Glencore Doubles Down on Coal With $1.7 Billion Australian Investment -- Update
20 Março 2018 - 10:14AM
Dow Jones News
By Scott Patterson and Oliver Griffin
LONDON -- Glencore PLC added to its growing portfolio of coal
assets with a $1.7 billion investment in a pair of Australian
producers -- part of a bet by the mining giant that demand for coal
in Southeast Asia will remain strong, even as competitors shy away
from the stuff.
The Swiss mining and trading giant said it acquired Rio Tinto
PLC's 82% interest in the Hail Creek coal mine and adjacent coal
resources, as well as its 71.2% interest in the Valeria coal
resource. The deal follows Glencore's purchase last year of a 49%
stake in Rio Tinto's Hunter Valley coal operations in Australia,
which sit adjacent to Glencore's coal facilities, for $1.1
billion.
While some big integrated mining giants such as Rio Tinto have
been backing away from coal, Glencore, led by former coal trader
Ivan Glasenberg, has been doubling down in a gamble that Southeast
Asian countries continue to rely on it as a cheap fuel for power
plants.
Hail Creek produces metallurgical coal, largely used in steel
construction, as well as thermal coal for power generation. Valeria
primarily produces thermal coal.
The backlash against coal among some mining companies is driven
in part by concerns over its role as a fuel blamed for contributing
to climate change. Regulatory scrutiny and a push toward
alternative-energy sources, such as solar and wind, could leave
large chunks of coal assets stranded in the ground. BHP Billiton
Ltd., the world's largest mining company, in December said it is
reconsidering its membership in the World Coal Association and U.S.
Chamber of Commerce over disagreements on climate policy.
Mr. Glasenberg, meanwhile, is ramping up his company's exposure
to coal, hoping to take advantage of solid demand and weak
investments in new coal assets. Three years ago, Glencore's share
price was suffering after a big decline in coal prices. But a rally
last year in coal, as well as other important commodities to
Glencore, such as copper, cobalt and nickel, have buoyed its stock,
which is up more than 400% since a gut-wrenching downward spiral
pummeled its shares in 2015.
"Thermal coal, once again, this is powering Asian growth and
urbanization," Mr. Glasenberg said on a December conference call.
"We see in Southeast Asia and Asia, the demand is increasing." Coal
is a commodity "where there's been under investment over the
years," with lackluster expansion in Western countries, he
said.
Glencore could boost its Australian coal assets even more. The
remaining 18% of Hail Creek is owned by Nippon Steel Australia Pty
Ltd, Marubeni Coal Pty Ltd., and Sumisho Coal Development Pty Ltd.
Each has the right to sell its share to Glencore, which could
result in an additional payment of $340 million, Glencore said.
During the 2017 financial year, Rio Tinto's attributable pretax
profit from Hail Creek was $357 million, Glencore said. Rio Tinto
said it expects the deal to be completed in the second half of
2018, adding that the proceeds will be used for general corporate
purchases.
Write to Scott Patterson at scott.patterson@wsj.com
(END) Dow Jones Newswires
March 20, 2018 08:59 ET (12:59 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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