There is a 30-day due diligence on the deal, which is also subject to Chilean regulatory approval.

The sale of its wholly owned Humitos project will give Rey more cash to continue work on its flagship Duchess Paradise coal project in Western Australia.

Rey said it would continue discussions to dispose of its other non-core assets.

Duchess Paradise is part of the explorer’s wider Canning Basin coal project and contains 35.2 million tonnes of measured resources, 143.6Mt indicated and 331.5Mt inferred from two thermal coal seams, P1 and P2.

A prefeasibility study has confirmed that the best approach is an initial 2Mt per annum trench highwall mining operation.

Rey plans to wash the coal onsite and truck it 180 kilometres to the company’s wharf at Derby, then barge it to ships for export.

The prefeasibility study investigated underground coal mining to follow the 20Mt of highwall mining.

Bord and pillar mining is forecast to result in a 2Mtpa run-of-mine operation with cash costs of $A63 per tonne free on board at a capital expenditure of $167 million.

Longwall mining is projected to produce 4.4Mtpa of ROM coal and 3.2Mtpa of product coal with lower cash costs of $48/t FOB but at a higher capex of $579 million.

Both underground options are expected to result in a mine life of 21 years.

Rey had a cash position of $14.5 million at the end of 2009. Its shares are trading at 16.5c this morning, gaining 1c since the announcement yesterday.