Lanco's Griffin Coal and Perdaman settle litigation

REUTERS - Australia's Griffin Coal, a unit of India's Lanco Infratech Ltd , and Perdaman Chemicals have settled the A$3.5 billion lawsuit brought by Perdaman for what it said was a breach of a coal supply agreement.

Under the settlement, Lanco will pay Perdaman A$7.5 million plus legal costs without admission of any of the allegations of Perdaman, the Indian company said in a statement on Monday.

Shares in Lanco jumped after the announcement and were up more than 10 percent in the early afternoon.

Perdaman filed a lawsuit against Lanco in 2011 in the Supreme Court of Western Australia seeking A$3.5 billion in compensation for breach of a coal supply agreement. Lanco had called Perdaman's claims baseless.

Perdaman is now talking to Chinese coal producer Yanzhou Coal Mining Co Ltd to supply coal for its urea project.

Perdaman said it had concerns about the commercial viability of pursuing a protracted legal case against Lanco.

"Perdaman has maintained its concerns as to Griffin and Lanco's solvency and the commercial value of pursuing its legal case," it said in a statement on Monday.

Lanco posted a net loss in the December quarter and had a net debt-to-equity ratio of 5.13 at the end of December. In August, CARE Ratings lowered its rating on the company's debt instruments.

Nagaprasad Kandimalla, head of business development at Lanco, dismissed worries about the companies' finances.

"This is another...baseless, unmeritorious, cheap comment," he told Reuters by phone. "This is basically a face-covering statement."

With the threat of a costly legal case no longer hanging over it, Lanco will now be able to pursue the expansion of its Collie mine in Australia to 15-17 million tonnes from 4 million tonnes within three years, Kandimalla added.

($1 = 0.9721 Australian dollars)

(Reporting by Sumeet Chatterjee, Matthias Williams and Sonali Paul; Editing by Matt Driskill)