Anglo-Australian mining giant Rio Tinto has upped its bid for Sydney-based Riversdale Mining, making a fresh $3.9bn (£2.5bn) offer.
Riversdale's directors said that the offer provided "immediate value" and that they would be recommending it to shareholders.
Rio made a $2.2bn offer for the company earlier this month.
Riversdale, whose largest shareholder is India's Tata Steel, has huge coking-coal projects in Mozambique.
Both Tata and Brazil's Vale, which has coal mines in Mozambique, are seen as potential rival bidders.
"The acquisition of Riversdale is in line with our growth strategy of investing in, developing and operating large, long-term, cost-competitive mines and businesses," said Rio's energy chief Doug Ritchie.
"We believe Rio is one of the few groups in the world with the capabilities to develop [Riversdale's] projects quickly, bringing considerable benefit to the people of Mozambique."
Riversdale boss Michael O'Keeffe described Rio's offer as "transformational" for his company.
"Riversdale is at the crossroads of having to commit significant resources and funds to develop our coal projects and to make substantial investments in infrastructure," the company said.
A takeover of Riversdale would be Rio's first major acquisition since its $38bn purchase of Alcan in 2007, a deal widely seen as mistimed because it was made at the height of the commodities boom.