Rio’s sale of Australian coal mines paves way for Glencore’s arrival

RIO TINTO has finally sold its Australian coal mines to Yancoal, paving the way for a follow-up deal that will allow Glencore to take a stake in the assets and begin operating them.

FTSE 100 miner Rio announced the completion of the Coal & Allied deal yesterday, drawing an end to an eightmonth saga that sparked a bidding war between Asx-listed Yancoal – its preferred buyer – and Glencore.

Yancoal has paid $2.69bn (£2bn) to acquire Coal & Allied, which mines thermal coal in New South Wales, largely for export to Japan.

It completed a $2.5bn fundraising last month to pay for the business, which had been coveted by Glencore because of its proximity to its own coal mines.

Having been rebuffed by Rio, Glencore subsequently struck a deal with Yancoal and Mitsubishi, which also owns a slice of the Hunter Valley mines, to buy a 49pc stake for $1bn. Under the deal, Glencore will also take over operation of the mines. Glencore said it would look to complete its deal within six months. It is also entitled to a share of Hunter Valley profits from yesterday.

The price of thermal coal, which is used in power stations, has risen on the back of supply restrictions in China. Glencore has made no secret of its desire to own more coal mines, even as companies such as Rio back out of the commodity. Coal’s poor environmental credentials have meant it has fallen out of favour with investors, but Glencore maintains it will remain in long-term demand, particularly in Asia.

The sale leaves Rio sitting pretty, with many analysts tipping the Angloaustralian miner to announce a special dividend later this year.

Rio, which paid a record interim dividend of $2bn last month, said proceeds from the deal would go to “general corporate purposes”.

Analysts at Investec said of the business: “Tax on the sale is expected to be low, given carried forward losses, so this leaves Rio in the very comfortable position of wondering just what to do with the cash.”

Rio shares rose 13p to end at £37.60, while Glencore. Glencore climbed 2pc to 367p.