Under the agreement, Yancoal will supply the equipment and help with the training of the Peabody workforce, which will operate the equipment at its North Goonyella mine in Queensland.

The equipment is scheduled to be installed at North Goonyella next year.

Yancoal is a subsidiary of Yanzhou Coal Mining Ltd, the Chinese company that has developed the caving equipment for underground coal mining in China and Australia.

Yancoal would benefit from the agreement by sharing the increased coal output from the mine as well as earning a royalty for supplying the equipment, it said.

The equipment was made by Caterpillar in Germany under licence from the Yankuang Group and will go to the mine site for a mini-build after the compatibility testing is completed.

There were two key advantages of using the equipment in underground coal mining, Yancoal said.

Firstly, more coal could be recovered from the coal seam than with conventional longwall mining equipment. Secondly, mining conditions were safer as less coal remained in the goaf to generate harmful gases.

Yancoal Australia has been operating the caving equipment at its Austar Mine near Cessnock, New South Wales, since 2005.