Glencore Xstrata and Rio Tinto are reportedly in discussion over a joint venture to strengthen their coal mining operations in the Hunter Valley.
Amid weak thermal coal prices and industry trends for cutting down on operating costs, the two companies will work towards reducing costs and improving profit margins.
Coal prices have been declining since the peak in 2011, with the Australian coal price at $89.51 per tonne in September 2013, compared to $129.15 in September 2011.
Glencore CEO Ivan Glasenberg said the joint venture would lead to better co-operation between the mining giants.
“How we’ll get and how soon we can reach an agreement, I don’t know, but it’s something that clearly makes a lot of economic sense”, he said.
“In the Hunter Valley assets there’s a lot to be done where we can get substantial synergies, so we’re talking to Rio Tinto, but it takes time for both sides to assess each other’s assets.”
Yesterday BHP Billiton Chief Executive Andrew Mackenzie predicted that more than 70 per cent of the world’s energy will be supplied by fossil fuels by 2030, with current demand for energy set to increase by 30 per cent.
In the Hunter Valley, Rio Tinto’s operations export up to 12 million tonnes of coal per annum, while Glencore supplies local power stations and exports to Japan and China.
Rio Tinto have recently faced difficulties with their Mt Thorley-Warkworth mine expansion project, with a small expansion approved in January, but a larger expansion proposal is currently being disputed in the NSW Supreme Court.
Glencore has also been rumoured to consider interests in BHP Billiton’s flagging nickel operations, after writedowns on the Nickel West mines.
The Australian Bureau of Statistics reported nickel exploration expenditure for the Decemeber 2013 down by 49.2 per cent.