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The sale follows reports that Wesfarmers had shortlisted bidders for the mine in August after noticing a wide interest from potential buyers.
The Premier Coal mine in Collie, 200 kilometres south of Perth, produces about 3.5 million tonnes of thermal coal each year.
The mine mainly supplies coal to Western Australia’s state-owned power generator Verve Energy.
Yancoal, a wholly owned subsidiary of China's Yanzhou Coal Mining Company, operates five mines in New South Wales and Queensland which produce an estimated 11Mtpa of coal.
Wesfarmers said it would record a pre-tax profit of about $90 million from the sale of the mine.
Wesfarmers managing director Richard Goyder said the sale of the mine reflected the best outcome for Wesfarmers shareholders and the business.
The sale of Premier Coal will remain subject to conditions following approval from the Foreign Investment Review Board and Chinese government authorities.
