Monday's commitment to Stage 2 of exploration is part of the three-stage, $A5.3 million farm-in agreement between Northern Energy and Japanese trading house Sojitz, entered into earlier this year.

Stage 2 will focus on increased definition within the identified resource of coal quality and strata information as input to a preliminary development study. The joint venture will then embark on a bankable feasibility study.

Stage 1 of the exploration program identified an inferred resource of 190 million tonnes and an additional 220 - 260Mt exploration target to a 300m depth cut-off.

A conceptual development plan to be investigated involves a short life opencut operation at the A2 seam subcrop; a shallow continuous miner extraction from multiple entries along the opencut highwall; and potentially leading to development of either a longwall or full-extraction, continuous mining operation.

Stage 2 exploration will involve 5800m of core and open-hole drilling, seismic surveys, and geotechnical and groundwater analyses which will provide a platform for the full feasibility study in 2008.

Stage 2 is expected to be completed within 12 months and the third stage farm-in by the end of 2009.

"Timing of any subsequent mine development will be dependent on the availability of rail and port capacity in the Gladstone coal chain," NEC managing director Keith Barker said.

Ownership of the Yamala Coal Joint Venture comprises Northern Energy Corporation (92%) and Sojitz (8%) after the end of the Stage 1 earn-in. On completion of the $5.3 million program Sojitz will have earned a 30% JV interest and will have the option to acquire a further 19% by paying NEC $6.65 million cash.