Xstrata to buy Sukunka coal deposit from Talisman Energy for $500 million

Swiss diversified miner Xstrata Plc, which has agreed to merge with commodities trading giant Glencore, is buying the coking coal assets in Canada's British Columbia from oil explorer Talisman Energy, for $500 million in cash.

The Swiss miner is buying Talisman's Sukunka coal deposit located in the Peace River in northern British Columbia, contiguous to First Coal Corporation and Lossan coal blocks that it acquired in 2011.

Sukunka coal is located near Chetwynd and covers over 20,000 acres and includes an underground mine.

Sukunka, which has estimated reserves of 236 million metric tons, ''has the potential to be a high quality metallurgical coal mine,'' said Peter Freyberg, head of Xstrata's coal division, ''Once developed, Sukunka would meaningfully increase our exposure to hard coking coal.''

Coal from the Peace River region is exported to steel mills in Japan, Korea and China.

Rising steel prices due to continued recovery in demand for steel and rising raw material costs, are expected to continue to cascade through the steel sector as hard coking coal supply shortages become evident.