Via The Wall Street Journal, a report that U.S.-based Peabody Energy Corp. will pursue a giant coal-mine project in China’s western Xinjiang region in partnership with the local provincial government, one of the most demonstrative signs of rising foreign interest in the resource-rich but restive area:

“…Plans call for a surface mine that will produce some 50 million metric tons of coal annually to feed China’s energy needs, St. Louis-based Peabody said Thursday in a joint statement with its partner, the government of the Xinjiang Uyghur Autonomous Region. On hand for a ceremony to market their “framework agreement” were Peabody Chairman and Chief Executive Officer Gregory H. Boyce and Xinjiang Communist Party Secretary Zhang Chunxian.

The mine plan is ambitious, with output forecast at around half the 105.8 million short tons that Peabody last year sold from its flagship North Antelope Rochelle thermal coal mine in Wyoming. Thermal coal currently sells for around $120 per ton in Asia, theoretically valuing the output from the new mine in the billions of dollars annually.

The deal comes as Peabody pursues coal projects in Mongolia and Australia that are likewise designed to serve unbridled demand in China, the world’s largest energy user whose top energy source is likely to remain coal, even as the country expands its new energy industries.

In China, the partners didn’t announce timetables but will now undertake studies to determine a specific location for the mine. In past statements about its plans for Xinjiang, Peabody has said it aimed to build a surface mine to serve a power plant and natural gas facility planned for the region.

The Peabody project appears to be just one planned for Xinjiang. Thursday’s statement noted the vast region, which takes up a sixth of China’s landmass and is over twice the size of Texas, is rich with resources and will in coming years generate ten times the 100 million metric tons of coal produced last year. Xinjiang sits on 40% of national coal reserves and work is ongoing for a rail line to ship more of it east starting in 2013.

For decades, Beijing has sought foreign investors for Xinjiang, and most of the investment it has obtained is energy-related—from natural-gas exploration to wind and solar farms. One hope is to unlock the potential of the coal reserves by gasifying the resource and transport it out of the region by pipeline.

Yet analysts say foreign interest in Xinjiang is held back by a combination of the region’s distance from the country’s eastern markets, as well as Beijing’s poor human-rights record with the population of predominantly local Turkic Muslim Uyghurs. The region’s capital, Urumqi, was site of bloody ethnic clashes two years ago.

Xinjiang regional governor, Nuer Baikeli, said in Thursday’s statement the mine could be among the world’s most modern with Peabody’s “application of the world’s most advanced mining techniques, management systems, and environmental protection and safety standards.”

“Together we can unlock the full benefits of Xinjiang’s vast energy resources to supply essential energy and benefit the region through job creation, economic development and social responsibility,” Peabody’s Mr. Boyce said in the statement.

Peabody, with $6.86 billion in global revenues last year, is enthusiastic about coal opportunities in Asia, and is pursuing projects in Mongolia, Indonesia and India. On Thursday , Peabody sweetened a $5.05 billion offer for Australia miner Macarthur Coal Ltd. in partnership with steel giant ArcelorMittal. Also in recent days, the government in Mongolia awarded it rights to participate in the development of its giant Tavan Tolgoi coal deposit.

But Peabody remains a largely U.S. producer. Led by its Wyoming facility, its 20 U.S. mines contributed almost 79% of the 245.9 million short tons the company sold last year, with remaining sales coming from Australia and its trading operations, according to its annual report.“