state after independence closed in 2001, leaving thousands unemployed, following years of underinvestment and rising costs.

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.

Earlier this month the company said it expected the Indian government to finalise details for the tender to run the mine before the end of the year.

Copyright: Thomson Reuters 2013