Kestrel Deal Sees Rio Complete Coal Exit

By Glenn Dyer | More Articles by Glenn Dyer

Rio Tinto completed its exit from coal with the sale of its Kestrel underground coking coal mine in Queensland for a better than expected $US2.25 billion. The buyers are a private equity company called EMR Capital and an Indonesian miner, PT Adaro Energy Tbk (Adaro).

The deal follows the sale last week of its 82% stake in the Hail Creek mine and Valeria prospect, also in Queensland’s Bowen basin for $US1.7 billion, and the sale last year of its NSW coal interests housed in Coal and Allied for just on $US2.7 billion.

Glencore bought the Hail Creek and Valeria interests and bought into the NSW coal mines, purchasing 49% from Shenhua Coal Australia, a Chinese owned coal miner.

The Kestrel sale takes the amount raised by Rio to more $US6.6 billion, or more than $A8 billion and raises the prospect of a capital return to shareholders later in the year.

Rio Tinto chief executive J-S Jacques said “The sale of Kestrel, together with the announced divestments of Hail Creek and our undeveloped coal projects, delivers exceptional value to our shareholders and will leave our portfolio stronger and more focused on delivering the highest returns through targeted allocation of capital.

“I would like to thank the many people at Rio Tinto and the communities where we operate, whose hard work and commitment has contributed to the success of the coal business over many years. I wish them continued success under new ownership.”

The transaction is subject to customary conditions precedent being satisfied, including the receipt of regulatory approvals from Australia’s Foreign Investment Review Board and the Queensland Government.

Subject to all regulatory approvals and other conditions precedent being satisfied, completion is expected to occur in the second half of this year. It will bring the total amount achieved from the recent divestments of Rio Tinto’s Queensland coal assets to $4.15 billion, with the funds to be used for general corporate purposes.

The Kestrel mine is located in the Bowen Basin north-east of Emerald in central Queensland, Australia.

In 2017 the Kestrel mine produced 5.1 million tonnes of saleable coal, comprising 4.25 million tonnes of hard coking coal and 0.84 million tonnes of thermal coal. At the end last December, Rio Tinto reported marketable reserves for Kestrel of 146 million tonnes and mineral resources of 241 million tonnes.

In 2017 Kestrel generated earnings before interest, tax, depreciation and amortisation of $341 million and profit before tax of $258 million, being Rio Tinto’s attributable share. Rio Tinto said its share of gross assets at 31 December 2017 was $1,441 billion.

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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