Insight

Glencore continues coal acquisition spree in $1.7 billion deal with Rio Tinto

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Report summary

Glencore announced it had agreed to purchase Rio Tinto's 82% interest in the Hail Creek coal mine and 71.2% interest in the Valeria thermal coal project in Queensland for US$1.7 billion in cash. Assuming a zero valuation for the Valeria project, we estimate the deal was struck at a 41% premium to our valuation of Hail Creek. We estimate consideration payable results in a deal-implied long-term real 2018$ benchmark export hard coking coal and thermal coal prices of US$146/tonne (FOB Qld) and US$83/tonne (FOB Newcastle) respectively.

What's included

This report contains

  • Document

    Glencore_coal_spree.xls

    XLS 2.46 MB

  • Document

    Glencore continues coal acquisition spree in $1.7 billion deal with Rio Tinto

    ZIP 1.19 MB

  • Document

    Glencore continues coal acquisition spree in $1.7 billion deal with Rio Tinto

    ZIP 1.19 MB

Table of contents

  • Overview
  • Deal summary
  • Hail Creek
  • Valeria
  • Deal Analysis
  • Strategic rationale, upside and risks

Tables and charts

This report includes 15 images and tables including:

Tables

  • Deal summary
  • Marketable reserves (as at 1 July 2018)
  • Hail Creek coal export sales by coal type and destination FY17 (million tonnes)
  • Summary valuation
  • Valuation metrics
  • Economic assumptions

Images

  • Location map
  • Metallurgical coal sales share FY17 (%)
  • Thermal coal sales share FY17 (%)
  • Deal implied prices move higher on recovery in metallurgical coal prices
  • Thermal deal implied prices also moving higher
  • Glencore Australian pro-forma production profile - metallurgical coal
  • Glencore Australian pro-forma production profile - thermal coal
  • Seaborne metcoal margin curve 2018
  • Seaborne thermal coal margin curve 2018

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