Glencore and Peabody Energy have agreed to form a 50:50 joint venture to develop a brownfield open cut coal project located between their existing United and Wambo mines in the NSW Hunter Valley.

The project is subject to relevant state and federal planning approvals.

But it will not increase Glencore’s overall annualised export tonnage from the Hunter Valley.

Expected to commence in mid-2017, the project will realise major synergies between the two neighbouring operations. It will deliver optimal resource recovery and infrastructure use and significantly reduce operating and capital costs.

This latest news shows Glencore is continuing to show an interest in achieving synergies in its Hunter operations at a time of low coal prices.

In October this year it was reported that Rio Tinto had rebuffed a take-over offer by its smaller rival Glencore.

Rio Tinto's coal assets in the Hunter Valley include the nearby Warkworth,Mt Thorley and Hunter Valley Operations.

These assets have been on the market for sometime and Glencore's boss Ivan Glasenberg has previously spoken about the synergies that could be achieved by combining Glencore's and Rio Tinot's Hunter Valley coal operations.

Recently Glencore also announced they are implementing production shut downs across their Australian coal operations for three weeks commencing mid-December.

More proof the company is looking at ways to reduce costs to deal with the oversupply in the market.

News of the JV was welcomed by Peter Jordan, President of the CFMEU Northern Mining and NSW Energy District, who said the project would provide continuity of employment for mineworkers. 

“It is very welcome news at a time when our region is suffering from substantial job losses in the coal industry”, he said.

“It will contribute towards job security and inject badly needed income into the regional community as well,” he said.

Output from some of Glencore’s existing operations will decline by 2017, so the JV enables the company to grow value for shareholders without growing volume, a company spokesman said.

The United-Wambo JV will combine leases held by United Collieries (Glencore 95 per cent and Construction Forestry Mining and Energy Union 5 per cent) and Peabody’s Wambo operations near Singleton.

It will be managed by Glencore, with their share of production being a maximum of 3 million tonnes per annum of saleable coal.