Yancoal to raise US$2.5bn to fund Coal & Allied acquisition

News | 3 August 2017

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Yancoal, one of the largest coal miners in Australia, will launch a US$2.5bn equity raising to fund its purchase of Coal & Allied from Rio Tinto.

Yancoal is buying Coal & Allied for a total of US$2.69bn, made up of a US$2.45bn cash payment on completion, US$240 million in future non-contingent royalty payments over five years, and a coal price linked contingent royalty.

However, Noble Group (which is anticipating US$1.8bn losses in Q2 and is selling assets to fund its core operations) owns just over 13% of Yancoal and as a minority shareholder, it stands to have its stake in the company diluted if the equity raising goes ahead and is expected to object to the move.

“The strategic acquisition of Coal & Allied will redefine our position within the global coal marketplace and strengthen Yancoal Australia for the future,” said Xiyong Li, Yancoal chairman.

Yanzhou Coal Mining Company owns the majority of shares in Yancoal and has said it will subscribe for US$1bn in the equity raising.

Glencore has committed US$300m as part of its purchase of 49% of the Hunter Valley Operations, which is one of the Coal & Allied coal mines.

Various other investors have expressed their interest too, but none have made an official offer yet.

If the proceeds in the raising are less than US$2.45bn, a maximum of US$1bn can be withdrawn from a new loan facility provided by Yankuang Group.

The group is a 56% shareholder of Yanzou, which owns the majority of Yancoal shares.

The successful competition of Yancoal’s purchase of Coal & Allied will see the company become Australia’s the third largest pure-play coal producer, behind Glencore and BHP. 

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