Rio Tinto hands Hunter Valley coal mines ownership to Yancoal

PERTH (miningweekly.com) – ASX-listed Yancoal Australia has completed the acquisition of mining major Rio Tinto’s Coal & Allied (C&A) assets, marking the diversified mining company’s official exit from the thermal coal sector.

“Today is a significant achievement for Yancoal Australia and redefines our business as a leader within the Australian resources sector and a major competitor throughout international coal markets,” said Yancoal chairperson Xiyong Li.

In return for its thermal coal business in the Hunter Valley region of New South Wales, Rio Tinto will receive a total consideration of $2.69-billion, comprising $2.45-billion in cash and a further $240-million of unconditional guaranteed royalty payments.

The first royalty payment of $10-million was made on Friday, and an additional $100-million will be received before the end of the year. A further $90-million is expected before the end of 2018.

Diversified miner Glencore has struck a deal with Yancoal to acquire a 49% interest in the Hunter Valley operations for $1.14-billion in cash, plus a 27.9% share of the $240-million royalties over a five year period, as well as 49% of price contingent royalties payable to Rio.

Rio said on Friday that the company would use all the consideration received for the sale of the C&A assets for general corporate purposes.

With the production of the Hunter Valley operations transferring to Yancoal, Rio is now expected to produce between 13-million and 14-million tonnes of thermal coal in 2017, down from the previous guidance of between 17-million and 18-million.