Aquila says Eagle Downs coal mine to proceed with Vale

Vale and Australia's Aquila Resources have jointly agreed toproceed with development of the Eagle Downs coal mine inAustralia, ending a lengthy dispute between the two companiesand averting a forced sale of Aquila's stake. Aquila said it signed off on the project to avoid triggering a rights clause that could have forced a discounted sale of its50 percent share to Brazil's Vale.

Vale was not immediately available for comment.

The mine is expected to produce an average of 4.5 million tones a year of hard coking coal used in steelmaking in theinitial 10 years of operation, Aquila said in a statement.

Aquila had been fighting against a preferred option by Vale to develop the mine ahead of port and rail links to the project, but said in a statement a joint management committee had approved the plan.

Aquila estimates the cost at $1.25 billion, equally shouldered by the 50-50 partners.

Vale has said Aquila's preference of beginning work on both simultaneously would delay production by a year.

Earlier this year, Aquila accused the Brazilian miner of notacting in "good faith" and delaying the project to weaken Aquila's cashflow to force it to sell its stake in Eagle Downs below value.

Aquila said it voted in favour of Vale's option to avoid the risk of a buy-out right arising in favour of Vale underconditions set out in the joint venture agreement.

An Aquila spokesman said the company sees its stake as a"highly valuable asset in the strategically significant marketfor hard coking coal".

The partners were trying to identify and secure a suitableport and rail network for the project, according to thespokesman.

One option could be utilising facilities created by anexpansion of Queensland state's Wiggins Island port terminal,details of which are expected in the first quarter of next year. This would see capacity available in late 2015.

Vale and Aquila have also each applied individually forcapacity at a proposed new coal terminal at Dudgeon Point inQueensland, which is expected to be available in 2017.