A bidding war has broken out between Yancoal and Glencore for the Australia-based mining assets of Rio Tinto. This bidding war is an unexpected development, as until now only Yancoal was in the running to acquire the assets. Glencore made the offer to Rio Tinto out of the blue.
Bidding war for coal assets
Mining contractors and companies are realising that governments are slowly shifting from coal-based energy to other greener and more sustainable energy sources. Many mining majors are therefore gradually divesting their mining assets. This bidding war for coal assets has created quite a furore in the Australian mining sector.
Rio Tinto is the second largest mining company in the world, and it has decided to withdraw from coal mining in Australia at a time when coal prices are falling and the market is fluctuating.
In January 2017, Rio Tinto announced that it was selling Coal & Allied to Yancoal Australia, which is owned by Yanzhou Coal, the largest mining company in China. The mining assets were to be sold for US$2.45 billion. However, Glencore decided to join the bidding by offering Rio Tinto US$100 million more than what Yancoal had offered. Glencore already owns mines that are located close to Coal & Allied mines in New South Wales.
Who will win the bidding war?
A Rio Tinto spokesperson announced that the company’s board and management would give Glencore’s proposal the appropriate consideration. The agreement with Yancoal Australia allows Rio Tinto to check if other offers are better than the China-backed mining contractor’s offer.
Glencore has given Rio Tinto until 26th June to consider its offer, which is fully funded. However, the Swiss mining company did say that it would purchase minority stakes in Mitsubishi’s mining assets should the Rio Tinto deal fall through.
Yancoal has already received approval from Australia’s Foreign Investment Review Board. However, Glencore would also have to get the approval if Rio Tinto decides in its favour.