Glencore executives have made a direct pitch to Rio Tinto bosses in London to convince the board to back its $US2.55 billion ($3.35bn) bid to buy the Coal and Allied assets in the Hunter Valley.
Rio Tinto and the Swiss-based mining house held discussions at the weekend where the miner sought further information on Glencore’s offer that emerged a week ago.
The talks were led by Glencore global boss Peter Freyberg, who heads the Australian business, and Rio Tinto’s British-based business development team.
If the deal proceeds, Rio Tinto would receive a $US2.05bn initial payment and then $US500 million in five-year annual cash payments.
The Rio assets, owned by the company’s subsidiary Coal and Allied, consist of joint venture ownerships in the Hunter Valley Operations mine, Mount Thorley and Warkworth, which are considered low-cost mines.
Rio Tinto is set to decide within the next few days whether it backs the Glencore bid, which is fully-funded and $US100m higher than a competing offer made by Yancoal.
Rio’s board met in Montreal late last week, but last night had yet to determine whether Glencore’s offer would be deemed superior.
There were suggestions a decision could be made later this week, even as Yancoal and its adviser JPMorgan waited on the sidelines. Under the terms of Yancoal’s bid, the Chinese-backed miner has to be given five days to match or better a competing offer deemed superior by Rio. Glencore was last night formulating its response to a number of questions posted by Rio which would need to be answered before a recommendation is likely to be delivered.
Doubt remains over Yancoal’s bid because it has yet to lock in funding and Australian backers have indicated a $2bn capital raising would not be supported.
Yancoal and its parent company, Yanzhou, are understood to have called on China’s state-owned banks to secure cash.
Glencore already owns the Ravensworth North and Bulga mines in the Hunter Valley region.
The bidder has said its operations, once merged with Rio’s assets, would produce 81 million tonnes.
The suitor has said it believed there would be major synergies and savings made from merging the two sets of operations.
If the deal goes ahead, Glencore would also take Rio Tinto’s 36.5 per cent stake of Port Waratah Coal Services, a Port of Newcastle export terminal.