Kepco general manager of project development Lee Sang-Pal said the deal was likely to be sealed in September.

While Felix Resources managing director Brian Flannery admitted the company was in discussion with several parties about possible equity in the $300 million Moolarben project, he said no final decisions had been made.

“Those discussions are continuing with a number of parties including Kepco,” he said.

“We are discussing with the Koreans and several other potential non-Korean participants about long-term offtake agreements coupled with equity injection … Felix may sell small stakes in Moolarben if it is in the best interest of Felix shareholders.”

Located in the New South Wales western coal fields, the mine is planned to commence construction by mid-2007 and produce 4 million tonnes output in financial year 2008, ramping up to 10Mt from 2010.

Moolarben has encountered ongoing opposition from environmental groups, who claim longwall mining will cause subsidence damage to the Goulburn River gorge area.

In March, Xstrata launched court action to prevent the NSW Government from granting a mining lease to Felix that would hand over part of the Swiss miner’s neighbouring Ulan complex to the Moolarben project.