The Donkin project is a joint venture with Erdene Resource Development, which owns the remaining 25% stake in the project.

The mine is tipped to produce 2.75 million tonnes of washed coal per annum and will directly employ 300 people.

Providing reasoning for the decision, Xstrata Coal chief executive Peter Freyberg said the company had grown too big to continue its interest in the project.

“Over the past decade Xstrata Coal has evolved, as has our business strategy and core to that is a focus on larger volume mining complexes,” he said.

“We believe the Donkin coal project is a valuable asset to a qualified partner and remain positive about its viability.

“We will continue to work closely with Erdene and the province of Nova Scotia to secure an operating partner to advance the project to production,” he said.

Xstrata predicts the sale process will be concluded sometime during 2012.

It is seeking a company with “the mining experience, technical expertise and financial capability” to operate the underground mine safely and efficiently.

Erdene has a 60-day right of first refusal on the sale by Xstrata.

As the sale process progresses, Xstrata will continue to ensure the project’s timeline is maintained, including the completion of an environmental assessment and progression of engineering work.

Full environmental approval is anticipated to be received in early 2013, with mine start-up slated for mid-2014.

The Donkin project is based on a multiple continuous miner underground operation with potential to advance to a longwall operation.

Under the JV agreement, Xstrata committed to fund the first $10 million of Erdene’s development funding requirement.

Xstrata said it would bring forward up to $1 million to cover Erdene’s share of expenditure on the project during the sales process.