The deal also increases the chances of the $1 billion Winchester South going ahead with Whitehaven pointing out that it was adjacent to Daunia and would create significant synergies.

Shares in Whitehaven jumped 13 per cent on the deal.

It said it would pay $US3.2 billion in staggered payments through its cash holdings, a bridging facility and cashflows.

Whitehaven said the deal had significant value upside with attractive growth options and would provide synergies with its planned Winchester South mine.

It also transforms the company into a majority metallurgical coal producer and increases its exposure to an “attractive high-growth market” in Asia.

There were also contingency payments of $US900 million if coal prices exceeded agreed thresholds.

Managing director Paul Flynn said it was a compelling transaction that accelerated the company’s strategy to shift into met coal, used in steel production.

Whitehaven said it was considering a sell-down of the assets to global steel producers through a strategic joint venture. This would reduce its funding requirements.

The company said there was a range of improvement and growth options including the opportunity to increase production and materially extend the life of the mine at Blackwater.

“Synergies with Whitehaven’s Winchester South development project, which is adjacent to Daunia, include shared infrastructure and utilities, shared operational functions, blending opportunities, labour sharing and technical expertise including deployment of automated haulage,” Whitehaven said.