Yancoal doubts in Anglo race

Yancoal is facing headwinds in the race for Anglo American.

Doubts are starting to emerge about Yancoal’s prospects in the race for Anglo American, with uncertainty over its backing from the Chinese government.

While the Chinese government, which controls Australian-listed Yancoal’s 62 per cent shareholder Yankuang Energy, has offered indicative approval, it is yet to give final approval for the group to bid for the $US3bn ($4.57bn) offering.

There’s chatter in the market the approval may not come through, as was the case when Yancoal bid for BHP’s Daunia and Blackwater coal mines last year.

Meanwhile, DataRoom understands Swiss trader Glencore had left the sale process but is in talks to rejoin the race, putting forward an offer for some of the assets. Analysts suggest it may want to pick up the troubled Grosvenor mine at an opportunistic price and would be keen to buy Moranbah North.

Both have been considered the jewels in the crown, but Grosvenor’s coal production has been wiped out by a recent mine fire. The setback is understood to have shaved about $US1bn off the asking price of the portfolio, taking it down to about $US3bn.

Yancoal is known to have been keen to buy the entire portfolio and had been in front on price, locking in approval from 15 Chinese lenders to fund a deal.

The talk in the market is if Yancoal is out, the Stanmore Coal-led consortium, backed by M Resources and Indonesian mining group Golden Energy and Resources, is the leading bidder, while US-based coal producer Peabody Energy, with backing from shareholder Elliott Investment Management (now holding less than 5 per cent in the stock after once being the largest investor), continues to work hard on a deal.

Peabody is keen to increase its exposure to coal and buy more assets after it bounced back from Chapter 11 bankruptcy in the US.

Goldman Sachs and Morgan Stanley are working on the Anglo American process, for which final bids are due next week.

In 2023, Anglo American’s steelmaking coal operations generated 15 million tonnes of coal, equating to $1.3bn of earnings before interest, tax, depreciation and amortisation.

It is targeting production of about 20 million tonnes per year at a unit cost of $US100 per tonne by 2026.

Anglo American announced a company break-up after fending off advances from BHP, leading to some of the best coal mines in the world being put on the market.

Elsewhere, St Barbara tapped the market last week for $100m at 38c per share to expand its Simberi Project, following industry peer Capricorn Metals, which secured $200m.

The St Barbara price was a 17.4 per cent discount to its last traded share price and was underwritten by Petra Capital.