Yancoal’s bid for Rio Tinto’s Coal & Allied assets has sparked concern about possible mining job losses in the Hunter Valley associated with a $600 million bid black hole.
The Chinese state-controlled miner recently received government sign-off for the $2.45 billion planned acquisition, which includes coal mines in the Hunter Valley as well as a major stake in the coal terminal at Newcastle Port.
However, in an independent assessment of the bid, by accounting giant Ernst & Young states the assets are worth $1.8 billion at most, meaning the Chinese firm will be paying well over the odds to secure them.
This, coupled with its very high debt burden by industry standards, has raised concerns that Yancoal will be forced to shed jobs in order to make back the money. The company has not made a profit since 2012.
Yancoal’s losses have got it into trouble in the past. Two years ago, it cut 50 percent of the workforce in the Hunter Valley’s Abel and Austar mines, following ongoing financial problems.
In 2016 it shed 92 jobs out of 103 at the Donaldson mine after it was forced to hand over control to lenders.
The deal has also proven controversial within national security circles, given Yancoal’s close ties to the Chinese state.