Located south of Gladstone in Queensland, Macarthur says the $A300 million Monto project has the potential to produce 10 million tonnes per annum from opencut operations. Macarthur has a 51% interest in the project and will sell 25.5% of that to Huaneng.

Under the sale agreement, Huaneng will pay $A12 million on completion of the deal and $A17.42 million on completion of a feasibility study and go-ahead of the mine.

The sale is subject to agreement from the other Monto Coal Joint Venture partners to a revised development plan for the project.

The plan involves an extensive exploration program and major feasibility study for up to a 10Mtpa operation. The feasibility study will involve the establishment of a trial opencut test pit mining operation.

Macarthur said the drilling and feasibility study would take between two to three years to complete.

Should the project proceed, Huaneng will become a substantial consumer of coal produced from Monto.

“Macarthur Coal looks forward to working with China Huaneng Group and the other Monto Joint Venture participants in completing the Stage two feasibility study as soon as possible so that the development decision can be determined," Macarthur chairman Keith De Lacy said.

Huaneng is one of the top ten power companies in the world and the largest power generator in China. It has a total installed generating capacity of 40,990MW, representing about 9% of the total installed generating capacity in China.

Huaneng has a long-term development plan to expand its power generating capacity to 60,000MW by 2010 and to 120,000MW by 2020.