The colliery’s operating company, Cook Resource Mining, is 95% owned by Xstrata and 5% owned by Tokyo Boeki.

The Cook Colliery produces hard coking, semi-soft and thermal coal products primarily for the export market.

Xstrata has agreed to sell the Southern region of the Cook mine to Caledon, but will retain exclusive ownership of the Northern region for exploration.

The Cook mine purchase gives Caledon mining rights to the current Cook mine reserve, mine site infrastructure and mining equipment, haulage roads and rights of access to the coal preparation plant, rail loop and load-out facilities.

Xstrata Coal chief executive Peter Coates said Xstrata was now focusing on implementing an exploration program of the available resources in the Northern region of the site.

The colliery has a reserve base of 126 million tonnes, with Caledon confirming at least 40Mt of premium coking coal is readily accessible and equivalent to 20 years of mine life at an ultimate mining target rate of 2 million tonnes per annum.

Caledon said premium quality coking coal, such as that produced at the Cook mine, has achieved prices from $US90 to $US120 per tonne over the past two years.

“Coking coal prices are forecasted to remain strong for the foreseeable future, driven by worldwide demand for steel and by current constraints on the seaborne coking coal supply chain,” Caledon said.

On completion of the formal asset purchase agreement, Caledon expects to increase the current Cook mine production to 1.5Mtpa within a period of two years. Caledon is limited to this production level until 2009, due to rail and port constraints.

Xstrata has agreed to enter into a four-month dealing period to enable Caledon to finalise its shareholder approval and funding.