Wesfarmers Ltd is to sell its Premier Coal business to Chinese-owned Yancoal Australia for $296.8 million.
The Premier Coal mine, in Collie, 200 kilometres south of Perth, produces about 3.5 million tonnes of thermal coal annually.
Premier Coal supplies coal to Western Australia's state-owned power generator Verve Energy.
Wesfarmers said it would recognise a pre-tax profit of about $90 million on the sale, which likely would be included in its financial results for the second half of the current financial year.
Yancoal, headquartered in Sydney, is a wholly-owned subsidiary of China's Yanzhou Coal Mining Company.
Yancoal already operates five mines in NSW and Queensland, which produce about 11 million tonnes of therm and metallurgical coal each year.
The sale of Premier Coal remains subject to approval from the Foreign Investment Review board and Chinese government authorities, Wesfarmers said.