Oct 3 (Reuters) - Anglo American has initiated

arbitration proceedings against Peabody Energy ( BTU ) in

response to the termination of a purchase agreement for the

British mining giant's steelmaking coal assets, the U.S.-based

company said on Friday.

In August, Peabody withdrew its $3.78 billion bid for Anglo

American's Australian coking coal assets, after the two

companies failed to agree on lowering the price following a mine

fire.

Anglo was selling the mines in Queensland's Bowen Basin, the

world's top steelmaking coal region, as part of its plan to

divest or spin off non-core assets following bigger rival BHP's

failed takeover attempt last year.

Operations at the Moranbah North mine were halted in April

after an underground fire caused by high gas levels. This

prompted Peabody to invoke a clause allowing it to walk away or

renegotiate if a major adverse event occurred between signing

and completion.

"Peabody remains confident that a material adverse change

occurred, entitling Peabody to terminate the purchase

agreements", the U.S. coal miner said in a regulatory filing on

Friday.

Anglo has so far returned $29 million of the $75 million

deposit due to Peabody, the U.S.-based coal miner said, adding

that the company has demanded repayment of the remaining amount

"without further delay."

Shares of Peabody Energy ( BTU ) were marginally up at $29.48 in

premarket trading.