St. Louis based Peabody Energy has entered into an agreement with the government of Inner Mongolia and other Chinese partners to explore development opportunities for a large surface mine and downstream coal gasification facility that would produce methanol, chemicals, or fuel products.

The majority of coal from the mine would be dedicated for fuel supply to the coal conversion plant.

The agreement is between Peabody Energy, the Inner Mongolia Jitong Railway Group, the People's Government of the Inner Mongolia Autonomous Region, and the Administrative Office of Xilinguole Region.

The project is expected to have an annual capacity of at least 1.2 million tonnes of methanol or equivalent fuel and chemical production, and is being planned for the Xilinguole League. In the coming months, the companies will begin a feasibility study to examine the potential for the project. Peabody is also continuing discussions with major global chemical companies as project partners. The major open-cut mine would be located on coal resources that, subject to additional confirmatory drilling, could total up to 3 billion tonnes.

Peabody,the world's largest private-sector coal company, is the only non-Chinese participant in GreenGen, China's signature carbon initiative, and the company has an office in Beijing and growing coal trading activities.