Stemcor agreed to take 45% of the first 1 million tonnes of production from the project along with 30% of any additional tonnages above this level.

The exclusive agency agreement runs for the first five years of production from the planned open cut mine, with first coal expected in late 2011.

While New Zealand has a small coal industry, its coking coal quality is well recognised.

Bathurst said Stemcor consequently agreed to have a proportion of its agent’s commission driven by premiums above benchmark that it can gain on product sales.

The steelmaking materials trader also plans to make a $US50 million coal finance facility available to Bathurst once due diligence has been completed.

Both parties have spent months putting the deal together.

Bathurst managing director Hamish Bohannan is “extremely confident” in Stemcor’s experience and relationships in the global steel markets.

“Stemcor are looking to expand the coal arm of their business and we are pleased that they have recognised the strong coking properties that our coal possesses and believe this offtake agreement will be a mutually beneficial and long-term relationship for both parties,” he said.

“We have a good working relationship with the management at Bathurst and are excited about the future prospects for this project,” Stemcor Australia managing director Stephen Baker said.

“We view their product as a very good fit for our steel and steelmaking raw materials focus, and as a niche product of high quality, it should be well received by our customer base in Asia.”

Stemcor is biggest independent steel trader in the world on a tonnes traded basis.

Bathurst plans to start mining the Escarpment deposit in the project in the December quarter of 2011 to produce about 650,000 tonnes of hard coking coal in an area containing old workings.

A ramp-up to 1Mtpa is expected in 2012 when mining starts moving into an area of virgin coal.

In the 2012-13 financial year, Bathurst expects the Deep Creek prospect of the project to start up.

This will double total production to 2Mtpa.

Two years later, the explorer hopes to kick off another open cut operation at the North Buller prospect to ramp up to 4Mtpa of product coal.

Bathurst shares closed up 7.7% to 70c yesterday.