Glencore has obtained half a coal mine in Australia, just weeks after succumbing to a bidding war to purchase the whole lot.
The FTSE 100 mining giant will need $1.1bn (£839m) to acquire a 49pc share in the Hunter Valley Operations in New South Wales. It will purchase Japanese conglomerate Mitsubishi, which holds 32pc of the mine, and gain an extra 16.6pc from Yancoal, which just last month beat Glencore to get a majority share from Rio Tinto for $2.69bn.
Analysts welcomed the move as a “bargain” that gave “the best of both worlds”, and a vital victory for Glencore chief Ivan Glasenberg, after he lost a bidding war to China-backed Yancoal.
Glencore and Yancoal will create a shared venture with the former picking the management team to operate the mines.
The Hunter Valley Operations lie next to mines already controlled by Glencore, and the firm has repeatedly said that it sees a possibility to wring cost savings from merging the two.
Glencore first showed an interest in purchasing Rio’s side of the Hunter Valley in 2013. It values the area for its “premium quality” coal, which is mainly shipped to Japan, and thinks the commodity will continue in high demand. On the other hand, Rio wants to stop quarrying coal, which has slipped out of favour as a power source in many parts of the planet and among environmentally informed investors.
Under the regulations of the deal, Glencore will also purchase $300m worth of shares in Yancoal’s equity raising, which it will require doing to fund its venture with Rio Tinto.
Glencore’s interference means that Yancoal will not have to borrow as much money as anticipated to complete the deal. In the meantime, Glencore will have the rights to sell the coal through its wide exchanging network.
“The deal would be a win-win situation for Glencore and Yancoal,” said Paul Gait, an analyst at Bernstein.