State-run Coal India Ltd. has received seven proposals from U.S.-based Peabody Energy (BTU) to partner in overseas coal assets and is examining two of them that include forming joint ventures and buying stakes in coal properties, its chairman said Friday.

"We are doing diligence on the proposals," Partha Bhattacharyya told reporters on the sidelines of an industry conference, without saying how long the due diligence could take or when a final decision is likely.

Coal India, which contributes about four-fifths of India's total coal production, floated a tender in July seeking joint business initiatives in coal mining in Australia, the U.S., South Africa and Indonesia as it seeks to secure fuel supplies for the world's second-fastest growing major economy.

It received about 17 proposals from the companies, including Peabody.

India's coal, steel and power producers are scouting for coal assets overseas as local output is unable to keep pace with the fast growth in demand, fuelled by rapid capacity additions in the country's power sector.

Coal India may invest $2 billion over the next four years to buy stakes in overseas assets to boost local availability of coal, Bhattacharyya said in February.

Coal India acquired two coal blocks in Mozambique with estimated reserves of 1 billion tons in 2009. It aims to import coal from the Mozambique blocks to India. Bhattacharyya said the company is yet to begin production at Mozambique, but didn't provide a timeline on when it might start.

Coal India expects to produce 430 million tons of coal at its blocks in India in the current financial year and aims to ramp up output by 7% to 460.5 million tons in the next financial year that begins April 1, its chairman said.

Share Sale

India's federal government will divest a 10% stake in Coal India by July-August, Bhattacharyya said. The government plans to sell part of its stakes in several state-run companies to raise funds for social-sector projects and to reduce the fiscal deficit.

The coal miner will offer another 1% equity to its employees, taking the total share sale to 11% of its equity.

Coal India will file a prospectus for the initial share sale with the market regulator by June 15.

-By Nikhil Gulati, Dow Jones Newswires; +91-11-4356-3334; rakesh.sharma@dowjones.com
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