Swiss mining giant Xstrata PLC said Thursday it will pay $500 million in cash to Talisman Energy Inc. for its Sukunka hard coking coal deposit in northern British Columbia, Canada.

The deal, which is subject to regulatory approvals, expands Xstrata's presence in northern British Columbia and signals its confidence in the global steel industry's growing demand for the type of coal needed to turn iron into various products.

Xstrata Coal, which holds interests in more than 30 coal mines in Australia, South Africa and Colombia, is the largest global exporter of coal used for electricity generation, also known as thermal coal, and one of the largest producers of coking coal.

The Sukunka deposit, which holds an estimated 260 million tons of coal, is next to Xstrata's First Coal Corp. and Lossan tenements acquired by Xstrata Coal in August and October 2011, respectively. 

Based on our due diligence and technical analysis, Sukunka has the potential to be a high quality metallurgical coal mine. Once developed, Sukunka would meaningfully increase our exposure to hard coking coal, while unlocking synergies with our neighbouring assets in the Peace River coal field and providing additional regional scale, Peter Freyberg, Xstrata Coal CEO, said in a statement. 

The Sukunka deposit has approximately 260 million tons of coal.

Xstrata shares rose 1.55 percent to £1,144.50 ($1,807.97) per share on the London Stock Exchange.