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Glencore to buy 49% stake in HVO coal mine in Australia for $1.14bn

EBR Staff Writer Published 31 July 2017

Swiss-based miner Glencore has agreed to acquire a stake of 49% in the Hunter Valley Operations (HVO) coal mine in the Australian state of New South Wales, for $1.14bn.

As part of the proposal, it will first acquire Yancoal Australia’s 16.6% in the coal mine located in the Hunter Valley, 24km away from Singleton. After which, Glencore will work alongside Yancoal to buy Mitsubishi Development’s 32.4% stake in HVO.

Glencore will take its share of the profits from the coal mine as and when the China-based Yanzhou Coal Mining’s subsidiary Yancoal closes its $2.69bn acquisition of Coal & Allied from Rio Tinto.

Currently, Coal & Allied owns 67.6% stake in HVO, while the remainder stake is owned by Mitsubishi Development, a subsidiary of Japan-based Mitsubishi.

After the transaction is closed, Glencore will form a joint venture (JV) with Yancoal, which will hold a stake of 51% in HVO.

The coal mine is located near several existing Glencore mines in the Hunter Valley and will expand the company’s production capacity in the region to 69 million tonnes per annum.

As part of the deal, Glencore will also pay a 27.9% share of $240m non-contingent royalties for five years along with 49% of price contingent royalties payable by Yancoal to Rio Tinto on production of coal from HVO in connection with the Coal & Allied acquisition.

Glencore has also agreed to invest $300m in Yancoal, and will exclusively market HVO coal sales into Japan, South Korea and all other countries with the exception of China, Taiwan, Malaysia and Thailand.

The Swiss-based mining firm expects to fund the overall transaction from its available cash resources along with committed facilities. Its acquisition of the HVO stake is likely to be closed within six months, subject to receipt of mandatory regulatory approvals.