Following a bidding race where the company initially lost, Glencore (LON:GLEN) was finally able to put its hands on Rio Tinto’s (ASX, LON:RIO) former coal assets in Australia’s Hunter Valley, located in the New South Wales region.
The Anglo–Swiss multinational announced that it signed agreements with Yancoal Australia (ASX:YAL), a subsidiary of China’s Yanzhou Coal Mining, regarding the acquisition of a 49 per cent interest in the Hunter Valley Operations coal mine and forming a joint venture following Yancoal’s acquisition of Rio’s Coal & Allied unit for $2.69 billion.
In detail, Glencore will buy out Mitsubishi, which owns 32 per cent of the mine, and acquire a further 16.6 per cent from Yancoal. Once the latter completes its acquisition of the Coal & Allied unit, the European giant will be entitled to its share of the profits of the Hunter Valley Operations.
Glencore, who first tried and failed to buy Coal & Allied in 2015 because it owns several other assets in the surrounding areas, has also agreed to subscribe for $300 million worth of shares in Yancoal’s equity raising. This means that Yanzhou’s subsidiary will not have to gather as much money as expected to close the transaction.
The backing also implies that Glencore gets to choose the management team that will run the mines and that it will also have the rights to market the coal in Japan, South Korea, and all other countries, excluding China, Taiwan (with certain exclusions), Thailand and Malaysia.
From now on, Glencore’s combined portfolio of mines in the Hunter Valley will have a production capacity of 69 million metric tons per year of high-quality energy coal which, the company states, is aimed at meeting Asia’s increasing demand.