The investment by Beijing Guoli Energy Investment, which is subject to due diligence and regulatory approvals, will be undertaken in two stages.

Stage one will consist of $A5M at 25c pre-IPO in January, with the second stage of the investment including $15M at the IPO price.

Before the Guoli deal Cuesta had raised $9 million in pre-IPO funding and hoped to raise a further $25 million in the IPO.

The company said it was reworking its prospectus in light of the investment by Guoli and planned to have a revised prospectus ready early next month.

The investment is subject to Cuesta Coal shareholder approval and Chinese regulatory and FIRB approvals.

Cuesta Coal managing director Matthew Crawford welcomed Guoli’s commitment to the company.

“We are pleased to have attracted Guoli as a cornerstone investor and we believe it is a strong endorsement of the quality of our portfolio of assets and the strength of our board and management team,” Crawford said.

“Guoli has committed to fund a significant proportion of Cuesta’s planned IPO and this is a major strategic advantage as we approach our IPO.”

Cuesta formed in September last year to acquire the available securities of Queensland coal exploration company Blackwood Coal in preparation for a public listing.

Listed explorer Argonaut Resources has a 38% undiluted interest in Blackwood Coal and has made a $7.5 million investment in Cuesta.

Cuesta’s focus tenements are located in Queensland’s coal bearing regions of the Surat, Bowen and Galilee Basin.

Its focus tenements include West Bowen, East Wandoan and Eastern Galilee.

To date 6000m of drilling has been completed on the tenements.

Crawford said Guoli’s funds would enable the company to continue with its planned exploration program at its perspective thermal coal tenements.

“The two stage investment allows the company to continue as planned its 2012 exploration activities at the company’s key project areas leading up to the IPO,” Crawford said.

“This will enable the company to continue to increase the coal resource base quickly and sustainably over the coming 6 to 18 months.”

Cuesta plans to list on the Australian Securities Exchange before March.

Guoli has been busy with investment agreements, injecting $A16 million into the ASX-listed ASF Group yesterday.

ASF said it would put the funds towards expanding its thermal coal exploration activities in Australia.