Takeover target Macarthur Coal Ltd. (MCC.AU) said Tuesday that it is pushing ahead with exploration to lift production beyond the 9.2 million metric tons of saleable coal a year it has targeted by fiscal 2014, and plans to spend A$60 million in the year ahead.

The Australian company's exploration budget is a marked increase from the A$53 million spent over the last five years and comes at a time when its shareholders are weighing a A$4.7 billion takeover bid from St. Louis-based Peabody Energy Corp. (BTU) and steel giant ArcelorMittal (MT).

The bidders have said Macarthur has fallen short of its production guidance for four of the past five years. Macarthur's board has urged shareholders to take no action on the bid, and said it was in ongoing discussions with other possible suitors.

Macarthur said in a statement that a number of undeveloped exploration tenements are expected to contribute to rising output beyond 2014, and it has contracts in place for environmental studies to support the evaluation of eight projects. The company has also launched an independent review of its portfolio to identify additional exploration targets, it said.

The Queensland-based company, which sold 5.17 million tons of its own coal in the year ended June 30, has applied to secure additional port capacity at export terminals in the state.

Macarthur has estimated its coal reserves at 259 million tons and its resources at 2.3 billion tons. Reserves indicate the amount of metal or mineral it is technically possible to extract, while resources are an estimate of the total metal or mineral potentially available for mining.

Peabody and ArcelorMittal, which already has a 16% stake in Macarthur, earlier this month submitted a cash bid at A$15.50 a share after failing to negotiate an agreed deal.

-By Robb M. Stewart, Dow Jones Newswires; +61 3 9292 2094; robb.stewart@dowjones.com

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