Glencore Xstrata Plc (GLEN), the biggest exporter of power station coal, is studying a plan to combine some of its Australian coal operations with mines run by Rio Tinto Group, according to two people familiar with the matter.
Glencore and Rio own some of the largest thermal coal mines in the Hunter Valley region of New South Wales and have held initial talks on ways to share mines and infrastructure to cut costs, the people said, asking not to be identified as the discussions are confidential. There is no certainty an agreement will be reached, one of the people said.
Slumping Chinese imports of the fuel and rising output in Indonesia are suppressing demand for Australian coal, prompting producers to fire workers to reduce costs. Baar, Switzerland-based Glencore Xstrata has interests in about 35 coal mines in Colombia, Africa and Australia, accounting for about 10 percent of global seaborne supplies of the fuel.
Spokesmen for Glencore and Rio Tinto declined to comment.
“A sharing of infrastructure and some combination of operations would likely have significant merit given coal earnings are highly sensitive to any reduction in the unit cost base,” Ash Lazenby, an analyst at Liberum Capital Ltd. in London, said today.