Aldi Plans $5 Billion US Investment, Glencore Bids for Rio Coal Assets

With a tenement footprint that's more or less surrounded by Glencore's own mines, Rio Tinto's Hunter Valley pits have always been an obvious target for the trader.

Glencore has a number of neighbouring mines in the Hunter Valley and CEO Ivan Glasenberg has long wanted the assets, in part to cut costs.

Yancoal has signalled it may be willing to raise its bid for Rio Tinto's Hunter Valley coal assets, after striking an agreement with Mitsubishi to buy its stakes in the same thermal coal mines.

Glencore Plc is doubling down on coal, even as rivals BHP Billiton Ltd. and Rio Tinto Group move away from the world's dirtiest fossil fuel. Glencore's offer expires on June 26, a day before Rio Tinto has scheduled an extraordinary general meeting to vote on the deal with Yancoal.

China's Yancoal was thought to have the $2.45bn (£1.93bn) deal for the large New South Wales assets in the bag, but Glencore announced a counter bid for $2.55bn on Friday evening. Yancoal has offered $US710 million. Rio is considering the proposal, which trumps an agreement made with a unit of China's Yanzhou Coal Mining Co. The company's combined portfolio of mines in the Hunter Valley would have production capacity of 81m tonnes a year of high energy coal that feeds increasing Asian demand for high efficiency, low emission coal. Nicholas Hoffman & Company LLC. raised its stake in Rio Tinto plc by 0.3% in the first quarter.

Yancoal said: "If Rio Tinto determines that the Glencore Proposal is a superior proposal, Yancoal Australia will have a right to match or better that proposal".

At the very least there could be competition undertakings given surrounding an expanded Glencore holding in the Newcastle coal loader, according to industry figures.

Glencore said that its proposal is only subject to regulatory conditions and has already secured an approval from the Japanese anti-trust authorities.

But Yancoal has a big problem in Noble has suffered a massive loss of confidence in its own financial health in recent months and itself is struggling to survive.

Interestingly, Glencore said it would stick to balance sheet conservatism by selling no less than $1.5bn "of other assets" or selling down its stake in C&A if acquired to as much as 50%.

The Glencore offer is a $US2.05 billion up front payment with five annual $US100 million payments along with the same royalty structure.

  • Zachary Reyes