Rio Tinto sells Hail Creek, Valeria coalmines to Glencore
Rio Tinto has sold its Hail Creek and Valeria coal projects in Queensland to Glencore for $2.2bn.
Rio Tinto has sold its Hail Creek and Valeria coal projects in Queensland to Glencore for $US1.7 billion ($2.2bn), taking it a step closer to a full exit from the coal industry.
The sale, outlined Tuesday night, will add even more cash to the existing pile sitting within Rio following the recent sale of its Coal & Allied business in NSW, although Rio was quick to state that the proceeds would be used “for general corporate purposes” rather than specifically earmarked for return to shareholders.
Rio has been running a sale process over its two remaining Australian coalmines, Hail Creek and Kestrel, since late last year. It is understood that the company is well advanced in its efforts to also find a buyer for Kestrel.
For Glencore, the acquisition adds to its already major position in Queensland’s coal industry. Glencore already owns five mining complexes in the Bowen Basin, and produced more than 38 million tonnes of thermal and coking coal in the state in 2016.
The acquisition of Hail Creek should significantly increase Glencore’s exposure to coking coal, a higher value commodity used in the production of steel. Glencore produced only 6.1 million tonnes of coking coal in its Australian mines last year, but Hail Creek alone produced 5.2 million tonnes of coking coal last year as well as 4.1 million tonnes of less valuable thermal coal.
The deal is the latest in a string of asset sales under Rio chief executive Jean-Sebastien Jacques as he looks to strip back the business to its high-margin iron ore, copper and aluminium assets.
“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,” Mr Jacques said in a statement.
“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.”
Rio’s minority partners in Hail Creek — Nippon Steel, Marubeni Coal and Sumisho Coal — all have the right to add their stakes to the sale, which will potentially cost Glencore a further $US340 million.
Hail Creek generated a pre-tax profit for Rio last year of $US357m.
The undeveloped Valeria deposit, meanwhile, contains 762 million tonnes of coal resources.
Paul Garvey