As part of the deal, Peabody will also get the first right to participate in any future coal upgrading projects White Energy starts in North America and China.

The agreement gives Peabody a right to take a stake of nearly 15% in White Energy.

For the new upgrading plant, White Energy expects the engineering design and permitting activities to require up to two years.

The Sydney-based company said the first phase of the plant’s development will result in 1 million tons per annum of upgraded coal output, while later phases could boost capacity to more than 20Mtpa.

“We view this technology as a way to unlock further value in our reserves in the Powder River Basin and at other locations to create new marketing opportunities for US or export customers,” Peabody president and chief commercial officer Richard A Navarre said.

“We are pleased to be partnering with White Energy to develop a coal product with expanded market reach.”

White Energy chief executive officer John Atkinson said the company was delighted to partner with Peabody to build a clean coal business in the US and work together on opportunities in China.

White Energy holds the patent to the binderless coal briquetting process which upgrades lower-rank coal to increase its energy efficiency.

Peabody has three mines in the Powder River Basin, including the North Antelope Rochelle Mine which shipped a record 97.5 million tons of low-sulfur coal last year and more than 1 billion tons since it began.

Shares in White Energy are unchanged this morning at $1.60.