China isn’t just buying Australia’s coal assets, it’s also expanding access to the limited infrastructure needed to ship it globally.
Yancoal Australia Ltd.’s $2.45 billion purchase of the biggest slice of Rio Tinto Group’s coal operations will double the Chinese-owned miner’s output in the country. The deal also includes a 36.5 percent stake in Port Waratah Coal Services Ltd., the owner of two terminals at the port of Newcastle, Australia’s main conduit for thermal coal. The amount Yancoal will be permitted to ship will double.
“The Rio operations are long life, so they have plenty of reserves, and Yancoal will benefit from increased port capacity at Newcastle,” said Matthew Boyle, a Sydney-based industry consultant at CRU Group. “This is a definite game changer and Yancoal suddenly becomes a rather large player.”
Yancoal is expanding its clout in the world’s second-biggest shipper of thermal coal as prices of the power station fuel recover from a five-year collapse. The commodity is forecast to remain the dominant fuel in global electricity generation over the next decade amid rising demand from India, China and Japan, in spite of environmental opposition.
The deal for Rio’s Coal & Allied Industries Ltd. will raise Yancoal’s annual output of saleable coal to about 34 million metric tons, making it the biggest coal-only producer in Australia. That compares with mining giant Glencore Plc’s total 66 million tons from Australia in 2015 and parent Yanzhou Coal Mining Co.’s 60.5 million tons last year, including China.
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