Rio Tinto to sell Queensland coal mine stakes to Glencore for $1.7bn

Mining industry news : Australian-British mining giant Rio Tinto has made a $1.7 billion deal to exit from two Queensland coal mines – the Hail Creek coal mine and the Valeria coal mine in Australia by selling its stakes to Swiss natural resource company Glencore.

Rio Tinto has been looking to divest all of its coal assets and the sale of the two Queensland coal mines in Australia is in line with that strategy. It follows the September 2017 deal in which Rio Tinto sold its Australia-based subsidiary Coal & Allied Industries to Yancoal Australia for $2.45 billion.

Commenting on the sale of the Queensland coal mines, J-S Jacques – CEO of Rio Tinto, said: “The sale of Hail Creek and Valeria delivers compelling value for our shareholders and continues our strategy of strengthening our portfolio, focusing on highest returns, maintaining a strong balance sheet and allocating capital to the highest value opportunities.

“We expect that Hail Creek will continue to perform strongly under its new owner, securing long-term jobs and continuing its contribution to the State of Queensland.”

Hail Creek coal mine in Queensland, Australia. Photo Copyright © 2017 Rio Tinto.

Rio Tinto holds a stake of 82% in the Hail Creek coal mine and nearby coal resources. Its partners in this Queensland coal mine in the northern Bowen Basin are Nippon Steel Australia (8%), Marubeni Coal (6.67%) and Sumisho Coal Development (3.33%).

The three partners of Rio Tinto are expected to follow suit by selling their respective stakes, a combined 18% interest in the Hail Creek coal mine to Glencore for a total sum of $340 million.

In 2017, the Hail Creek coal mine registered a production of nearly 9.4 million tonnes of coal, which was made up of 5.25 million tonnes of hard coking coal and 4.13 million tonnes of thermal coal.

The Lake Elphinstone and Mount Robert tenements found near the Hail Creek coal mine are also part of the Hail Creek Complex, and are very much part of the transaction.

The other asset being acquired by Glencore is the undeveloped Valeria coal project, where it will buy out Rio Tinto’s 71.2% stake in the Queensland coal mine, located near Emerald. The Valeria coal mine is estimated to contain 762 million tonnes of coal mineral resources.

For Glencore, the acquisition of the two Queensland coal mines is expected to strengthen its coal operations in Australia. The Swiss mining company is currently engaged in 13 mining complexes in Australia, which includes 17 operational mines across the states of New South Wales and Queensland.