Chinese-controlled Yancoal has secured Foreign Investment Review Board (FIRB) approval for a $US2.45 billion ($3.2 billion) acquisition of Rio Tinto’s Hunter Valley coal division in New South Wales.
Yancoal today reported the Australian Government foreign investment watchdog had no objection to it purchasing Coal & Allied Industries, the Rio Tinto subsidiary which owns majority shares in the Hunter Valley, Mount Thorley and Warkworth coal mines.
The FIRB approval is “a critical milestone”, according to Yancoal.
“Today’s FIRB approval is a positive step forward for Yancoal, its shareholders and the Hunter Valley, demonstrating the Australian Government’s support for continued investment into the local resources sector,” Yancoal chief executive officer Reinhold Schmidt said.
“Yancoal remains a key provider of employment, training and investment within NSW and we look forward to continuing to grow our operations.”
The proposed deal between Rio Tinto and Yancoal, announced in January, involves a $US1.95 billion upfront payment and the potential for a further $US500 million over a five-year period. Rio Tinto would also potentially be entitled to royalties once the deal is completed.
Yancoal’s Australian coal portfolio would expand to seven sites across Queensland and NSW with the acquisition of Coal & Allied. The ASX-listed company previously announced that it plans to fund the transaction through a capital raising and entitlement offer of its shares.
The acquisition remains subject to additional conditions, including approval from shareholders of Rio Tinto and Yancoal’s majority owner, Yanzhou Coal Mining.