Share

South32 said to study bid for $1.6bn Rio coal mines

Melbourne - South32 [JSE:S32] is studying a potential bid for Rio Tinto’s $1.6bn coking coal portfolio, people familiar with the matter said, as it seeks to take advantage of surging prices for the steelmaking ingredient.

The Perth-based company is working with an adviser as it weighs an offer for Rio Tinto’s Hail Creek and Kestrel mines in Australia, according to the people. It could face competition from suitors including Whitehaven Coal, which is also considering a bid, the people said, asking not to be identified because the information is private.

Rio Tinto distributed preliminary information on the assets to potential buyers earlier this month and has asked for indicative bids by early December, the people said. The company is also gauging buyer interest for its Valeria and Winchester South coal projects in Queensland state, one of the people said.

South32’s coking coal output tumbled by two-thirds in the three months to September 30 after operations at an Australian mine were halted. Output in part of the Illawarra operations resumed this month, though production will be lower than previously expected over at least the next two years, RBC Capital Markets said on Thursday in a note.

Coking coal prices have more than doubled since the start of last year. Chief executive officer Graham Kerr, who has said he wants to boost production of the commodity, in April dropped the purchase of a Peabody Energy coking coal mine after Australia’s competition regulator expressed concerns. 

Big deal

Any transaction would be the biggest purchase by the company, which hasn’t closed any major deals since it was spun off from BHP Billiton [JSE:BIL] more than two years ago. The company’s largest deal so far was an initial $88m investment in explorer Arizona Mining, data compiled by Bloomberg shows.

A spokesperson for South32 said the company continues to focus on identifying new opportunities outside its portfolio to compete for capital, in an emailed response to Bloomberg queries. He declined to comment on the Rio assets.

Private equity groups including EMR Capital Advisors are also considering bidding for the mines and other mining companies including Anglo American [JSE:ANG] are expected to study the details of the operations, the people said.

Spokespeople for Rio Tinto and Whitehaven declined to comment, while a spokesperson for EMR Capital declined to comment. A Brisbane-based spokesperson for Anglo American didn’t immediately respond to a request for comment.

Rio Tinto controls 82% of Hail Creek in the Bowen Basin region of Queensland state. The mine can produce as much as 10 million metric tons of coal a year, according to the firm’s website. It owns 80% of Kestrel, which produced five million tons of coking and thermal coal in 2016, the website shows. Rio rose 0.9% to 3 631 pence in London by 12:00.

The company last month boosted estimates of coal reserves at Kestrel by 62 million tons to 185 million tons, according to an exchange filing. The Valeria project is a semi-soft coking coal and thermal coal deposit close to Kestrel, while Winchester South is a coking coal asset in central Queensland.

SUBSCRIBE FOR FREE UPDATE: Get Fin24's top morning business news and opinions in your inbox.

Read Fin24's top stories trending on Twitter:

We live in a world where facts and fiction get blurred
Who we choose to trust can have a profound impact on our lives. Join thousands of devoted South Africans who look to News24 to bring them news they can trust every day. As we celebrate 25 years, become a News24 subscriber as we strive to keep you informed, inspired and empowered.
Join News24 today
heading
description
username
Show Comments ()
Rand - Dollar
18.94
-0.9%
Rand - Pound
24.10
-0.9%
Rand - Euro
20.59
-0.7%
Rand - Aus dollar
12.42
-0.9%
Rand - Yen
0.13
-0.8%
Platinum
915.75
-0.8%
Palladium
1,028.36
-3.5%
Gold
2,159.96
+0.2%
Silver
25.03
-0.6%
Brent Crude
85.34
-0.1%
Top 40
66,252
0.0%
All Share
72,431
0.0%
Resource 10
53,317
0.0%
Industrial 25
100,473
0.0%
Financial 15
16,622
0.0%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Editorial feedback and complaints

Contact the public editor with feedback for our journalists, complaints, queries or suggestions about articles on News24.

LEARN MORE
Government tenders

Find public sector tender opportunities in South Africa here.

Government tenders
This portal provides access to information on all tenders made by all public sector organisations in all spheres of government.
Browse tenders