Despite a last-minute bid from commodity trader Glencore, Rio Tinto has decided to sell its coal operations in the Hunter Valley of New South Wales to Yancoal Australia. The sale price for the operations of Rio’s subsidiary Coal & Allied is US$2.45 billion.

Mitsubishi Corp owns 32.4% of Coal & Allied’s Hunter Valley Operations mine and 28.9% in its Warkworth mine. It has agreed to sell these interests to Yancoal for $940 million upon Coal & Allied’s sale.

Coal & Allied also owns the Mt Thorley mine and in 2016 the three mines produced about 25.9 million tonnes of thermal and semi-soft coking coal, with Rio’s share amounting to 17.1 million tonnes. In addition, it owns a 36.5% stake in coal-exporting facilities at the Port of Newcastle, the world’s largest coal export facility.

Yancoal is an Australian subsidiary of large Chinese mining company Yanzhou Coal Mining, which wants to expand its foreign assets and officially entered negotiations with Rio Tinto in January.

Glencore’s offer was $100 million greater than Yancoal’s but was ultimately not chosen. Yancoal was originally to pay $1.95 billion up front and the $500 million remainder in instalments for the next five years but it changed the proposal to a lump sum payment after Glencore made its bid in early June.

In April, Australia's Foreign Investment Review Board approved Yancoal’s deal with Rio Tinto – the largest acquisition by a Chinese government-controlled firm of Australian assets.

Addressing some concerns about how it will finance the deal, Yancoal announced earlier this week that State-backed Yankuang Group, which controls a 56.2% stake in Yanzhou, would supply up to $2.1 billion in funding if needed to complete the sale.

Rio Tinto started dismantling its energy division and selling coal mines in 2015.

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