The decision follows the completion of a 17-month feasibility study, including 250,000t combustion trials of the coal in power stations in Australia, Korea and Japan.

MIM managing director Vince Gauci said the company was waiting on approval of the mining lease and other regulatory approvals before starting work on the project.

Operations are expected to begin in the second half of 2004, with production to ramp up over three years to 6Mtpa with one dragline.

The capital cost for the initial 6Mtpa is estimated at $175 million, including $40 million for a mobile mining fleet which MIM is looking at leasing or hiring to ensure sufficient flexibility to allow it to change equipment as a result of an increase in production.

MIM expects the mine to reach its 8Mtpa target in 2006-07 with the purchase of a second dragline, which will cost the company a further $75 million.

Gauci said at the rate of 8Mtpa the mine had a production life of more than 20 years, which the company predicts will provide in excess of $6 billion in export revenue.

"Rolleston will be a long-life, low-cost mine that will produce strong returns even during times of low coal prices," he said.

"The project rate of return from the Rolleston project comfortably exceeds MIM's investment hurdle rate of 12.5% real after tax, even in the scenario of extremely low Australian dollar price or thermal coal.

"Rolleston is conceived as the first stage of the Gladstone thermal coal project for the production of up to 20Mtpa in the next decade from Rolleston and the Wandoan mine (in the Surat Basin) which is now in pre-feasibility study phase."

The Rolleston mine site is located to the southwest of the Bowen Basin, 16km west of the town of Rolleston and 275km west of the established coal port of Gladstone, from where the coal will be exported.