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Glencore, Apollo said to bid for Rio's last coal assets

Dec 20 2017 12:15
Brett Foley, Scott Deveau, David Stringer and Perry Williams, Bloomberg News

Melbourne - Glencore [JSE:GLN] and a group led by Apollo Global Management are among bidders set to be shortlisted for the sale of Rio Tinto Group’s last remaining coal mines, which may fetch more than $1.5bn, people familiar with the matter said.

Whitehaven Coal and South32 [JSE:S32] also made indicative offers for the Hail Creek and Kestrel mines by the deadline this month, the people said, asking not to be identified because the information is private.

The parties, which also include EMR Capital Advisors are preparing to enter the second round of the sale process, which will include management presentations and site visits, before deciding on final bids, the people said.

A sale would allow Rio, the world’s second-biggest miner, to complete its exit from coal and continue an asset divestment programme that has returned more than $7bn since 2013.

This year it agreed to sell $2.69bn of Australian mines to a company controlled by China’s Yanzhou Coal Mining, and CEO Jean-Sebastien Jacques said in September that a rebound in metals and energy prices has opened a window for additional sales.

Representatives for Rio Tinto, Whitehaven, EMR Capital and Glencore declined to comment.

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

Apollo bid

New York-based Apollo is bidding with Xcoal Energy & Resources and Canada Pension Plan Investment Board, the people said.

A representative for Xcoal Energy didn’t respond to Bloomberg queries, while Apollo and CPPIB declined to 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 5 million tons of coking and thermal coal in 2016.

The sale process, being run by Credit Suisse, also includes the Valeria and Winchester South coal projects in Queensland state, people familiar with the matter said in October.

A representative for Credit Suisse declined to comment.

Rio Tinto shares rose 1.3% in London by 8:06 and touched the highest since mid-November. Glencore added 0.4%.

Rio Tinto in September 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.

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glencore  |  rio tinto  |  mining  |  companies  |  coal
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