Crest Mining signed the heads of agreement with the Beijing Investment Company which gives Crest a 17% farm-in stake in the Yihe Coal project, located in northeast Inner Mongolia.

Cochrane told International Longwall News Crest planned to grow the farm-in to a majority position as it looks to develop the project over the next four years.

The deal is subject to due diligence, with a final agreement due during October. The agreement will then go to the Chinese government for foreign investment approval. In China foreign companies can invest in up to 100% of a thermal coal project but only 49% of coking coal projects.

Cochrane said the project contained about 800Mt of underground thermal coal resources – an estimate based on Beijing Investment Company’s drilling of 60 holes. He said the resource would be brought up to JORC compliance as exploration and studies progressed.

The mine is planned to have a 5Mtpa top coal caving system to produce thermal coal from the 13m seam to the domestic market, and depending on Chinese government policy of the time, the export market as well.

The development is located 650km from the port, a distance Cochrane says is relatively close compared with some of the large coal mines throughout China.

The Chinese government is currently constructing three rail lines in the area, one dedicated as the Energy Rail Line, to serve the eastern and northern industrial regions of China and potentially also to the export port of Qinghuangdao.

According to Australian Trade Minister Simon Crean, China plans to double Inner Mongolia’s annual coal output to 500Mtpa by 2010.

“Inner Mongolia will become an increasingly important coal production base in north China,” Crean said.

“Inefficient exploitation and utilisation of resources to date has resulted in poor returns in the past and this is where Australian capability, and companies like Crest, can make the difference.”

Cochrane said he hoped to bring the best of the East and West together on the project.

“We want to combine some of the best in Australian longwall engineering with the best in China,” Cochrane said.

“Just as importantly we also want to introduce Australian safety standards to bench-case this for what can be done in China.

“We are looking to introduce high productivity longwall systems and work closely with a local partner.”

Cochrane also has big plans for Crest, which is currently made up of himself and two other investors. He said they were also looking for other partners.

Crest is assessing other projects in Mongolia and China and is planning a listing on the Australian Securities Exchange around the middle of next year to raise funds, partially to develop the Yihe Coal project.

Cochrane has spent 25 years in the mining industry, with the past 11 as a consultant to the Chinese and Asian mining sector. He has provided regular independent audits, valuations and investor advice to companies wishing to invest in China, Indonesia and Australia.

“Not a lot of people know about Chinese investments and I have been fortunate enough over the last 11 years, mostly working for other companies, to get in and undertake detailed due diligence,” Cochrane said.

Cochrane recently sold his founding stake in the 3Mtpa Millennium Coal project in Queensland to Peabody Energy. He is also the current chairman of thin seam coal specialist Bounty Industries.