Yancoal to purchase Rio Coal & Allied

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 02 Feb 2017   Posted by admin

Mount Thorley Warkworth in the Hunter Valley was one of the mines that would be sold. Image: Rio Tinto.

By Elizabeth Fabri

CHINESE–owned Yancoal Australia has entered a binding agreement with Rio Tinto to purchase its wholly-owned subsidiary Coal & Allied Industries for $US2.45 billion.

Subject to regulatory Government and shareholder approvals, the deal would see Yancoal acquire a 100 per cent interest in Coal & Allied through an initial $US1.95bn cash payment at completion; $500 million in aggregate deferred cash payments; and coal price linked royalty.

Coal & Allied owned and operated multiple, multi-seam open cut mines in the Hunter Valley, with a 67.6 per cent interest in the Hunter Valley Operations mining complex (HVO); 80 per cent interest in the Mt Thorley mine; 55.6 per cent interest in the Warkworth mine; as well as a 36.5 per cent interest in Port Waratah Coal Services coal export terminal.

Yancoal currently operated seven mines in NSW, WA and Queensland, as well as a number of projects at feasibility stages, infrastructure holdings, and a suite of exploration assets.

The deal would put Yancoal in the top spot as Australia’s largest, pure-play coal producer, with expected ROM coal production of 71mtpa.

 “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.

“Via the acquisition of Coal & Allied’s high-quality asset portfolio, we will be delivering substantial cash flows to the company, quality coal products and long-term relationships with end-users in key global markets.

“The substantial cash flows from Coal & Allied’s assets, combined with the anticipated synergies and proposed equity raising will materially strengthen Yancoal’s balance sheet.”

Rio Tinto chief executive Jean-Sébastien Jacques said the sale was consistent with the miner’s strategy of reshaping its portfolio to ensure the most effective use of capital.

“We are confident that Coal & Allied will continue to contribute to the New South Wales economy and the communities of the Hunter Valley under a new owner.”

The transaction was estimated to be complete by the third quarter of 2017.