Coal mining M&A talks in Australia

According to The Australian Financial Review today, a major iron ore exporter, Rio Tinto, is hoping to reap more than $US 3 billion ($3.9 billion) in a sale of its Hunter Valley coal business, with X2 chief Mick Davis likely to face off with his arch rival and the man many see as the natural owner of the assets, Glencore's Ivan Glasenberg.

Glencore's coal business in the Hunter Valley is right next door to Rio Tinto's operations, and the Swiss giant still has designs on a deal after its attempt last year to execute a joint venture of the two coal divisions in NSW fell flat.

Reports out of London have suggested former Xstrata boss Mr Davis, who now operates mining investment group X2, is reportedly in "serious" talks with Rio Tinto about buying the miner's Hunter portfolio. X2 has $US5.6 billion in equity to spend on mining assets, and could borrow further to build a warchest of up to $13 billion. Coal and copper are top of X2's wish-list, but it is also keen on nickel and zinc.

To date, Glencore has not been prepared to pay what Rio wants for the division – which is thought to about $US4 billion, with $US3 billion as a starting point – or to structure a joint venture with terms that suit Rio. Informal talks between the rivals are thought to have restarted again this year. 

Sources said Glencore might be prepared to put $US1.5 billion to $US2 billion but X2 would likely be talking at least $US3 billion with Rio. 

Rio chief executive Sam Walsh has made it clear that the miner is open to divestments if a big enough cheque is offered.

According to The Australian Financial Review last week, US coal giant Peabody is selling most of its Queensland coal exploration portfolio, in what could be the first step in executing a wider exit of its Australian portfolio.

South Korean steelmaker Posco is tipped to be interested in buying a stake in the mine.

Ref: http://www.afr.com/business/mining/x2s-mick-davis-eyes-rio-tinto-thermal-coal-20150630-gi134o

http://www.afr.com/business/mining/keith-de-lacy-saddened-by-fall-of-us-coal-giant-peabody-energy-20150630-gi0ile

http://www.afr.com/street-talk/peabody-energy-puts-exploration-assets-on-the-block-20150618-ghqt4w