Rio Divests Coal Assets To Glencore

By Glenn Dyer | More Articles by Glenn Dyer

Rio Tinto has sold its Hail Creek coking coal mine in Queensland to Glencore for $US1.7 billion, expanding Glencore’s control over Australian coal exports.

Switzerland-based Glencore said it had agreed to buy Rio’s 82% interest in the Queensland mine, as well as the company’s 71.2% interest in the Valeria coal mine.

For a further $US340 million, Glencore can buy the remaining 18% in Hail Creek from Nippon Steel, Marubeni Coal and Sumisho Coal Development. The companies all have a right to sell their share to Glencore under change of control provisions in the shareholder agreement.

Glencore is already a large producer of coal in Australia, producing over 87 million tonnes of the fuel last year from its 17 mines in Queensland and New South Wales.

Hail Creek will lift this to more than 96 million tonnes.

“The sale of Hail Creek and Valeria delivers compelling value for our shareholders and continues our strategy of strengthening our portfolio," Chief Executive Jean-Sebastien Jacques said in the statement.

Rio Tinto made a strategic decision in 2017 to exit coal and focus on growth in iron ore, copper and its aluminium division.

The deal, which follows the $US2.7 billion sale of its Hunter Valley coal operations in Australia to Yancoal last year, is subject to regulatory approvals and is expected to be completed in the second half of this year.

Glencore bought a 49% interest in those Yancoal’s Hunter Valley mines last year.

Rio Tinto’s Kestrel coal mine in Queensland is also currently up for sale.

Hail Creek mine produces coking coal for steel making as well as thermal coal for power stations. It produced about 9.4 million tonnes of coal for export last year.

In its statement Rio Tinto said:

Rio Tinto anticipates that Australian income tax will be payable on sale proceeds which are in excess of the cost base of the assets at completion. The currently estimated tax payable is in the order of $300 million, however the quantum of tax payable will depend on the final proceeds (after taking into account working capital adjustments), the tax cost base at completion and the total of capital gains and losses realised by the Rio Tinto Australian tax consolidated group as at 31 December 2018.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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