The companies will develop a 50:50 a brownfield open cut coal project between Glencore’s 95%-owned United mine and Peabody’s Wambo mine.

The JV will combine Wambo's open cut mining operations with United's adjacent reserves in the Hunter Valley.

Glencore will manage the combined mining operations, using Wambo's infrastructure and Peabody will continue to operate coal washing and loading facilities.

Peabody's North Wambo underground operations are not affected.

The project, which is subject to relevant state and federal approvals, will realise major synergies between the two neighbouring operations, according to Glencore.

“It will deliver optimal resource recovery and infrastructure use and reduce operating and capital costs,” the company said in a statement.

Peabody Energy president and chief operating officer Glenn Kellow said the move came as Peabody continued to take positive steps to further reduce costs, improve its competitive position and create value.

“This combined operation is expected to deliver substantial synergies to both parties while providing ongoing local employment opportunities and economic contributions,” he said.

Peabody's share of the combined operation's output is expected to remain consistent with Wambo open-cut mine's historical volumes of about 3 million tonnes per year.

Glencore said output from some of its existing operations would decline by 2017, so the JV enabled it to grow value for shareholders without growing volume.

The United-Wambo JV will combine leases held by United Collieries (Glencore 95% and CFMEU 5%) and Peabody’s Wambo operations near Singleton.

“Glencore continues to focus on aligning its portfolio and production with the prevailing market conditions,” the company said.

“The JV will be managed by Glencore, with our share of production a maximum of 3 million tonnes per annum of saleable coal.”

CFMEU northern mining and NSW energy district president Peter Jordan said the project would provide continuity of employment for mineworkers.

“It is very welcome news at a time when our region is suffering from substantial job losses in the coal industry,” he said.

“It will contribute towards job security and inject badly needed income into the regional community as well.”