Yancoal unveils $US710m bid for Mitsubishi Hunter Valley coal stake

Image: Rio Tinto

Yancoal has launched a $US710 million ($946.9 million) offer for Mitsubishi’s stake in its Hunter Valley Operations Joint Venture (HVO JV) with Rio Tinto in New South Wales.

The bid fulfils Yancoal’s obligation to make a ‘tag-along offer’ to Mitsubishi under its agreement to acquire Rio Tinto’s Hunter Valley thermal coal division, Coal & Allied Industries.

Yancoal, a Chinese-controlled company listed on the ASX, last month secured Foreign Investment Review Board (FIRB) approval to acquire Coal & Allied for $US2.45 billion.

If the Mitsubishi offer is accepted, Yancoal will secure a binding agreement to acquire its 32.4 per cent interest in the HVO JV.

Yancoal Australia chief executive officer Reinhold Schmidt said the offer was another important milestone in the strategic acquisition of Coal & Allied.

“We have negotiated a commercially robust offer in the best interests of all parties and the future growth of the Coal & Allied assets,” Schmidt said.

“With Rio Tinto’s support, we look forward to progressing the next steps in the Coal & Allied transaction to become Australia’s largest independent coal producer.”

If accepted, the deal will be completed six months after the Coal & Allied transaction has been executed or 10 business days after all conditions of the deal with Mitsubishi have been satisfied – whichever of the two takes place at a later date.

Yancoal launched the bid for the Rio Hunter Valley coal subsidiary in January. Coal & Allied’s assets include majority shares in the Hunter Valley Operations mine, the Mount Thorley mine and the Warkworth mine. The three operations produced 25.9 million tonnes (Mt) of thermal and semi-soft coking coal in 2016, of which 17.1Mt were Rio Tinto’s share.

The deal involved a $US1.95 billion upfront payment and the potential for a further $US500 million over five years. Rio Tinto will also be entitled to potential royalties.