Glencore snaps up Rio Tinto’s Hail Creek coal mine and project for $1.7bn

Rio Tinto CEO Jean-Sebastien Jacques wants the company to withdraw from the coal market. (Reuters)
Updated 21 March 2018
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Glencore snaps up Rio Tinto’s Hail Creek coal mine and project for $1.7bn

SYDNEY: Glencore is buying Rio Tinto’s Hail Creek coal mine and the Valeria coal project in Australia for $1.7 billion, tightening the Swiss trading and mining giant’s grip on coal as its rivals exit the industry.
The acquisition, announced by both companies on Tuesday, follows Glencore’s purchase of half of Rio Tinto’s Hunter Valley coal operations, also in Australia, for $1.1 billion 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 steelmaking.
“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 Paul Gait, an analyst at Bernstein in London.
The sale consists of Rio’s 82 percent interest in the Hail Creek operating mine and its 71.2 percent interest in the Valeria project, the company said in a statement.
Rio Tinto made a strategic decision in 2017 to exit coal and focus on growth in iron ore, copper and its aluminum division.
On Tuesday it said it was still looking to sell its remaining Australian coal assets — the Kestrel coking coal mine and the Winchester South development project. Investors had expected the two mines and projects to be sold as a package.
“The best option to extract value for our shareholders is to go in a piecemeal approach,” Rio CEO Jean-Sébastien Jacques told reporters after a business event in Melbourne.
Analysts said the price for Hail Creek and Valeria looked good for Rio Tinto while not too expensive for Glencore.
“Given we all expected a $2 billion to $2.5 billion number for Hail Creek plus Kestrel and the other stuff, it’s a pretty big number,” said Shaw and Partners analyst Peter O’Connor in Sydney.
Gait said that he was bullish on metallurgical coal prices, now above $200 a ton, which would help justify the price Glencore agreed to pay.
“Glencore clearly have synergies in terms of both the operating and, physically, the marketing of these assets and when I look at the price that they’ve acquired these things for, it doesn’t seem to me to be exorbitant,” he said.
Rio Tinto said it planned to use the sale proceeds “for general corporate purposes,” however Jacques did not rule out returning the cash to shareholders
in future.
“You shouldn’t draw any conclusions. The next time we review it will be in August,” he told reporters, referring to the company’s next moves on capital management.
UBS has forecast that the sale of Hail Creek and Kestrel could help Rio hand back more than $9 billion to shareholders over the next 12 months.
The Hail Creek deal is subject to regulatory approvals and is expected to be completed in the second half of 2018, Rio said.
The remaining 18 percent of Hail Creek is owned by units of Nippon Steel and Sumitomo Metal Corp, Marubeni Corp. and Sumitomo Corp, which all have rights to sell their stakes to Glencore, which it said in a statement would cost up to $340 million.
Glencore declined to comment further on the acquisition.


Porsche first German carmaker to abandon diesel engines

Updated 23 September 2018
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Porsche first German carmaker to abandon diesel engines

  • The company would concentrate on its core strength, ‘powerful petrol, hybrid and, from 2019, purely electric vehicles’
  • But Porsche promised it would keep servicing diesel models on the road now

BERLIN: Sports car maker Porsche said Sunday it would become the first German auto giant to abandon the diesel engine, reacting to parent company Volkswagen’s emissions cheating scandal and resulting urban driving bans.
“There won’t be any Porsche diesels in the future,” CEO Oliver Blume told the newspaper Bild am Sonntag.
Instead, the company would concentrate on what he called its core strength, “powerful petrol, hybrid and, from 2019, purely electric vehicles.”
The Porsche chief conceded the step was a result of the three-year-old “dieselgate” scandal at auto giant Volkswagen, the group to which the luxury sports car brand belongs.
VW in 2015 admitted to US regulators to having installed so-called “defeat devices” in 11 million cars worldwide to dupe emissions tests.
It has so far paid out more than €27 billion in fines, vehicle buybacks, recalls and legal costs and remains mired in legal woes at home and abroad.
Diesel car sales have dropped sharply as several German cities have banned them to bring down air pollution — a trend that Chancellor Angela Merkel was due to discuss with car company chiefs in Berlin later Sunday.
Stuttgart-based Porsche in February stopped taking orders for diesel models, which it had sold for nearly a decade.
Blume said Porsche had “never developed and produced diesel engines,” having used Audi motors, yet the image of the brand had suffered.
“The diesel crisis has caused us a lot of trouble,” he said, months after Germany’s Federal Transport Authority ordered the recall of nearly 60,000 Porsche SUVs in Europe.
Blume promised that the company would keep servicing diesel models on the road now.
According to the paper, Porsche also faces claims of having manipulated engines to produce a more powerful sound with a technique that was deactivated during testing.
Blume acknowledged that German regulators had found irregularities in the 8-cylinder Cayenne EU5, affecting some 13,500 units.
Merkel, Transport Minister Andreas Scheuer and heads of German auto companies were due to meet in Berlin later Sunday to discuss steps to avoid more city driving bans.
The German government hopes to see one million fully electric and hybrid vehicles on the road by 2022, up from fewer than 100,000 at the start of this year.