The deal is another example of Glencore's counter-cyclical M&A. The company has been keen to add top quality coal assets to its operating base when others, including Rio, have been looking to reduce their exposure.

 

The trading and mining house could splash more cash if the minority owners of Hail Creek - Nippon Steel Australia Pty Ltd (8%), Marubeni Coal Pty Ltd (6.67%) and Sumisho Coal Development Pty Ltd (3.33%) - decide to exercise their "tag-along" rights. Glencore estimates it could spend another $340 million buying up the minority interests.

 

 

Hail Creek produced about 9.4 million tonnes of coal for export last year and pocketed Rio a pre-tax profit of US$357 million ($435 million, on a 100% basis). Two-thirds of coal produced at the mine is premium quality hard coking coal with one-thirds fitting the export thermal coal definition, according to Glencore. 

 

The asset had JORC resources of 794 million tonnes with proven and probable reserves of 142 million tonnes at the end of last year. Valeria, 67km southeast of Glencore's own Clermont-managed coal operation, has a thermal coal resource base of 762Mt.  

 

The sales price was in keeping with most analyst expectations. 

 

Rio, which has been on a divestment spree since the downturn hit, said it planned to use the funds for "general corporate purposes".

 

The company is expecting to pay Australian income tax on the sale proceeds, estimated to come in around $300 million.

 

It leaves Rio with just two coal assets on its books. Kestrel, a mine it owns 82% of and produces around 5Mt per annum of mainly coking coal, is going through a separate sales process.

 

After losing out last year in a bidding war to Yancoal (AU:YAL) for Rio's Coal and Allied business, Glencore was able to claim 49% of the Hunter Valley assets after negotiating a deal with Yancoal and Mitsubishi Development, the latter of which held a 32.4% stake in the operations.  

 

Glencore's Australian coal business managed the production of more than 87Mt of saleable coal last year from 17 mines in Queensland and New South Wales.

 

The deal is expected to complete in the second half of the year.