The thermal coal hopeful announced on Monday that it had entered into an agreement with substantial shareholder Crystal Yield Investments for the sale of the Duchess Paradise project.

Hong Kong's Crystal will make staged payments of $3 million on signing of the share sale agreement, $9.6 million on completion of due diligence and $8.4 million on granting of a mining lease.

Duchess Paradise is 175km southeast of the remote Kimberley town of Derby in Western Australia.

A definitive feasibility study for the project suggested production potential of 2.5 million tonnes per annum of thermal coal over an initial 10-year mine life.

Rey said the assets of Duchess Paradise consisted of four exploration licenses, a mining license application, a miscellaneous license application, a sublease, port facilities and equipment.

All of the assets will move to Crystal through a staged acquisition of Rey subsidiary Blackfin.

After the completion of the above milestones and payments, Crystal will hold 100% ownership of Blackfin and the Duchess Paradise project.

The deal is subject to Foreign Investment Review Board approval, shareholder approval and due diligence.

Managing director Kevin Wilson said challenging international coal markets had prompted the company to let go of its flagship coal project and focus on developing its Canning Basin oil and gas prospects instead.

“While we also intend to continue the development of our coal exploration assets in the Canning Basin, during this period of sustained lower thermal coal prices, we believe the best interest of shareholders is served by this transaction,” he said.

The company acquired a further 15% interest in March in two highly prospective petroleum permits known as the ‘Fitzroy Blocks’ in a joint venture with advanced regional explorer Buru Energy and global multinational Mitsubishi Corporation. Rey now holds a 25% interest and Buru and Mitsubishi each hold 37.5% in the permits.