Coal India, the world's largest coal miner, is in advanced talks to buy up to 40 per cent of Indonesian low-grade coal producer Golden Energy Mines for up to $1 billion, three sources with direct knowledge of the deal said yesterday.

'The due diligence has been going on for some time and will be completed soon and we plan to submit bid by the end of next month,' a source said.

Officials at Coal India and Golden Energy's parent company, Dian Swastatika in Jakarta, could not be reached for comment.

Golden Energy Mines aims to raise its output to 10 million tonnes a year of 4,200-5,300kc/kg coal this year from 3m at its Sumatra and Kalimantan mines.

Indian firms have rushed to find coal mine assets in Indonesia, South Africa and Australia to fill the growing gulf between domestic coal output and demand.

'All the good medium to high-grade coal reserves in Indonesia are owned by existing players, what's left are sub-bituminous or low-grade reserves in central Kalimantan or areas where it's not economic to mine,' a source at one of Indonesia's biggest miners said.

'Many of these reserves are so far from a river for barging or roads for trucking to the ports that the costs don't work for low-energy coal,' he said.

Indian entities chasing overseas mines could find they get burned by overpaying for low-grade assets which come with high cash costs to port, coal industry sources said.