The state-owned Chinese entity will explore 190 square kilometres in the emerging coal region for thermal coal, NSW Mineral Resources Minister Ian Macdonald is expected to announce today.

The coal would be earmarked for domestic and export markets.

The project could be worth more than $670 million to the state, Macdonald told news agency Bloomberg.

Known as the Watermark licence, Shenhua is believed to have beaten other coal majors including Anglo American, Griffin Coal Mining, Xstrata, Donaldson Coal and White Mining for the exploration rights, according to reports in today’s Financial Review.

Industry sources told the newspaper that Shenhua bid at least $100 million more than its rivals, which could have been the deciding factor for the state government.

The NSW government invited initial bids for the permit in October last year and final bids closed in February.

Under the agreement Shenhua will pay the initial exploration fee, followed by $200 million if a mining lease is granted.

The Chinese company is also tipped to invest $175 million in transport infrastructure in the region.

Earlier this month Shenhua increased its net profit by 35.7% for the six months to June.

Shenhua is not the first Chinese company to make moves into NSW. Yanzhou Coal Mining already owns and operates Australia’s only longwall top coal caving mine in the Hunter Valley.

Other coal movements in the region saw coal producer Whitehaven Coal selling 15% of its Narrabri Coal Project for $A253 million this month.