Henan Province-based Xinyang Iron and Steel Group Co. Ltd. has entered into an agreement with Australian coal miner Northern Energy Corp. Ltd. to buy a 12.7 percent stake from the miner for AUD 23 million ($21.35 million), Northern Energy announced on April 22.

According to the announcement, Xinyang Steel will acquire 16.32 million Northern Energy shares at a per-share price of AUD 1.41 ($1.31).

The two sides also signed a long term coking coal offtake agreement. This will allow Xinyang Steel to purchase 65 percent of the coking coal from Northern Energy's Maryborough Hard Coking Coal project, beginning with the Colton Mine.

The Maryborough project has total coal resources of up to 149 million tons. The Colton Mine, which will commence production in mid 2011, has a coking coal per annum production target of 500,000 tons.

Xinyang Steel has an annual production capacity of 1.8 million tons of pig iron, 1.5 million tons of crude steel, 1 million tons of steel products and 1.3 million tons of coke.

Australian Securities Exchange-listed Northern Energy holds several coking and thermal coal projects in Queensland and New South Wales. These include the Colton Hard Coking coal project, the Elimatta Thermal Coal project, the Yamala Thermal/PCI Coal project and the Ashford Hard Coking coal project.