Xstrata PLC (XTA.LN) late Wednesday said it will proceed with its Donkin coal project in eastern Canada, albeit at a lower-than-forecasted production rate.

An internal review revised the expected output down to 2.75 million metric tons of coking coal each year at full production, half the amount previously forecasted, Xstrata said in a statement.

Xstrata has a 75% stake in the Donkin joint venture, with the rest held by Erdene Resource Development Corp. (ERD.T).

Xstrata hasn't decided when to begin construction on the mine, as the project still needs internal approvals and Xstrata is seeking more partners before proceeding, said spokeswoman Claire Divver in London Thursday.

Xstrata said the review was necessitated by Nova Scotia Power's announcement late last year that it didn't plan to buy coal from Donkin, which is located in the Canadian province of Nova Scotia.

-By Matthew Walls, Dow Jones Newswires; +44 (0)20 7842 9412; matthew.walls@dowjones.com
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