Anglo American to sell Australian coal mines for up to $3.88 billion

* Deal includes $2.3 billion upfront, $1.58 billion ​tied to ⁠prices

* Anglo continues arbitration with ​Peabody over previous failed coal asset sale

* Proceeds from sale will be ​used ‌to reduce Anglo American's debt (Adds bullet points, context to lead ⁠paragraph and details throughout)

May 18 (Reuters) - Anglo American ⁠said on Monday it ​will sell its steelmaking coal mines in Australia to UK-based miner Dhilmar for up to $3.88 billion, exiting the sector, cutting ​debt ‌and streamlining assets ahead of a planned merger with Canada's Teck Resources.

London-listed Anglo is 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 ahead of completing the merger with Teck Resources that will form ‌a copper-focused heavyweight.

The deal comprises $2.3 billion upfront cash and up to $1.58 billion linked to coal prices, with proceeds ​earmarked to cut debt, the company said.

"Through this transaction, we will complete ‌our exit from steelmaking coal," Anglo CEO Duncan Wanblad said in a statement.

Last year, Peabody withdrew its $3.78 billion ⁠bid for ⁠Anglo's Australian coking coal assets, after ‌the two companies failed to agree on lowering the price following a ​mine fire.

In ​parallel with Monday's deal, Anglo continues ‌to pursue the arbitration with Peabody over the collapsed deal, the British firm said.

Anglo American