A £700m coal supply deal which will safeguard thousands of mining jobs has been signed.

The five-year deal has been agreed between RJB Mining and the owners of Europe's biggest power generation station, Drax, in Selby, North Yorkshire.

The deal, which comes into force next April, means up to 25.5 million tonnes of coal mined at RJB's Selby complex and other Yorkshire collieries will be supplied to AES Drax Power Ltd.

The agreement, which will end speculation about the future of 2,500 jobs in the Selby coalfield, was signed by RJB chief executive Richard Budge and Dave McMillen, president of AES Drax, after six months of negotiations.

Mr Budge said it would "substantially underpin" the output of the Selby complex for the next six years.

He added: "This provides AES with a reliable and secure supply of competitively priced coal free of exchange rate fluctuations.

"It is a sensible deal for both parties and for electricity consumers and enables us to plan our longer term mining operations with renewed confidence."

Last month Trade and Industry Secretary Stephen Byers offered the coal industry a lifeline with a rescue package totalling up to £100m. He said the two-year package was intended to enable the remaining British coal producers to compete on a "level playing field" with European rivals.