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Glencore to buy Rio Tinto’s Hail Creek and Valeria coal mine stakes for $1.7bn

EBR Staff Writer Published 21 March 2018

Swiss miner Glencore has agreed to acquire Rio Tinto’s stakes in the Hail Creek coal mine and the Valeria coal development project in Queensland, Australia for $1.7bn.

The transaction is expected to consolidate Glencore’s coal operations in Australia, where it is currently involved in 13 mining complexes, including 17 operational mines located in New South Wales and Queensland.

In the Hail Creek coal mine and adjacent coal resources, Glencore will acquire Rio Tinto’s stake of 82%, where the latter is partnered by Nippon Steel Australia (8%), Marubeni Coal (6.67%) and Sumisho Coal Development (3.33%).

Glencore said that the three partners have the right to sell their stakes to it through a “tag-along” right in connection with the transaction with Rio Tinto.

The Swiss miner expects to pay an additional amount of $340m to buy out the remaining 18% stake in the Hail Creek coal mine, located in the northern Bowen Basin.

Last year, the Hail Creek mine had produced about 9.4 million tonnes of coal, which included 5.25 million tonnes of hard coking coal and 4.13 million tonnes of thermal coal. The nearby Lake Elphinstone and Mount Robert tenements, which also form part of the Hail Creek Complex are included in the transaction.

In the undeveloped Valeria coal project, Glencore will buy Rio Tinto’s stake of 71.2%. Located about 40km north-west of Emerald, the Valeria coal mine holds 762 million tonnes of coal mineral resources.

Rio Tinto CEO J-S Jacques said: "The sale of Hail Creek and Valeria delivers compelling value for our shareholders and continues our strategy of strengthening our portfolio, focusing on highest returns, maintaining a strong balance sheet and allocating capital to the highest value opportunities.

"We expect 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 sale of the two Australian coal mines from Rio Tinto is part of its plans to sell all of its coal assets. In last September, Rio Tinto sold Coal & Allied Industries, its Australian coal unit to Yancoal Australia for $2.45bn.

Inage: The Hail Creek coal mine in Queensland, Australia. Photo: Copyright © 2017 Rio Tinto.