Glencore has signed $1.13bn in agreements with Yancoal Australia to acquire a 49% interest in the Hunter Valley Operations (HVO) coal mine in New South Wales, Australia.
The HVO mining operations form part of Yancoal’s proposed acquisition of Coal & Allied (C&A) from Rio Tinto.
Once the acquisition of C&A is complete, Yancoal and Glencore will form a joint venture (JV) for the HVO. Under this, Glencore will be entitled to its share of HVO profits.
Under the agreement, Glencore will also contribute to royalties payable by Yancoal to Rio Tinto on production from HVO in connection with the C&A acquisition. This will involve Glencore paying a 27.9% share of $240m non-contingent royalties over five years and 49% of price contingent royalties.
With the acquisition of 49% interest in HVO, Glencore will increase its existing portfolio in the Hunter Valley, and achieve operating synergies as a result.
Located in proximity to Glencore’s existing mines in the Hunter Valley, HVO produces export thermal coal and semi-soft coking coal.
Under the deal, the company will acquire Yancoal’s 16.6% interest in HVO.
In order to realise the 49% stake, Glencore will work in partnership with Yancoal to acquire Mitsubishi Development’s 32.4% interest in HVO.
Furthermore, the agreements will see Glencore subscribe for $300m worth of shares in Yancoal’s equity raising.
Subject to regulatory approvals, the transaction is scheduled to be complete within six months.
Glencore will realise a total coal production capacity of 69 million tonnes per annum from its mines in the Hunter Valley, including the proposed HVO acquisition, enabling it to serve Asian markets.