Australian resources company Galilee Energy will today launch a A$25 million ($32.90 million) float to fund operations in the South Island.

The ASX-listed company operates the Takitimu coal mine at Nightcaps in Southland and the Cascade coking coal mine near Westport on the West Coast.

It will use the funds for further development of a coking coal operation at Whareatea West, near Cascade.

The initial public offering, which will be placed into a separate Australian company listed on the ASX, will be for new shares in Eastern Resources Group, the holding company of Galilee Energy's New Zealand coal assets.

Business development and corporate relations manager Sam Aarons said the company had considered listing here but it was "expeditious" to stick with Australia to avoid incurring more compliance costs.

"Ultimately I think we will list in New Zealand. For the purposes of this IPO, it was quicker and cheaper to run this through the ASX," she said.

Galilee produces about 260,000 tonnes from its two operational mines in New Zealand. It has interests in coal-seam gas across the Tasman.

It would retain a cornerstone shareholding in Eastern Resources.

The company has said an initial coal resource of 25.7 million tonnes has been established at Whareatea West.

The resource is at a depth of 70-85m and is being targeted for potential underground mining. Results from initial coal-quality testing have indicated a range of coals from coking coal to a high ash thermal coal.

Another Australian listing, Bathurst Resources, is also considering raising capital to develop a coking coal project at Stockton on the West Coast.

The Perth-based company last month had a A$30 million offer for Galilee's New Zealand coal assets rejected by that company. Last month, Bathurst announced it had received Government approvals to acquire Stockton.

The company said environmental consent was the next key milestone in the process to develop the mine, but it would face opposition from conservation groups worried about the impact on the great spotted kiwi.

Eastern Coal Holdings is a significant producer in the South Island, supplying industrial customers from two mines, Cascade near Westport and Takitimu in the Deep South, and a coal blending facility at Timaru. In 2008, the firm began coal deliveries to Fonterra's Clandeboye plant.The contract to supply up to 130,000 tonnes of coal per year resulted in a near doubling of the company's New Zealand coal production and sales.