Rumours have been circulating for the last two weeks that RAG was planning to divest itself of its coal mining interests. Coal mining now makes up only 20% of group sales, but more than half of RAG’s 80,000 workers are still involved in the heavily subsidised industry.

The surprise announcement contradicted speculation on Friday that the sale of U.S. mining business, the fourth largest in the United States, would come first.

The two Bowen Basin, high-quality metallurgical coal operations have more than 100 million tonnes of coal reserves and export approximately 7 million tonnes per annum.

Peabody said the transaction is subject to a number of conditions, including Australian regulatory approval and the negotiation of definitive agreements and is expected to be completed in the first half of 2004.

Managing director of RAG Australia Coal, Darian Hielscher, said this move was merely a corporate change – from RAG to Peabody.

“Importantly, Peabody Energy is very impressed with the operations and is looking forward to the continued development of their potential.”

Hielscher said Peabody Energy had a high regard for Australian management – as evidenced by the fact that a number of the company’s mines in the United States were managed by Australians – and looked forward to working with the current management team.

“This transparent and seamless transition will allow the management team to continue the solid performance at both mines. It really is a case of business as usual and Peabody is keen to work with the management, employees, government, business and our customers to further develop these significant high grade coal assets.”

RAG also has shares in US open cut mines Belle Ayr and Eagle Buttle in Wyoming; Twentymile longwall mine in Colorado; Wabash room and pillar mine in Illinois; Emerald and Cumberland longwall mines in Pennsylvania; and Laurel Creek, Camp Creek and Kingston room and pillar mines as well as Pioneer surface mine in West Virginia.

Peabody Energy is the world's largest private-sector coal company, with 2002 sales of 198 million tons of coal and $2.7 billion in revenues. Its coal products fuel more than 9% of all U.S. electricity generation and more than 2% of worldwide electricity generation.