Xstrata Coal and JX Nippon Oil & ENERGY Corp have agreed to form a joint venture (JV) to develop contiguous metallurgical coal assets in the Peace River Coalfields in Western Canada.

Japan-based JX Nippon Oil & Energy has paid $435m in cash to acquire a 25% stake in Xstrata Coal British Columbia (XCBC), which owns a 100% stake in First Coal Corporation’s assets, including the Lossan coal deposit and the Sukunka coal deposit.

Xstrata Coal has retained a 75% stake in XCBC and will develop, operate and manage the assets on behalf of the joint venture.

JX Nippin will be the exclusive marketing agent for First Coal and Sukunka coal sold into Japan as part of the project.

Xstrata Coal chief executive Peter Freyberg said: "JX and Xstrata Coal have had a strong and successful partnership for many years through the Oakbridge joint venture in Australia. We are pleased to work with JX again as our long term partner in building a substantial metallurgical coal business in Western Canada.

"Our consolidation of the First Coal, Lossan and Sukunka assets since August 2011 will enable Xstrata Coal to increase our exposure to metallurgical coal further.

"There are meaningful synergies between these assets, creating the opportunity to develop a substantial and efficient complex of mining assets, unlocking significant value for our shareholders and other stakeholders in our operations."

Sukunka and the open pit Suska Coal project have the potential to produce up to about 9.5 million tonnes per annum of hard coking coal and PCI coal, according to recent technical studies.

The Suska Coal Project was formed by Xstrata Coal through the combination of Lossan with neighbouring First Coal tenements.

Sukunka has a coal resource of 236 million tonnes in the measured and indicated categories and Xstrata Coal’s technical studies point the potential to realise further value from the resource.