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June 3, 2022

Glencore likely to rebuff Chinese bid for stake in Yancoal Australia

The commodity firm considers the offer from Yankuang as ‘too low’ as it significantly undervalues the asset.

Anglo-Swiss commodity trading and mining company Glencore is expected to turn down a stake purchase bid of $3.60 per share by Chinese firm Yankuang Energy Group in coal producer Yancoal Australia, reported Reuters.

The move comes as the commodity firm considers the offer as ‘too low’, the news agency reported citing two sources with knowledge of the matter.

Last week, Yankuang Energy made an offer to buy the 37.7% stake it does not already own in Yancoal from Glencore for nearly $1.8bn, marking a discount to the existing market price.

Glencore, which owns a 6.4% stake in Yancoal, considers the offer “unacceptable” as it “significantly undervalues” the stock, one of the sources said.

If the deal materialises, Yankuang’s stake in Yancoal Australia could near the 90% mark.

As a result, Yankuang, as per Australian rules, would be allowed to acquire all the smaller shares held by institutional and retail investors in Yancoal and make it private.

Glencore, however, would consider divesting its holding in Yancoal Australia to Yankuang at the right price, according to the source.

The acquisition bid made by Yankuang would require assessment by Australia’s Foreign Investment Review Board (FIRB) and approval by the new treasurer Jim Chalmers.

As of 2021-end, Yancoal Australia had 819 million tonnes of saleable coal reserves and six billion tonnes of coal resources.

Yankuang Energy said that Yancoal Australia’s Moolarben, Hunter Valley Operations, and Mount Thorley Warkworth mines are coal assets with low operating costs and long mine life.

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