The high-stakes drama in the global mining sector escalated Tuesday as Anglo American PLC announced it will pursue arbitration against Peabody Energy, following the U.S. mining giant’s abrupt withdrawal from a $3.78 billion deal for steel-making coal mines in Australia.

Anglo American, advised by Latham & Watkins LLP, had struck the agreement in November, selling off its four remaining metallurgical coal mines to Peabody, which was counseled by Jones Day. But the pact crumbled after Peabody claimed a “material adverse change” hit the assets.

Peabody Cites Safety Incident at Key Mine

The flashpoint came at Anglo’s Moranbah North mine in Queensland, where Peabody alleged an “ignition event” triggered safety concerns and undermined the value of the deal. “The exact cause of the event remains unknown, with no definitive timeline for resuming sustainable longwall production,” Peabody said, referring to the mechanized coal-extraction method central to the mine’s output.

Anglo, however, dismissed the claim, noting it disclosed a “minor ignition” on March 31 but insisted operations stabilized swiftly. The company added that data and camera footage showed no damage and that regulators are moving toward approving a safe restart.

Anglo Pushes Back: No Grounds for Termination

Anglo blasted Peabody’s decision as baseless. “The event does not constitute a material adverse change under the definitive agreements,” the London-based miner declared. CEO Duncan Wanblad said the company had shown “great flexibility” to salvage the deal but is now confident arbitration will yield damages for wrongful termination.

“We believe it would have been better for all parties to avoid a legal dispute,” Wanblad said. “But we are confident in our legal position and will seek appropriate compensation.”

Strategic Sales Amid Takeover Pressure

The collapsed sale is part of Anglo’s sweeping restructuring after fending off a £34 billion ($46 billion) takeover bid by BHP Group Ltd. earlier this year. The company is offloading assets to sharpen its focus on copper and iron ore, while divesting its nickel operations, platinum arm, and diamond giant De Beers.

Wanblad reassured investors that the failed deal won’t derail Anglo’s strategy: “We are confident that we will successfully conclude an alternative sales process for value in due course.”

Arbitration Ahead

The arbitration proceedings now set the stage for a bruising legal clash between two mining titans, testing the fine print of the deal’s “material adverse change” clause. With billions on the line, the outcome could reshape the trajectory of both companies at a time when the mining industry is under immense pressure to balance profitability, safety, and sustainability.