The Australian Foreign Investment Review Board (FIRB) has approved the $2.45 billion sale of Rio Tinto’s local operations to Yancoal.
The Chinese-miner received confirmation on Thursday that “the Commonwealth has no objection to Yancoal acquiring 100 per cent of Coal&Allied which owns an interest in Hunter Valley Operations (HVO) and Mount Thorley Warkworth (MTW)”.
The two open-cut mining complexes are located outside of Singleton and back when the news of the sale broke in January, Yancoal chairman Xiyong Li said the deal would recapitalise the company and turn it into Australia's biggest pure-play coal miner.
In 2016 HVO produced 9.92 million tonnes of thermal coal and 3.72 million tonnes of higher margin semi-soft coking coal, while MTW produced 10 million tonnes of thermal coal and 2.25 million tonnes of semi-soft.
Yancoal CEO Reinhold Schmidt says the approval is a positive step forward for the company, its shareholder and the Hunter Valley, demonstrating the Australian Government’s support continued investment into the local resources sector.
“Yancoal remains a key provider of employment, training and investment within New South Wales and we look forward to continuing to grow our operations.”
The transaction remains subject to a number of further closing conditions, including approval from both Rio Tino and Yanzhou Coal mining company shareholders.
Despite concerns surrounding Yancoal being able to finance the deal, the sale is expected to be completed in the third quarter of 2017.
According to the publication Mining Mergers and Acquisitions, Yancoal currently carries five times as much debt as its comparable competitors, and it has not posted a profit in the last four years.
Since 2012, Yancoal investors have lost 17.7 cents for each dollar they have put into the company, following $1.3 billion of losses.
Yancoal’s parent company, Yanzhou Coal has said it will provide $1 billion of the required funding, leaving Yancoal with $1.45 billion to raise.
In addition, several security analysts have warned that increased Chinese influence over Australian coal exports could have long-term geostrategic ramifications for the region, potentially threatening Japanese and Korean energy security.