Geostar has signed a memorandum of understanding with Perth-based Environmental Solutions International to commercialise the Australian company's dewatering "clean coal" technology.

Under terms of the MOU, Geostar will match ESI's commercialisation funding for dewatering technology that was originally developed at Melbourne University, which ESI acquired with its purchase of Asia Pacific Coal & Steel earlier this year.

Geostar's Australian subsidiary, Victorian Coal Resources (VCR), will work with ESI to produce dewatered brown coal products suitable for steel production or clean coal feedstock for power generation (said to burn with 30% less greenhouse gas emissions than standard brown coal), coal gasification or coal-to-oil markets.

The US company said subject to infrastructure being in place, it had targeted a production rate of 100 million tonnes per annum for the "added value" brown coal products, with the intention of creating new export markets.

Geostar is listed on both the American and Toronto Stock Exchanges, and is (alongside Chesapeake Energy) a major shareholder in US-based oil and gas exploration company Gastar.

Gastar has signed a non-binding letter of intent to commit up to $680 million for a 50% development interest in VCR's lease in the Gippsland Basin, thought to represent reserves of 10 billion tonnes of viable brown coal reserves.

Gastar president J Russell Porter in a statement to the TSX, said the ESI technology had the potential to change the nature of Victoria's brown coal industry.

"We view the brown coal assets, coupled with the application of new and existing clean coal and coal-to-liquids (petroleum) technologies as an opportunity analogous to the world-class Canadian tar Sands play, in that a previously overlooked or low value resource base has become very valuable as a result of the application of various technologies and the current and projected commodity price environment," Porter said.

Geostar have said its lowest end commodity sales value for the processed brown coal products is $60 per tonne at "very good projected margins".