China wealth fund said to join fray for $2bn Rio Tinto portfolio

Mount Thorley Warkworth (pictured) is part of the package of assets Yancoal Australia was set to acquire, before being outbid by Glencore by $100 million. (Image courtesy of Rio Tinto)

The Chinese sovereign wealth fund is considering joining the bidding for Rio Tinto Group’s last remaining coal mines, which may fetch more than $2 billion, people familiar with the matter said.

China Investment Corp. is discussing making a joint offer with Australian private equity firm EMR Capital Advisors Pty, which was among shortlisted bidders for the Hail Creek and Kestrel mines, according to the people. Suitors are scheduled to make site visits to the operations in Australia’s Queensland state this month ahead of the final bid deadline in March, the people said, asking not to be identified because the information is private.

The EMR consortium would compete with  Whitehaven Coal Ltd. and the Australian unit of China’s Yanzhou Coal Mining Co., which are separately weighing binding offers for the Rio assets, the people said. South32 Ltd. and an investor group led by Apollo Global Management LLC were also preparing to enter the second round of the sale process, people familiar with the matter said in December.

EMR has said that deals for assets valued at more than $1 billion would likely be co-investments. The natural resources fund has attracted interest from Chinese state-owned and private entities on potential partnerships, Chief Executive Officer Jason Chang said in a December 2016 interview. CIC, which managed about $814 billion at the end of 2016, has been boosting its holdings in alternative assets to diversify away from listed companies and increase returns.

Bowen Basin

Xcoal Energy & Resources LLC and Canada Pension Plan Investment Board are part of the Apollo-led consortium pursuing the Rio coal mines, the people said in December. Glencore Plc was also among suitors set to proceed to the second round of bidding for the assets, the people said at the time.

Apollo and CIC didn’t immediately reply to emails seeking comment. Spokesmen for EMR, Glencore, Rio, Whitehaven and Yanzhou Coal’s local unit, Yancoal Australia Ltd., declined to comment. A representative for South32 declined to comment beyond a statement from December, when the company said it continues to focus on identifying new opportunities outside its portfolio.

A sale would allow Rio, the world’s second-biggest miner, to complete its exit from coal and continue an asset divestment program that has returned more than $7 billion since 2013. Last year it agreed to sell $2.69 billion of Australian mines to a company controlled by Yanzhou Coal, and Chief Executive Officer Jean-Sebastien Jacques said in September that a rebound in metals and energy prices has opened a window for additional sales.

Rio Tinto controls 82 percent of Hail Creek in the Bowen Basin region of Queensland state, which produced more than 9 million metric tons of coal in 2017, according to filings. It owns 80 percent of Kestrel, which produced about 5 million tons of coking and thermal coal in 2017. The sale also includes the Valeria and Winchester South coal projects in Queensland state, a person familiar with the matter said in October.

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