Peabody Energy, the St. Louis-based coal giant, signed an agreement Thursday to pursue development of a huge surface mine in China and also made progress in attempts to purchase an Australian mining firm.
The mine in northwest China would produce 50 million tons of coal yearly and operate for decades. Energy-hungry China wants to take advantage of Peabody's advanced mining techniques and is eager to begin the mine's development, said Nuer Baikeli, governor of Xinjiang, China.
"The Communist Party of China Xinjiang Regional Committee and the Xinjiang People's Government will fully support Peabody's development in Xinjiang so as to start the cooperation program at an early date, which we believe will generate the best possible returns for both sides," Baikeli said in a statement.
Gregory Boyce, Peabody's chairman and chief executive, attended a signing ceremony for the mining pact in the Xinjiang capital of Urumqi.
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"Peabody is honored to work with the government of Xinjiang to advance a world-class large-scale surface mine in the world's largest and fastest-growing coal market," Boyce said in a statement.
Also on Thursday, Peabody and ArcelorMittal S.A., the global steel company based in Luxembourg, have agreed to improve their joint effort proposal to buy Macarthur Coal Ltd. The companies will allow a dividend of 16 cents per share to be paid Macarthur shareholders without dropping the price per share and reducing the number of conditions attached to the proposal.
In return, Macarthur has agreed to conduct site visits to Peabody and ArcelorMittal, beginning Monday.
The proposal is at a cash price of not less than $15.50 per share, in Australian dollars, which represents a 43 percent premium to $10.83 per share, which was the one-month volume weighted average price before last Monday, when the proposal was made public.
If the deal goes through, Macarthur will form an integral part of Peabody Australia and expand ArcelorMittal's mining interests in the key resource market of Australia, the companies said.
Measured in U.S. dollars, the $5.1 billion bid announced before the new dividend agreement was significantly greater than the $3.4 billion offer Macarthur rejected a year ago.
Peabody spent two months pursuing Macarthur last year, only to be turned away. This time, it is partnering with the world's largest steel producer, which holds a 16 percent stake in the company it is pursuing.
Peabody's stock closed Thursday at $58.03, down 74 cents, or 1.26 percent, on the New York Stock Exchange.
