The move comes after a recent announcement from APM that it would sell its kaolin production assets and associated mining operation in Dearing, Georgia.

Located on tidewater in the province’s Cape Breton area, Donkin holds a 227 million tonne indicated resource of metallurgical coal and is described by Erdene as a “world-class asset”

The joint venture between Erdene (25%) and Xstrata (75%) is tipped to produce 2.75 million tonnes per annum of washed coal.

Erdene’s decision to sell its stake in Donkin and focus on its Mongolian assets follows an announcement last April from Xstrata that it intended to sell its interest in the project.

Xstrata said it would focus instead on larger volume mining complexes and would seek out a new operating company to assume its interest in Donkin.

The deal with APM will require Erdene to deliver all its North American interests (including Donkin) in exchange for APM shares.

The transaction is subject to shareholder agreement and approval from the Toronto Stock Exchange and the Nova Scotia Supreme Court.

A National Instrument 43-101 compliant technical report prepared for Donkin in early 2010 suggested the project had a $US1 billion net present value based on project development capital of approximately $500 million and was economically viable for proceeding to feasibility stage.

A feasibility study is expected to provide greater detail on the geology, structure and quality of the resource which, due to its subsea location, is not conducive to extensive drill testing.

Though the report currently recommends a room and pillar continuous miner operation, Erdene says a longwall operation producing 4-5Mtpa is possible at the site.