Mar 20, 2018

Glencore pays $2.2b for Rio Tinto coal assets

Glencore pays $2.2b for Rio Tinto coal assets

Glencore is buying Rio Tinto’s majority stake in the Hail Creek coal mine and adjacent coal resources, as well as its 71.2 per cent interest in the Valeria coal resource, for $2.2 billion (US$1.7 billion).

The remaining 18 per cent of Hail Creek is currently owned by Nippon Steel Australia, Marubeni Coal, and Sumisho Coal Development.

Each joint venture partner has the right to sell its share to Glencore through a “tag-along” right, which could result in additional consideration of up to $441 million (US$340 million).

The Hail Creek mine is located 120km south-west of Mackay and in 2017 produced about 9.4 million tonnes of coal for export from the Dalrymple Bay Coal Terminal.

The Valeria thermal coal deposit is located 265km west of Rockhampton and 67km south-east of Glencore’s Clermont coal operation.

It has JORC resources of 762 million tonnes.

There is a separate process underway to sell Rio Tinto’s remaining Australian coal assets.

“The sale of Hail Creek and Valeria delivers compelling value for our shareholders and continues our strategy of strengthening our portfolio, focusing on highest returns, maintaining a strong balance sheet and allocating capital to the highest value opportunities,” Rio Tinto chief executive Jean-Sébastien Jacques said.

“We expect that Hail Creek will continue to perform strongly under its new owner, securing long-term jobs and continuing its contribution to the state of Queensland.”

The transaction, still subject to regulatory approvals, is expected to be finalised in the second half of 2018.

Glencore’s coal business managed the production of more than 87 million tonnes of saleable coal last year from 17 operational mines in Queensland and New South Wales.

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