Rio Tinto has entered into a binding agreement with Glencore for the sale of its entire interests in the Hail Creek coal mine and the Valeria coal development project in Queensland, Australia, for $1.7 billion.
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The sale includes Rio Tinto's 82.0% interest in the Hail Creek operating mine and its 71.2% interest in the Valeria project.
Rio Tinto chief executive J-S Jacques expects that Hail Creek will continue to perform strongly under its new owner, securing long-term jobs and continuing its contribution to the State of Queensland.
The transaction is subject to customary conditions precedent being satisfied, including the receipt of regulatory approvals from Australia’s Foreign Investment and Review Board, the Queensland Government and applicable foreign competition authorities.
Subject to all regulatory approvals and other conditions precedent being satisfied, completion is expected in the second half of 2018. The funds will be used for general corporate purposes.
There is a separate process underway to sell Rio Tinto’s remaining Australian coal assets. Rio Tinto will update the market on this process as appropriate.
The Hail Creek Complex is located in the northern Bowen Basin, 120km south-west of Mackay, in central Queensland and comprises the Hail Creek, Lake Elphinstone and Mount Robert tenements. Hail Creek is a large scale open cut mining operation which commenced production in 2003.
In 2017 the Hail Creek mine produced 9.4 million tonnes of saleable coal, comprising 5.25 million tonnes of hard coking coal and 4.13 million tonnes of thermal coal. At 31 December 2017, Rio Tinto reported marketable reserves for Hail Creek of 142 million tonnes and mineral resources of 601 million tonnes. The combined mineral resources at Lake Elphinstone and Mount Robert were 193 million tonnes.
Valeria is a large undeveloped coal project located in the central Bowen Basin, approximately 40km north-west of Emerald. The Valeria tenements contain 762 million tonnes of coal mineral resources. Once developed, Valeria is expected to produce high energy, low ash thermal and coking coal products.
In the 2017 financial year, Rio Tinto's attributable share of Hail Creek made a pre-tax profit of US$357 million and, including the Valeria resource, had gross assets of US$859.1 million at 31 December 2017.