By Kishori Krishnan Exclusive To Coal Investing News ^{[1] [2]}

China has tentatively agreed to majority finance an ambitious US $ 5.15 billion Queensland coal mine project as the north Asian giant continues its relentless pursuit of Australia's resource assets.

Waratah Coal owned by mining magnate Clive Palmer's private concern Mineralogy said it had signed a MoU with China Metallurgical Group to develop what it described as Australia's largest thermal coal mine.

Australia's Waratah Coal Pty Ltd. announced in Brisbane on Thursday that it has entered into a deal with China's Metallurgical Group Corporation (MCC) for developing the country's largest thermal coal mine in Queensland at a cost of $5.15 billion (A$6.6 billion).

MCC, together with Chinese financial institutions, will provide up to $3.6 billion, which is about 70 per cent of the total project cost.

The massive project known as "China First" in the Galilee Basin south-west of Mackay in central Queensland is planned to produce around 40 million tonnes of coal per annum, three-fourths of which will be purchased by MCC, under a long-term contract.

Australia's resources magnate Clive Palmer, the company chairman, said, "MCC has agreed to be the engineering, procurement and civil (EPC) contractor of the project by providing a fixed price, lump sum construction price for the entire project."

Palmer said that MCC has agreed to arrange debt funding of up to 60 per cent of the total capital cost, estimated at $3.1 billion from Chinese banks in addition to providing around $515 million for 10 per cent of the project.

MCC's guaranteed purchase of 30 million tonnes of coal per annum is expected to generate $3 billion annually and $70 billion over the life of the project.

"This is the project of the century as it will open up all the wealth of the Galilee Basin - wealth that can be deployed for the benefit of Queenslanders and Australians," Palmer said.

The deal which is one of the largest Chinese investments in Australia, has to obtain a series of approvals from the Australian and Chinese authorities.

Base-metals firm

Meanwhile, Bloomberg reported that Canada's biggest base-metals company Teck Resources Limited ^[3](TSE:TCK.B) is in talks to sell coking coal assets to Chinese companies to help reduce debt.

Donald Lindsay CEO Teck Resources said that "We are going through a process of talks with Chinese companies including steelmakers, to buy as much as a 20 per cent stake in its coking coal business.

He declined to name the companies.

Lindsay is raising cash to help pay debt after the company added US$ 9.8 billion of loans of 2008 to buy Fording Canadian Coal Trust, a producer of coal used in steelmaking. Teck completed the acquisition shortly before metals and energy prices slumped amid the global recession.

He said that "We are in a very strong position to take our time to get a right partner and a right price. We'd like to see the steel industry recover a bit before a sale."

Lindsay said that the Vancouver-based company sold US$ 4.2 billion of bonds on May 5 to refinance its short term obligations. Teck may also consider selling a stake in coking-coal production assets to institutional investors. Teck in 2008 sold more than half of its coking coal production to Japan and Korea. It recently started selling the product to China and sales are encouraging.

He said that the company plans to increase sales to China, the world's biggest producer and consumer of steel and added that there were early signs of demand recovery in China, spurred by the stimulus package. Metals demand growth will be sustained in China if the economy meets its growth target of 8 per cent.

Almost 70 per cent of the company's operating profit in the first-quarter came from coal. The company's net income dropped 30 per cent to C$241 million ($195 million), or 50 cents a share, in the quarter from a year ago, it said on April 21.

Teck agreed to sell its stake in gold  ^[4]output from a Chilean mine to Royal Gold Inc ^[5] for $270 million on April 6 and two days later sold 5.6 million shares of Toronto-based Kinross Gold Corp ^[6] for about $101 million.

Rio Tinto Group ^[7], the world's third-largest mining company, this week said it was hopeful of a "V-shape" recovery in China, the world's biggest metals buyer. The nation increased imports of copper ^[8], aluminum  ^[9]and iron ^[10] ore to a record in April as buyers restocked for the country's 4 trillion yuan stimulus.

Teck shares gained 1 per cent to close at C$15.95 on May 26. The stock has more than doubled this year.