Cockatoo will take operational control of the mine, located on the southeastern limb of the Bowen Basin, through gaining Peabody’s 62.5% stake.

Cockatoo plans to use the mine as a platform into its existing leases, including the contiguous Bowen South project.

Cockatoo’s immediate plans are to further define the geology at Baralaba to produce a revised mine plan to expand output. The mine currently produces 300,000 tonnes per annum, and is expected to increase to 420,000tpa.

The site has about 1.5 million tonnes of remaining reserves, Peabody said.

Baralaba’s coal, produced via open cut truck and shovel methods, is a mix of 75% PCI and 25% thermal.

The unwashed coal is crushed and graded prior to being road hauled to a rail load out facility on the Moura to Gladstone railway line for shipment through Gladstone Port.

Cockatoo has a conceptual plan to reinstate a disused rail line from Baralaba to Moura and to build a wash plant capable of producing 3 million tonnes per annum for the export market. However, the plan is dependent upon continued successful exploration results and appropriate market conditions.

This morning’s deal also gives Cockatoo immediate Queensland Rail and Gladstone Port infrastructure entitlements up to 500,000tpa. If Cockatoo was to lift production above that level it would need to secure additional export capacity out of Gladstone.

Cockatoo said while it would continue to request additional capacity, it had also joined an agreement with other producers to underwrite the cost of a full feasibility study and detailed engineering design by the Gladstone Ports Corporation for the planned Wiggins Island Coal Export Terminal at Gladstone.

In return for this support, the company will be recognised as a preferred potential customer for the new port – giving it priority position to secure capacity from 2012.

To part finance the Baralaba deal, Cockatoo has entered an agreement where SK Australia will subscribe for 35,410,765 ordinary shares for $25 million which will be received as a loan by Cockatoo.

Under the deal, Cockatoo and SK Australia will also form a joint venture to manage the sale and marketing of all existing and future coal production from Cockatoo.

Cockatoo said the joint venture would further enhance the company’s access to the Korean market.

“This acquisition and capital raising are being undertaken whilst being cognisant of the existing and foreseeable difficult market circumstances,” Cockatoo said.

Cockatoo was trading up 16.7% mid-morning at 38.5c.