Glencore bids $2.55 billion to snatch Rio Tinto mines from Yancoal

The miner and commodities trader Glencore has launched a $2.55 billion bid to snatch Rio Tinto’s coals assets in Australia’s Hunter Valley from under the nose of Yancoal Australia.

The payment for Rio Tinto’s 100% stake in Coal & Allied Industries Limited (C&A) would be comprised of $2.05 billion cash payable on completion, and another $100 million each year for the next five years.

The terms of the offer also include coal price linked royalties.

Yancoal has already made a play for the mines, having bid $2.45 billion in January earlier this year which has been accepted by Australia's Foreign Investment Review Board.

However, the terms of the deal mean that Rio Tinto can negotiate improved terms with other companies.

In a statement, Glencore said that the C&A mines lie adjacent to numerous existing Glencore mines in the heart of the Hunter Valley, including its core Ravensworth North and Bulga mines.

“The addition of the C&A assets to our existing portfolio in the Hunter Valley would unlock large scale mining and operating synergies,” it said.  

“Glencore’s combined portfolio of mines in the Hunter Valley would have production capacity of 81 million tonnes per annum of high energy coal that feeds increasing Asian demand for high efficiency, low emission coal.”

Glencore has also offered to buy minority stakes in the Hunter Valley operations from Mitsubishi for $920 million cash.

Should Glenore be successful in its bid to buy C&A, it plans to raise at least $1.5 billion through the sale of some of its assets, most likely in the coal area.

It said that it would explore selling on up to 50% of its interest in the C&A mines.