UPDATE 1-Australian state sells A$1.5 bln stake in QR National

* State cuts stake in QR National in half to 16 pct

* QR National to buy back A$1 bln of state's shares

* QR National shares jump 5 pct

(Adds State, QR comments)

MELBOURNE, Oct 8 (Reuters) - Australia's Queensland stategovernment said on Monday it was selling $1.5 billion worth ofshares in QR National , the country's top coal-freightoperator, with the company planning to buy back two-thirds ofthose shares.

QR National said separately it would buy back A$1 billion ofthe shares from the state.

The announcements sent QR's shares up 5.2 percent to A$3.65,as the company's shares had been under pressure not only from aweak outlook for the coal market but also on anticipation of abig selldown by the state.

The government's sale at A$3.47 a share, in line with QRNational's closing price last Friday, will more than halveQueensland's stake in the former state-owned rail company to 16percent, the state's treasurer said.

"Whilst the Government will continue to review itsinvestment in QR National, we have no current intention to sellany of our remaining shares in the near term," Treasurer TimNicholls said in a statement.

QR National had already announced a buyback of up to 10percent of its shares in August, and has so far bought A$50million worth of shares.

It said the buyback of the state's shares would replace theon-market buyback, if approved by shareholders in November.

Monday's sale would reap a A$400 million gain for the state,which privatised QR National two years ago at A$2.55 a share.

(Reporting by Sonali Paul; Editing by Richard Pullin)

((Sonali.Paul@thomsonreuters.com)(+61 3 9286 1419)(ReutersMessaging: sonali.paul.thomsonreuters.com@reuters.net))