POSCO will pay $A30 million for a 10% share in the partnership and buy 400,000 tonnes of coal from the Newpac mine during the year starting April 1, 2007 and 500,000tpa for the following four years.

It is expected that the agreement will continue for the life of the mine with the coal price to be agreed annually.

Newpac has reserves of 252 million tonnes of high-quality coal and began operating as a bord and pillar operation in March 2001.

Resource Pacific managing director Paul Jury said the agreement was a positive step for the mine, which is due to start longwall mining this month.

“POSCO is one of the world's premium buyers of metallurgical coal and this agreement demonstrates its confidence in the quality of Newpac's coal and the mine,” Jury said.

POSCO, the third largest steelmaker in the world, is the largest private buyer of Australian mineral products and plans to spend about $A3.2 billion this year on coal, iron ore, nickel and zinc – an increase of almost 15% on last year.

The agreement is subject to bank approval.