Peabody had seemed a dark horse in the contest, with reports last week that it was behind Vale in the running to co-develop the 15 million tonnes per annum coal mine. The mine also has an estimated 1.2 billion tonnes of reserves.

The deal struck yesterday comes after a long period of uncertainty as the Mongolian government tried to find a decision that would balance the relations between its neighbours Russia and China.

The accord will give the companies the right to develop the western part of Tavan Tolgoi, which is reportedly rich in coking coal.

AFP reported a Mongolian government statement that Peabody would gain 24%, the Shenhua group would have a 40% share of the deposit, and the Russian-Mongolian consortium members would share the remaining 36%.

The statement reportedly said the deal would be set for approval by parliament at the end of this week, with the successful bidders to pay Mongolia $500 million, plus an additional $500 million advance payment.

Although there is no deadline for approval, the Mongolian parliament will reportedly review the deal by mid-July.

The announcement confirms Prime Minister Sukhbaatar Babtold’s statement last week that the Mongolian project could be shared by a handful of the shortlisted bidders.

“There are going to be about three or four of the major ones to create one consortium,” Batbold told Bloomberg Television.

The Mongolian government had whittled down the number of potential developers to a handful, with Brazil’s Vale expected to come out on top.

The deposit owned by Erdenes Tavan Tolgoi has the potential to produce 15 million tonnes annually for more than 30 years, enhancing Mongolia’s development as a major coking coal exporter to China.

The first phase of the mine development will rise in stages to 30Mtpa.

In Australia, Peabody is working to expand six major metallurgical and thermal export operations. It is also advancing growth efforts and commercial deals in China, Indonesia and India.