The companies have agreed to supply the Mexican Federal Electricity Commission with 8.84 million tonnes of thermal coal over 18 months, beginning in March. The deals, worth $A688 million, will comprise 17 deliveries of coal to Mexico.

Rio Tinto subsidiary Coal and Allied will ship 4.29Mt of coal to the Petacalco power plant in the Pacific coast state of Guerrero, while Xstrata will supply 4.55Mt.

“This deal represents diversification for Coal & Allied into Mexico – a healthy and robust market for us,” said company boss Grant Thorne, adding that Australian coal producers enjoyed a freight advantage over China and Indonesia.

Australian resources minister Ian Macfarlane, who was in Mexico last week to discuss coal, gas and other related energy issues, welcomed confirmation of the deals.

“These two contracts represent not only a major boost to Australia’s overall trade relationship with Mexico, but a significant jump in our annual coal exports to the energy-hungry country,” Macfarlane said.

“From our fruitful discussions last week I know the Mexican Government increasingly regards Australia as a natural trade partner in a number of areas, but specifically the energy sectors of coal, gas and mining technology.”

In January 2005, Mexico and Australia signed an energy cooperation agreement and this latest deal confirms Mexico’s growing importance as a major market. Last year Australia exported 4.09 million tonnes of coal to Mexico.