Yancoal grabs Mitsubishi stakes in Rio Tinto's coal mines in $940m deal

But battle with Glencore over Rio’s Coal & Allied unit goes on.

The battle over Rio Tinto’ (ASX, LON:RIO) coal assets in Australia's Hunter Valley has spiced up as Chinese-owned Yancoal (ASX:YAL) signalled Tuesday it may be willing to raise its offer and so outbid Glencore after striking an agreement with Mitsubishi to buy its 32.4% stake in the same two mines.

The tag-along deal with Mitsubishi came almost three days after miner and commodities trader Glencore (LON:GLEN) said it had reached an agreement with the Japanese firm to buy the same interests in the same coal mines. However, Yancoal's offer, at $940 million, was slightly higher.

Rio had agreed to sell its interest in Coal & Allied Industries Limited (C&A) to Yancoal for $2.45 billion, but the terms allowed it to engage in negotiations with another party if it made a better offer.

In January, Rio agreed to sell its interest in Coal & Allied Industries Limited (C&A) to Yancoal Australia for $2.45 billion. But the terms allowed Rio to engage in negotiations with another party if it made a better offer.

Along came Glencore, with a bid made up of $2.05 billion upfront and $0.5 billion in instalments over five years, plus an offer to buy Mitsubishi’s stake in the Hunter Valley operations for $920 million cash.

While the Swiss firm has failed to grab Mitsubishi’s piece of the pie, it is still contending with Yancoal over Rio’s Coal & Allied Industries. It noted it had a right to match or better the proposal if Rio considered Glencore’s bid to be superior.

Both Chinese regulatory authorities and the Australian Foreign Investment Review Board have already approved Yancoal’s offer for the C&A unit.

Coal asset sales stalled last year when prices for the commodity climbed up to almost five-year highs and companies raised their expectations on bids for their assets. But there's movement in the market once again.

Mitsubishi is also considering selling a stake in Clermont, another of its Australian coal mines. If sold, the company would be left with a stake in just one thermal coal mine.

Other Japanese trading houses have also been cutting or freezing investments in thermal coal.

Mitsui & Co said last month it would invest mainly in iron ore, LNG and oil and had no plans to consider acquiring or developing new thermal coal mines. The announcement followed last year’s decision to cut its exposure to coal by a third within three years.