May 3, 2017 / 11:53 PM / in 3 months

Adani agrees $54 million steel supply agreement with Arrium - source

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SYDNEY, May 4 (Reuters) - India's Adani Enterprises has agreed a A$73 million ($54 million) steel supply agreement with Australia's Arrium to be used in a rail line for the proposed Carmichael coal mine, a source told Reuters on Thursday.

The deal indicates Adani is moving ahead with plans for the A$16 billion Carmichael coal project as it works to secure the necessary finance, while the arrangement offers a potential life-line to Arrium.

Under the terms of the deal, Arrium will supply more than 50,000 tonnes of steel to be used in a rail line linking Adani's proposed coal mine with an export terminal on Australia's north east coast, said a source with knowledge of the deal, who spoke on condition of anonymity as he is not authorised to talk to the media.

The deal is subject to a full go-ahead for the mine.

Adani's Carmichael coal mine has been dogged by delays as the company struggles to secure necessary capital and legal challenges from environmental groups.

Adani plans to make a final investment decision in May or June on the project, which targets annual output of 25 million tonnes in its first phase, down from an original plan of 40 million tonnes.

Arrium entered voluntary administration, a precursor to bankruptcy, in April last year, , before a blackout in South Australia damaged the company's factory.

By striking a deal with the troubled Arrium, Adani will also please Australian policymakers, which have been keen to safeguard the future of the steelmarket - a significant rural employer.

$1 = 1.3463 Australian dollars Reporting by Colin Packham; Editing by Richard Pullin

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