Yancoal Group (China) Offered US$2.69 Billion in Mergers and Acquisitions of Rio Tinto Assets 01 May 2018
After the completion of the acquisition, the resources of the new Yancoal Australia company will reach 5.713 billion tons, and the annual output of equity raw coal is expected to increase from the current 18.89 million tons to 42.79 million tons. These figures mean that Yancoal Australia will become the largest independent coal operator in Australia, and its coal reserves and production will rise to third place in Australia, after Glencore and Rio Tinto.
From the perspective of company operations, Yancoal Australia's merger and acquisition of coal with stronger profitability can use the positive cash flow of high-quality assets to optimize the asset structure to help Yancoal Australia achieve its turnaround. At the same time, the acquisition will also help Yancoal Australia's independent financing capability in the capital market and create a platform for the continued development of Yanzhou Coal and Yancoal Australia.
The more important significance than scale and financing lie in the right to speak about international coal prices. With the expansion of production capacity, Yancoal Australia will become an important Australian coal supplier to Japan and South Korea in the future. It is expected to participate in or even dominate the thermal coal negotiations in Japan and Australia, and significantly increase the power of Chinese-funded coal companies in the Asia-Pacific oceanic coal market and pricing rights.
In fact, although China is a big coal producer, in recent years it has lacked the right to speak in the international coal market.
According to public information, Australia exports about 200-250 million tons of high-quality coal to the international market each year, accounting for about 30% of the world's total coal exports, and Japan is the largest exporter of Australian coal. At present, the coal prices sold to Japan and South Korea are dominated by Glencore, Rio Tinto and BHP Billiton. In 2015, thermal coal and semi-soft coking coal sold to Japan by joint coal accounted for 64% and 33% of the total sales.
Industry experts generally believe that after the completion of the acquisition, Yancoal Australia will become the largest independent coal operator in Australia. Coal reserves and production are second only to Glencore and BHP Billiton and will certainly replace Rio Tinto’s position in the seaborne thermal coal market in Japan and Australia. As an important Chinese-funded coal company that exports to Japan and South Korea, it is expected to participate in Japan's thermal coal pricing negotiations.