Rio Tinto continues coal exit with $US2.25bn Kestrel sale

Rio Tinto has agreed to sell its 80 per cent stake in the Kestrel underground coal mine in Queensland to a consortium of EMR Capital and Indonesia’s PT Adaro Energy for $US2.25 billion ($2.9 billion).

The Kestrel deal adds to Rio’s plans in the state to offload interests in the Hail Creek mine and Valeria project to Glencore for $US1.7 billion, and the Winchester South project to Whitehaven Coal for $US200 million.

All of these assets, including Kestrel, are located in the Bowen Basin. Kestrel, about 40km from Emerald, produced 5.1 million tonnes (Mt) of coal in 2017, comprising 4.25Mt of hard coking coal and 0.84Mt of thermal coal. Rio reported last December that Kestrel had reserves of 146Mt and resources of 241Mt.

Rio Tinto chief executive Jean-Sébastien Jacques said the sale of its coal assets would leave the company’s portfolio stronger and more focused on delivering the highest returns through targeted allocation of capital.

“I would like to thank the many people at Rio Tinto and the communities where we operate, whose hard work and commitment has contributed to the success of the coal business over many years. I wish them continued success under new ownership,” Jacques said.

If the transaction is approved, Melbourne-based equity fund EMR and Adaro will jointly manage and operate Kestrel. EMR is chaired by Owen Hegarty, who spent 25 years with Rio Tinto and was managing director of Oxiana.

EMR chief executive officer Jason Cheng said the transaction represented a once-in-a-generation opportunity.

“Coking coal is one of our four core commodities and it offers excellent demand and supply fundamentals for decades into the future,” Cheng said.

EMR also owns a share in the West Cumbria Mining coking coal operation in the United Kingdom. In Australia, EMR operates the Golden Grove mine in Western Australia and has guided the re-launch of the former Mount Morgan mine in Queensland under Capricorn Copper.

Adaro, one of Indonesia largest coal miners, produces more than 50Mt a year and supplies thermal coal to global seaborne market.

Garibaldi Thohir, Adaro chief executive office, commented: “The acquisition of the Kestrel mine is a significant milestone in Adaro’s strategic expansion of its portfolio of metallurgical coal as well as one of its largest investments outside of Indonesia.”

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