Xinwen Mining Group Ltd., producer of more than 35 million metric tons a year of coal in China, agreed to buy coal exploration permits in Australia for A$1.5 billion ($1.2 billion) to expand overseas.

Xinwen will buy the Teresa licenses in Queensland state from Linc Energy Ltd., Brisbane-based Linc Energy said today in a statement to the Australian Stock Exchange. Linc had a record gain in Sydney trading on the exchange.

Linc is seeking to develop a A$850 million project to convert coal into synthetic gas and then to clean diesel in what is set to be Australia’s first such project. The company said in July it intended to seek bids for the Teresa coking coal deposits.

“This deal effectively underwrites Linc Energy’s gas-to- liquids commercial aspirations over the coming years,” Bond said in today’s statement.

Linc Energy advanced as much as A$1.35, or 44 percent, to A$4.40 in Sydney trading, the highest in more than two months. The shares were at A$4.10 at 11:29 a.m. local time.

A sale contract for the EPC 980 and EPC 1226 permits will be completed over the next month, and state and federal government approvals are expected to take about 45 days, Linc said. The company in July announced an exploration target at the EPC 980 license of between 400 million and 500 million tons of coal.

Xinwen, which owns interests in “a number” of Chinese steel mills, agreed to pay Linc an initial installment of A$150 million immediately on receipt of the government approvals, Linc said. The balance will be paid in six additional installments.

Linc is poised to start up a pilot clean-diesel plant at its Chinchilla site in Queensland within weeks, and the demonstration plant is due to start in early 2011.

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