Monday, 26 June, 2017

Rio Sells Australia Coal Unit to Yancoal for $2.45 Billion

Julia Daniel | 25 January, 2017, 11:10

Yancoal hopes to add the purchase to their extensive portfolio in the Australian coal space, and are now the owner or operator of seven operations.

The mines produced a total of 25.9 million tonnes of coal in 2016, of which Rio's share was 17.1 million tonnes.

Rio said the sale of its subsidiary Coal & Allied Industries to Yancoal is consistent with the company's strategy of reshaping its portfolio to use capital more effectively, and delivers value for shareholders.

The Coal & Allied unit includes Rio Tinto's interests in the Hunter Valley Operations mine, an 80% interest in the Mount Thorley mine, a 55.6% stake in the Warkworth mine, and a 36.5% share in a coal export terminal at Newcastle.

Yancoal chairman Xiyong Li said the Coal & Allied deal would be a transformative acquisition for the company and form the basis of its future growth in Australia.

The move comes as Rio Tinto has aggressively attempted to divest itself of its coal mines over the past few years, as part of a broader asset divestiture program.

RIO Tinto will sell the Australian arm that holds its Hunter mines to Yancoal. Rio said the sale won't have a material impact on its earnings per share.

Even though it is listed locally, there is limited liquidity in Yancoal since after Yanzhou, trader Noble Group has a 13 per cent stake after blocking an earlier move by Yanzhou to take ful control of the company.

"We are confident that Coal & Allied will continue to contribute to the NSW economy and the communities of the Hunter Valley under a new owner", Jacques said.

Yancoal intends to fund the acquisition through a capital raising and pro-rata entitlement offer of shares.

Rio shares were up $2.47, or 3.81 per cent, at $67.23 on Wednesday while Yancoal shares were steady at 48 cents on the Australian Securities Exchange.

The transaction must still be approved by the Australian Government, NSW Government and Chinese regulatory agencies.

The Hunter Valley Operations and Mount Thorley Warkworth mines together produced 25.9 million tons of saleable thermal and semi-soft coking coal a year ago, with 17.1 million tons being Rio's share.

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