Glencore $1.7bn deal for Hail Creek, Valeria “not exorbitant”

GLENCORE’S acquisition of Rio Tinto’s Australian mines Hail Creek and the Valeria coal project for $1.7bn was hailed by Bernstein analyst, Paul Gait, who said the price paid by Glencore was “not exorbitant” as he was bullish on metallurgical coal prices.

“Glencore clearly have synergies in terms of both the operating and, physically, the marketing of these assets, and when I look at the price they’ve acquired these things for, it doesn’t seem to me to be exorbitant,” he was quoted by Reuters to have said.

The acquisition, announced by both companies earlier this week, follows Glencore’s purchase of half of Rio Tinto’s Hunter Valley coal operations, also in Australia, for $1.1bn last year in a deal with China’s Yancoal Australia.

Glencore is already the world’s biggest exporter of thermal coal used for power stations, and Hail Creek will give it a bigger stake in metallurgical coal used for steel making. “You’ve got one of the few big companies, in Glencore, that is both willing and able and clearly likes coal strategically and has been acquiring these assets,” said Gait.

The sale consists of Rio’s 82% interest in the Hail Creek operating mine and its 71.2% interest in the Valeria project, the company said in a statement.