Glencore eyes 81Mt/y Hunter Valley play with $2.5bn bid for Rio Tinto mines

PERTH (miningweekly.com) – Diversified miner Glencore has made a surprise $2.5-billion bid for miner Rio Tinto’s 100% interest in its Coal & Allied subsidiary, rivalling a bid from ASX-listed Yancoal which launched a $2.45-billion offer in January.

Glencore’s offer consisted of $2.05-billion in cash and $500-million in aggregate deferred cash payments, which will be payable as yearly installments of $100-million over five years, following the completion of the transaction.

Coal & Allied is the holding company for Rio’s thermal coal business in the Hunter Valley region of New South Wales. It holds a 67.6% stake in the Hunter Valley Operations mine, an 80% stake in the Mount Thorley mine and a 55.6% stake in the Warkworth mine, as well as a 36.5% interest in Port Waratah Coal Services, which owns a coal export terminal at the Port of Newcastle.

The Coal & Allied assets lie adjacent to a number of the company’s own coal mines in the Hunter Valley, including the Ravensworth North and the Bulga mines.

Glencore said that the Coal & Allied assets would allow the major to unlock large-scale mining and operating synergies, and that combined the portfolio of mines in the Hunter Valley would have a production capacity of some 81-million tonnes a year.

Yancoal’s offer, which the Australian Foreign Investment Review Board approved in April, consisted of an initial $1.95-billion cash payment upon the completion of the transaction in the second half of 2017, followed by $500-million in deferred cash payments to be settled in five yearly installments of $100-million.

Yancoal in May also offered $710-million to Coal & Allied’s joint venture (JV) partner Mitsubishi Development for its 32.4% interest in the Hunter Valley operation, fulfilling its obligation to the JV partner under the sale and purchase agreement with Coal & Allied.

Glencore has now also agreed to purchase Mitsubishi’s 32.4% interest in the Hunter Valley operation JV and its 28.898% interest in the Warkworth JV for $920-million cash conditional on completion of its acquisition of Coal & Allied, with $520-million being payable on completion and $100-million payable on the first four anniversaries of completion.

Rio Tinto has acknowledged receiving the Glencore offer, telling shareholders that the company’s board and management would give the proposal “appropriate” consideration.