Idemitsu Kosan is looking to invest $128m in Australia's Ensham mine to begin underground mining in the middle of 2011.
The Ensham mine has been producing thermal coal via open-cut mining, a process that will become more costly as it goes deeper into the layer below the surface.
The company said full-fledged underground mining will allow it to secure coal efficiently, according to Reuters.
The shift to underground mining, however, will not lead to higher coal production.
Japan’s Idemitsu holds 85% stake in the mine, which annually produces 7.6 million tons.