Bucyrus would own a controlling interest in the JV, which would initially focus on manufacturing belt systems and armoured face conveyors for resale on a preferential basis to Huainan Mining, as well as to other companies in China and overseas.

Equipment manufacturing and sales could begin approximately nine months after completion of the proposed JV.

The preliminary agreement is subject to many consents, approvals and conditions, including additional due diligence, final legal documentation, approval by the boards of both companies and Chinese governmental and regulatory approvals.

If the JV goes ahead, Bucyrus will be able to extend its market coverage and benefit from a low cost manufacturing base in China, while Huainan Mining can benefit from the higher technology products that would be made available to the company.

Bucyrus chief executive Tim Sullivan said the region would also gain from the JV through the development of a high technology manufacturing base in Anhui Province.

“Our underlying concept is to partner with strong industry players such as Huainan Mining, who have market access, a manufacturing base and a service network through which we can rapidly extend our footprint in China," Sullivan said.

“With Huainan Mining's coal production at 42 million tons in 2007 there is already an existing base market for the products that will result from a joint venture."

Sullivan said the preliminary agreement was a first step, with Bucyrus reviewing other additional options that could provide the company with an opportunity to achieve a "market leading position" in China.