Up to $11 will be spend by IMEA to undertake a preliminary study and complete a bankable feasibility study. Contribution of the maximum amount of funding required to be spent by IMEA will deliver IMEA a 49% stake in Vickery South coking/thermal coal project. The equity in the JV will be earned by IMEA by payment of the first tranche of $5m for 29% and a further tranche of up to $6m for 20%.

The MoU envisages that Coalworks will continue discussion with IMEA to negotiate binding formal agreements for the transaction. Such agreements would become effective after the satisfaction of certain conditions precedent including FIRB approval and completion of due diligence by IMEA, which is expected by March 2010 when contributions from Itochu are expected to commence.

The MOU further provides for Itochu to enter into a marketing and sales agreement and offtake agreement whereby Itochu will purchase or arrange the sale and marketing of all coking and thermal coal to be produced from Vickery South by the proposed JV.

Andrew Firek, managing director and CEO of Coalworks, said: “I am delighted to welcome Itochu as a joint venture partner for Coalworks. Their experience in mine development, coal offtake and marketing and coal industry investment make them an invaluable partner for us.

“We have already developed an excellent working relationship with them and we are pleased this relationship has culminated in this exciting venture in the booming Gunnedah Basin. We believe that Itochu will help us build Vickery South into a very valuable asset for Coalworks.”

Coalworks has already commenced a drilling program at Vickery South where shallow coal has been intersected in a number of holes. This work, to be funded by Itochu, is expected to lead to a preliminary feasibility study later this year.