UPDATE: Glencore has confirmed it had struck a $US1.139 billion deal to buy 49 per cent of the Hunter Valley Operations coal mines from Yancoal Australia and Mitsubishi.

The deal, which is conditional on approvals and the completion of Yancoal’s acquisition of Rio Tinto’s operating stake in HVO as part of a $US2.69bn deal struck last month to buy all of Rio’s Australian thermal coal, is expected to be completed within six months.

Under the deal, revealed by The Australian this afternoon, Glencore has also agreed to subscribe for $US300 million of Yancoal shares in an equity raising to fund Yancoal’s Rio purchase.

Glencore will be the exclusive marketing agent for HVO coal sales into Japan, South Korea and all other countries except China, Thailand, Taiwan and Malaysia.

Swiss miner and trader Glencore is close to finalising a $US1 billion deal to take a 49 per cent stake in the Hunter Valley Operations that Rio Tinto is selling to Chinese-backed Yancoal Australia as part of its exit of Australian thermal coal

The deal would give Glencore, who Yancoal last month beat in a late bidding auction for Rio’s Coal & Allied assets in New South Wales, access to marketing rights and cost savings that can be achieved with its neighbouring mines.

It would also extend Glencore’s position as the nation’s biggest miner of thermal coal, which is used in power stations.

For Yancoal, it gives access to the same cost savings and means it will not have to raise as much equity to complete its $US2.69bn purchase of the mines from Rio.

It is understood Glencore has agreed to buy a 16.6 per cent stake in the Hunter Valley Operations from Yancoal and a 32.4 per cent stake off Japanese trader Mitsubishi.

The deals are all subject to finalisation of Yancoal’s $US2.69bn purchase of Rio’s Coal & Allied operations in the Hunter Valley, which include HVO and the Mt Thorley-Warkworth mine (which is not thought to be part of the deal).

The price is not known, but based on a $US710 million deal Yancoal struck last month to buy Mitsubishi’s 32.4 per cent stake, it would be worth about $US1.1bn.

Glencore and Yancoal would jointly operate the mine and share marketing rights.

Yancoal went into a trading halt this morning “pending an announcement to the market in relation to a possible major transaction”, while its Hong Kong-listed, Chinese-controlled partner Yanzhou Coal said its board had approved the transfer of a 16.6 per cent interest in the Hunter Valley operations joint venture to an unnamed third party.

The Australian understands the third party is Glencore, which unsuccessfully tried to outbid Yancoal for the Rio assets, pushing the price up by $US240m from the original deal struck with Yancoal.

Glencore has also agreed to buy a Mitsubishi stake that Yancoal had previously agreed to buy.

Yanzhou also said it would also establish a joint venture to operate and manage the assets.

Neither Yancoal nor Glencore would comment further on the deal.

Published Date:2017-07-28