Insight
Costly but transformational: Yancoal buys Coal and Allied from Rio Tinto
*Please note that this report only includes an Excel data file if this is indicated in "What's included" below
Report summary
Yancoal and Rio Tinto announced January 24 they had entered into a binding agreement for Yancoal to buy Rio Tinto's NSW thermal and semi-soft coking coal producer, Coal and Allied. The deal is transformational for Yancoal, propelling it to become Australia's fourth largest coal producer. However nothing comes for free, and Yancoal have paid a significant premium to secure the assets, making it an attractive deal for Rio Tinto. The total upfront consideration of US$2.35 billion (assuming Yancoal elects to pay the entire amount upfront) represents a 60% premium to our valuation of US$1.46 billion. We estimate the deal was struck at an implied long-term benchmark thermal coal price of US$74/tonne and a hard coking coal price of US$124/tonne (flat real 2017 terms).
Table of contents
- Overview
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Deal summary
- Key facts
- Location map
-
Deal Analysis
- Summary valuation
- Valuation metrics
- Economic assumptions
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Upside, risks, and strategic rationale
- Top 10 producers 2017 (pre and post deal, attributable)
- Yancoal and Coal and Allied margins 2017
- Valuation sensitivity
Tables and charts
This report includes the following images and tables:
- Costly but transformational: Yancoal buys Coal and Allied from Rio Tinto: Table 1
- Costly but transformational: Yancoal buys Coal and Allied from Rio Tinto: Image 1
- Costly but transformational: Yancoal buys Coal and Allied from Rio Tinto: Table 2
- Costly but transformational: Yancoal buys Coal and Allied from Rio Tinto: Table 3
- Costly but transformational: Yancoal buys Coal and Allied from Rio Tinto: Table 4
- Costly but transformational: Yancoal buys Coal and Allied from Rio Tinto: Image 2
- Seaborne export thermal coal margins
- Seaborne export metallurgical coal margins
- Costly but transformational: Yancoal buys Coal and Allied from Rio Tinto: Image 5
What's included
This report contains:
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