Glencore Xstrata Plc and Sumitomo Corporation have signed a binding agreement to acquire Rio Tinto’s 50.1% interest in the Clermont thermal coal mine in Queensland, Australia. The deal is valued at US$1,015 million for all in cash. The sale however, is subject to an agreement of Rio’s joint venture partners and Rio Tinto will still be committed to coal in central Queensland.
There are several riders in the acquisition by Glencore Xstrata Plc and Sumitomo Corporation of the Clermont Thermal Coal Mine; for instance, it is subject to customary closing conditions. It will have to go through certain regulatory approvals and there would not be any production during the first quarter of 2014.
Additionally, the acquisition of Clermont Thermal Coal Mine is subject to the terms of the Clermont Joint Venture documents which contain that three companies e.g. Mitsubishi Development Pty Ltd, J-Power Australia Pty Ltd and JCD Australia Pty Ltd hold pre-emptive rights.
Observers say that when the recent expansion of the Kestrel mine and a study into a possible expansion at Hail Creek, Rio Tinto would not be leaving coal mines in central Queensland. Nonetheless, selling Clermont, Australia’s third largest thermal coal mine, is a strategic decision for Rio Tinto to get some cash to invest in other new ventures.
According to the agreement once the deal is complete, Glencore will assume Rio Tinto’s role in relation to operational management and marketing for the Clermont joint venture in exchange of customary management fees. Mr. Peter Freyberg, Head of Glencore’s Coal Assets, says that the company is pleased to be jointly acquiring a controlling interest in this mine with Sumitomo.
Sumitomo is a joint venture partner for Glencore’s Queensland coal operations. Recently, Clermont which has been producing a large scale, low cost, producing mine, has become an asset for it brings an attractive financial return. Additionally, being Australia’s third largest thermal coal mine, it has ability to bypass 90% of coal without washing.
After Deal, Glencore Xstrata PLC Stock Rating Reaffirmed by Credit Suisse (GLEN)
After the deal with Rio Tinto, Glencore Xstrata PLC got its stocks rating restated by Credit Suisse which issued a note on Monday; now, the company has a GBX 400 ($6.47) price target on the stock. The company’s shares opened at 345.00 on Monday. The year has so far been dismal for it as its share went down to GBX 256.05.
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