Production in the Galilee Basin in central Queensland is to begin in 2014 for 30 million tons of coal a year, which later can be increased to 84 million tons.
The deal, covering Hancock's Alpha, Alpha West and Kevin's Corner project, comes a year after Australia's Linc Energy sold its Galilee Basin coal deposits to India's Adani Group in a deal worth $2.7 billion.
The GVK and Adani deals account for about 80 percent of the available coal in the Galilee Basin.
GVK is planning a vertically integrated operation much like that of Adani, which owns the mine, the railway line to transport the coal as well as the port.
While Hancock hasn't yet built the 310-mile railway needed to move the coal from the Galilee Basin to the coal port of Abbot Point, for which Hancock had already been allocated space, the deal allows GVK to take over Hancock's interests in the two pieces of infrastructure.
"We are also very pleased with this strategic alliance with a country (via GVK) that needs our coal and which should help to propel these mines to successful development and on-going operations over decades," Hancock Group Chairman Georgina Hope Rinehart said in a statement, noting that the Galilee coal project was one of the largest projects undertaken by both companies.
While India has the fifth-largest coal reserves in the world, a shortfall in local supplies has grown rapidly due to rising coal-fired power plant capacity.
India's Central Electricity Authority said it expects a 54 million-ton gap between the country's requirements and availability of domestic coal for 2011-12, with 35 million tons of that to be met through imports.
GVK is likely to invest another $6 billion in the first phase of development, said Issac George, chief financial officer of GVK, Press Trust of India reported Tuesday. GVK has put the cost of the first-stage development at $10 billion.
"These are truly world class coal assets in both quality and scale and we look forward to the opportunity of jointly developing these projects to their full potential," said G.V. Krishna Chairman Reddy.
The deal allows GVK to increase the capacity of its coal power business with an ''assured in-house supply of raw material," Reddy said.