Glencore to pay $1bn for half of Australian coal operation

GLENCORE has acquired half a coal mine in Australia, just weeks after losing a bidding war to buy the whole lot.

The FTSE 100 mining giant will pay $1.1bn (£839m) to buy a 49pc stake in Hunter Valley Operations in New South Wales.

It will buy out Japanese conglomerate Mitsubishi, which owns 32pc of the mine, and acquire a further 16.6pc from Yancoal, which only last month beat Glencore to buy a majority stake from Rio Tinto for $2.69bn.

Analysts hailed the move as a “bargain” that offered “the best of both worlds”, and a significant victory for Ivan Glasenberg, the Glencore boss, after he lost a very public bidding war to China-backed Yancoal.

Glencore and Yancoal will form a joint venture, with the former choosing the management team to run the mine. The Hunter Valley Operations mines lie adjacent to mines already owned by Glencore and the company has stated repeatedly that it sees a chance to wring cost savings from combining the two.

Glencore first expressed an interest in buying Rio’s side of the Hunter Valley in 2013.

It prizes the region for its “premium quality” coal, which is mainly exported to Japan, and believes the commodity will remain in high demand.

Rio, by contrast, wants to stop mining coal, which has fallen out of favour as an energy source in many parts of the world, and among environmentally conscious investors.

Under the terms of the deal, Glencore will also buy $300m worth of shares in Yancoal’s equity fund-raising, which it will need to do to fund its deal with Rio Tinto. The Chinese group is listed in Australia.

Glencore’s intervention means that Yancoal will not have to raise as much money as was originally expected to complete the transaction.

Meanwhile, Glencore will have the rights to market the coal through its vast trading network.

“The deal would be a win-win situation for Glencore and Yancoal,” said Paul Gait, an analyst at Bernstein.

Shares in Glencore rose 1.05p to 330.7p yesterday.