Drummond Company has reached an agreement with Itochu to form a new entity that will own and operate coal mining operations and transportation infrastructure in Colombia.

Drummond will own an 80% stake in the new entity and ITOCHU will own the remaining 20% stake in the assets currently 100% owned by Drummond.

ITOCHU will put forward about $1.5bn for the 20% ownership interest and will obtain certain rights to market coal produced by the Colombian operations into Japan.

ITOCHU’s investment will be used to finance Drummond’s portion of its ongoing capital programme in Colombia over the next five years, which is projected to be over $1.3bn.

The programme will include the purchase of mining equipment along with an investment of about $375m to $400m in the construction of a new direct-loading port facility mandated by a decree of the Colombian Government.