A BHP Billiton spokesperson said the agreement was of an exploratory nature and at this stage was in its preliminary phase.

BHP said the agreement recognised there could be potential business opportunities for both companies given that Huaneng are one of the largest utilities in China and BHP are one of the largest producers of coal.

The South China Morning Post said the deal with BHP was a move by the Chinese government to push state firms to tap foreign resources.

The paper said the agreement outlines that Huaneng would buy coal from BHP Billiton and they would join forces to develop transport facilities, mining projects and power-plant construction in China and Australia.