The new mine is planned to complement the existing Ulan No.3 underground mine and will share some of the infrastructure at the Ulan complex.

Xstrata said the cash costs would be at the bottom of the second quartile of the industry cost curve.

While the company awaits development approval and other government environmental approvals, construction is expected to start in late 2010 and to create 270 jobs.

About 350 jobs will be created for operating Ulan West.

“The development of Ulan West will add another low-cost, efficient longwall operation to Xstrata Coal’s portfolio, leveraging a known resource base at Ulan to increase our production volumes by at least seven million tonnes per annum to satisfy growing demand for export quality thermal coal in Asia,” Xstrata Coal chief executive Peter Freyberg said.

“Through our continued investment into new operations, Xstrata Coal is providing new employment and local business opportunities within the Mudgee region and making an important contribution to the state’s economy.”

Xstrata owns 90% of Ulan Coal Mines with Mitsubishi Development owning the other 10%.