ArcelorMittal, which bought a 14.9 per cent stake in the Australian coal mine Macarthur Coal for $630 million last week, is expected to make an A$4.2 billion plus (over $4 billion) offer for full stake in the Brisbane, Queensland-based mining house.

Executives from ArcelorMittal, the world's largest steel company, are in Brisbane for a due diligence on Macarthur Coal, ahead of a possible take-over bid.

ArcelorMittal, which paid an average A$19.96 a share for less than 15 per cent holding, is now Macarthur's third-biggest shareholder.

Luxumburg-based ArcelorMittal bought a 4.3 per cent stake from Macarthur's largest shareholder and founder Ken Talbot and the balance from private investor Nathan Tinkler.

ArcelorMittal had applied to Australia's Foreign Investment Review Board to increase its holding in Macarthur beyond 14.9 per cent.

Broking firm Merrill Lynch, in an update of the Macarthur Coal deal, said ArcelorMittal is likely to offer $20 a share for full control of  Macarthur.

An acquisition of Macarthur, the world's biggest maker of pulverised coal used by steelmakers, would help ArcelorMittal increase its self-sufficiency in coal to around 20 per cent.

Macarthur produces 35 per cent of the global supply of pulverized coal from two mines, Coppabella and Moorvale, in Australia's Queensland state

Australia is the largest exporter of coal used to make steel.

ArcelorMittal had bought three mines from OAO Severstal, Russia's largest steelmaker, for $720 million to boost its coking coal supplies.

The steel giant has 45 per cent self-sufficiency in iron ore, the key raw material for steel mills. In fact, ArcelorMittal's iron ore business is growing faster than its steel production. Mining acquisitions in Ukraine and Mexico are expected to push iron ore self-sufficiency to 65 to 75 per cent by 2012, and a possible 75 to 85 per cent by 2014-15.

ArcelorMittal also recently signed a 10-year off-take agreement with the big Brazilian iron ore producer Vale.

Potential acquirers of Macarthur include Xstrata, Anglo American Plc and Vale. Other possible acquirers may include Noble Group Ltd and CITIC Group, Macarthur's second-largest shareholder, which is backed by the Chinese government.

Local mining firm Xstrata had completed a due diligence on Macarthur and, according to market-watchers, was adopting a wait-and-see policy for starting negotiations.

Chinese mining companies are also expected to be keen to on raising stake in the company. China's CITIC has just over 17 per cent stake in Macarthur.

Prices of coking coal are expected to stay at record levels because of rising demand for steel and cost overruns. The price of pulverized coal, which was at  $67-68 a tonne in 2007, had nearly doubled to $150 now and is expected to touch $245 a tonne next year.

ArcelorMittal is also planning a total investment of up to $10 billion in Indonesia, covering three projects, including a 49 per cent stake in Krakatau Steel, a second deal to set up a new steel mill as a joint venture with Krakatau, and a possible partnership with state-owned miner PT Aneka Tambang to look for iron ore, nickel and manganese.