THE HERALD'S OPINION: Glencore's trumping of Yancoal for Coal & Allied an unfolding drama

ANYONE listening to the daily political debate in Australia could be forgiven for thinking that the coal industry was dead and buried, an immoral hangover from an earlier, less enlightened age.

Prominent figures on both sides of politics say that Australia will never again build a coal-fired power station.

Yet all of this fatalistic gloom appears to be in stark contrast with the realities of the international outlook, with the market for seaborne coal as strong as it’s ever been. Newcastle export volumes are still rising, and prices have all but doubled since the existential lows that devastated the industry in 2015.

Evidence of the global appetite for coal can also be seen in Glencore’s 11th hour bid for the Rio Tinto subsidiary Coal & Allied, trumping by $US100 million a $US2.45 billion deal struck in January between Rio and the Chinese-backed miner Yancoal.

Glencore’s move has has hit like a lightning strike. Rio shareholders were due to gather in London June 27, and in Sydney on June 29, to vote on the Yancoal deal, which Rio chairman Jan du Plessis described last month as “compelling value”. The Glencore bid lapses the day before the London meeting, on June 26.

The ball is now firmly back in Yancoal’s court. In the same way as the January deal allowed Rio to entertain any higher offers, Yancoal is also able to respond to Glencore with its own counter-bid.

It is impossible at this stage to say which company will emerge with the prize. China, with a reputation for long-term rather than cyclic investment, has a corresponding reputation of paying what it must to obtain what it wants.

By the same token, Glencore chief executive Ivan Glasenberg is regarded as a bold corporate raider – he proposed a $160 billion merger with Rio in 2014, but was rebuffed – and he is also bullish on the future of coal.

Glencore and Yancoal already have substantial interests in the Hunter industry, and their respective methods of management and operation are well known. The coming days are set to be pivotal ones for the industry, and the broader Hunter economy, as these two corporate behemoths battle for control of some of the region’s most valuable coal assets. Others might have their doubts, but foreign investors obviously still see a future for the Hunter’s thermal coal.

ISSUE: 38,517.


Discuss "Glencore sees strong future for Hunter coal"

Please note: All comments made or shown here are bound by the Online Discussion Terms & Conditions.