The coal business is booming in Australia thanks to demand from and proximity to Asia, and analysts said Peabody still would like to expand its presence there.

The company's interest in Australia is in spite of a new, costly mining tax likely to be put in place in the country over the next 18 months.

"There are some cheaper assets in the U.S.," said Jeremy Sussman, an analyst with Brean Murray Carret & Co. "But I believe Peabody is set on its growth plan in Australia and will keep its eyes and ears open."

The St. Louis-based company has never hidden its interest in expanding in the world's largest coal exporter.

It acquired Excel Coal Ltd in 2006 for about $1.3 billion and was willing to shell out billions more for Macarthur, which has deep reserves of a coal used in the steelmaking process.

After Macarthur Coal's board turned down Peabody's revised $3.5 billion bid this week, the U.S. company said it looked forward "to advancing its internal growth projects and continuing to pursue other value-added investments to serve high demand markets."

Those companies are smaller than Macarthur by market capitalization, but are positioned to do substantial export business to Asia.

DRAW OF CHINA AND INDIA

The company may be smarting from its failed Macarthur bid, but FBR Capital Markets analyst David Khani said Peabody shouldn't be deterred from its expansion plans in the country.

"They put in their full effort on (Macarthur), but maybe in six months or a year they will come back," Khani said. "They believe in the long-term China and India story."

The world's largest private-sector coal company, Peabody's revenues last year were $6 billion and sales volumes totaled 243.6 million tons -- 22.3 million of those from Australia.

Peabody has gone all-out to boost exports from its Australian mines by 20 percent to 30 percent this year to tap increasing demand from Asian steelmakers for metallurgical, or coking coal.

In January, when Peabody posted higher-than-expected fourth-quarter profits, partly on booming Australian sales, Chief Executive Greg Boyce said the company was advancing access to transportation infrastructure in Australia, including new contracts with rail providers and construction of a terminal in the port of Newcastle.

Asked whether Peabody might abandon acquisition efforts after the Macarthur rebuff, Sussman said: "You may see some share buybacks, but it will be small compared with the growth through Macarthur-type targets.

"I think Peabody will move on to Plan B -- grow organically and keep its ears and eyes open in Australia. They think of themselves as a growth company."