Yancoal To Spend $2.45B On Rio Tinto's Aussie Coal Assets
- Author: Sonia Alvarado Jan 26, 2017,
Jan 26, 2017, 0:39
The deal involves an initial payment of $1.95 billion for Rio's Coal & Allied Industries Ltd., followed by further annual payments, taking the total price up to $2.45 billion. The UK-based company has announced or completed at least $7.7bn worth of divestments since 2013.
"Yancoal has successfully restructured its operations and reduced costs throughout the past three years and established itself as a leading coal producer committed to investing in the Australian resources sector".
Desperate to cut debt, Anglo American (AAL.L) put its prized Grosvenor and Moranbah mines, which produce coking coal used in steel-making, up for sale about a year ago.
Once settlement is finalized, Yancoal will pay royalties of two US dollars per ton as long as the thermal coal price remains above 75 USA dollars a ton.
Yancoal Australia is expected to pay $2 billion in cash to Rio Tinto.
"This is a transformative and exciting acquisition for Yancoal shareholders and will form the basis for our future growth and success as Australia's largest pure-play coal company", Yancoal Chairman Xiyong Li said in a statement.
Yancoal intends to fund the acquisition through a capital raising and pro-rata entitlement offer of shares.
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Yanzhou Coal is one of China's largest mining groups by market capitalisation and already operates several mines across Australia.
The deal requires approval from Chinese government regulators, the Australian federal government's foreign investment review board, the Korean Fair Trade Commission, shareholders in both Rio and Yancoal and also the New South Wales state government.
"Assuming the deal closes, this would account for ~75p in value gained per Rio share".
"Our world-class assets, strong balance sheet and relentless focus on cash will ensure that we deliver superior returns for our shareholders", Rio Tinto chief executive Jean-Sebastien Jacques said.
With Anglo holding on to those mines, the biggest deal pending is Australian conglomerate Wesfarmers' (WES.AX) sale of its Curragh mine and its 40 percent interest in the Bengalla mine, which industry sources say could fetch more than $1.5 billion all together.
RBC analyst Tyler Broda said Yancoal had paid a material premium for the Coal & Allied assets, which include Rio's stakes in the Mt Thorley Warkworth mine and the Hunter Valley Operations mine.