Chinese miner raising $3b to secure Rio coal assets

YANCOAL is seeking $US2.5 billion ($A3.1 billion) from investors to fund its “strategically compelling” purchase of Coal & Allied from mining giant Rio Tinto.

Yancoal won a bidding war with Glencore in June to secure Coal & Allied and yesterday announced details of a 23.6 for 1 renounceable rights offer and a share placement to strategic investors to fund the deal.

Rio Tinto rejected a $US2.5 billion ($A3.1 billion) offer from Glencore for the NSW Hunter Valley-based coal assets and recommended the Yancoal bid that will ensure Rio at least five years of $US240 million in royalty payments.

Yancoal chairman Xiyong Li said yesterday the acquisition, totalling $US2.69 billion, would redefine the company’s position in the global coal marketplace and transform Yancoal into Australia’s largest pureplay coal producer.

The rights offer is 10 US cents per new share — a steep discount from the 39 Australian cents Yancoal share price before a trading halt last month.

The deal could give Yancoal, controlled by the New York, Hong Kong and Shanghai-listed coal giant Yanzhou, majority interests in three of the 10 largest low-cost thermal coal mining operations in Australia.

Yanzhou is connected to China’s Shandong provincial government through Shandong’s 70 per cent controlling stake in Yanzhou’s majority owner, Yankuang Group. If the amount raised falls below $US2.45 billion, the shortfall — up to $US1 billion — will be made available via a new loan facility from Yankuang.

Yanzhou has committed to take up $US1 billion of its entitlements and the balance of the entitlement offer is underwritten to the combined value of $US1.3 billion, with Swiss company Glencore providing $US300 million.

Two Chinese-state connected investment vehicles, China Cinda Asset Management Co, and Shandong Lucion Investment Holdings Group, will underwrite the rest, $US750 million and $US250 million respectively.

On the funding side, Yancoal secured commitments from Shandong Taizhong Energy and the Tianjin-based commodity trader, General Nice Development, respectively to subscribe for $US100 million and $US50 million, respectively, and $US150 million in aggregate, in new shares.