Glencore announced on 27 July that it had reached an agreement with Yancoal to purchase a 49% shareholding in Hunter Valley Operations (HVO), subject to completion of Yancoal's acquisition of Coal and Allied from Rio Tinto. Glencore has offered a cash consideration of US$1,139 million and a 27.9% share of US$240 million non-contingent royalties over a five year period (which we value at US$55.8 million). The deal represents fair value being done at a level close to our base case valuation. It is also at a slightly higher level than Yancoal's Coal & Allied deal with Rio Tinto and Mitsubishi Corporation that was struck at implied long-term benchmark prices of US$69 and U$116/tonne for thermal and hard coking coal respectively. We expect this deal to offer significant upside and synergies for both Yancoal and Glencore.