The largest acquisition by a Chinese government entity of Australian assets has been greenlighted with the Foreign Investment Review Board recommending the $US2.5 billion ($3.3 billion) purchase of Rio Tinto’s suite of NSW coal assets.
The buyer is Yancoal Australia, which is 78 per cent owned by Yanzhou Coal Mining Co of Hong Kong, which is in turn controlled by an arm of the Chinese government.
Yancoal Australia has won FIRB approval for $US2.5b coal mine buy Photo: Peter Rae
Chinese bids to acquire Australian assets have been controversial, with a string of planned acquisitions – from Ausgrid to the Kidman rural empire – blocked.
However the state-owned utility State Power Investment Corp’s purchase of Pacific Hydro, a renewable energy company for an estimated $3 billion acquisition – which also included borrowings – was approved a little over a year ago, along with its purchase of the Taralga Wind for an estimated $300 million, also including debt.
These deals would have been dwarfed by State Grid Corporation and Cheung Kong Infrastructure which had been seeking to buy half of Ausgrid for $10 billion before being blocked due to national security issues.
“FIRB approval is a positive step forward for Yancoal, its shareholders and the Hunter Valley, demonstrating the Australian Government’s support for continued investment into the local resources sector,” said Reinhold Schmidt, the chief executive of the miner said in a statement.
“Yancoal …[looks] forward to continuing to grow our operations.”
Yancoal sells around 25 million tonnes of coal annually produced at its Australian mines, which will more than double to an estimated 51 million tonnes once the deal is concluded.
The next step in concluding the deal is to raise the funds with a large slice expected to be raised via the sharemarket, with the company’s offshore parent saying it is willing to invest $US1 billion of fresh equity into its local arm.
Last month, the Japanese newspaper, the Nihon Keizai Shimbun, reported Mitsubishi Corp is looking to sell its 31.4 percent stake in the Clermont mine, and may also sell stake its 32.4 per cent stake in Rio’s Hunter Valley operation following the Rio sale ot Yancoal.
“We are considering all options including selling a stake in the Clermont coal mine and we have hired Rothschild as financial advisor for the deal,” a spokesman said, according to a Reuter wire service report.