March 14, 2012 / 8:55 AM / 7 years ago

UPDATE 2-JX, Xstrata to supply coking coal to Japan

* JX buys stake in Xstrata’s nascent Canadian coking coal ops

* Peak annual output seen at 9.5 mln tonnes

* Production could start around 2015

* Japan steelmakers keen to diversify coal sources away from Aus

LONDON/TOKYO, March 14 (Reuters) - JX Nippon Oil and Energy Corp has bought a stake in miner Xstrata’s burgeoning Canadian coking coal operations, as it looks to tap demand from steelmakers in Japan for coal from diversified sources.

Japan’s steel firms are keen to shift away from their reliance on Australia for coking coal, especially after tight supply early last year following devastating floods in Queensland — the heart of Australia’s coal mining sector.

The bulk of premium hard-coking coal used by Nippon Steel Corp, the world’s No.4 steel firm, and JFE Steel, the No.5, comes from the BHP-Mitsubishi Alliance, owned by Australia’s BHP and Mitsubishi Corp.

JX Nippon’s Australian unit paid $435 million in cash for a 25 percent stake in Xstrata Coal British Columbia, the two companies said. A joint venture between the firms will shortly start a feasibility study, with production slated to begin around 2015, a JX spokesman said.

The mine is expected to produce 9.5 million tonnes at its peak, mostly hard coking coal, he added.

Xstrata has been building its presence in the Peace River coalfield in northern British Columbia, acquiring First Coal in August, the Lossan deposit in October and the Sukunka coal deposit last week.

The miner said it would develop and operate the assets, and JX would be the exclusive marketing agent for First Coal and Sukunka coal sold in Japan.

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