Located in Collie, about 200km south of Perth, the Premier Coal mine produces about 3.5 million tonnes of thermal coal per year from the Collie Coal Basin.
The transaction is subject to approvals from the Australian Foreign Investment Review Board and Chinese government authorities.
Wesfarmers said it will record a pre-tax profit of about A$90m ($87.6m) on successful completion of the transaction.
Premier Coal supplies coal to the Western Australian state owned power producer Verve Energy, and a number of domestic industrial customers.
