Davis wants to buy Rio coal assets: report

MICK Davis – the former boss of Xstrata before it was bought out by Glencore – is in negotiations with Rio Tinto to acquire its New South Wales thermal coal assets, including the controversial Mt Thorley Warkworth complex, according to a report in the Financial Times.
Davis wants to buy Rio coal assets: report Davis wants to buy Rio coal assets: report Davis wants to buy Rio coal assets: report Davis wants to buy Rio coal assets: report Davis wants to buy Rio coal assets: report

Mick Davis

Lou Caruana

A long believer in thermal coal in his days at Xstrata, Davis’ X2 Resources company is now ready to make a strategic acquisition in the Australian thermal coal industry with his $US5.6 billion war chest as coal prices plumb historic lows.

The Financial Times quotes a person familiar with the talks as saying they were “reasonably serious discussions but at an early stage … it is reasonably solid interests on both sides.”

At this point Rio Tinto metallurgical coal interests in Queensland which include the expanded Kestrel mine operation may also be under discussion, the source told the Financial Times.

Earlier this year Davis said that the ebb in the commodity cycle had made this year ideal for acquisitions of major thermal coal mining projects.

Davis told the Financial Times earlier this year that “thermal coal was at the lowest ebb in terms of investor confidence … yet there are assets there in the right geographies, that can supply the right markets, which could well be interesting.”

Rio Tinto is known to have held talks with Glencore about merging its three thermal coal operations in NSW but nothing came of the discussions. The new interest being shown by Davis may serve to spur Glencore to revisit the negotiations with Rio Tinto.

Last month the NSW Department of Planning and Environment recommended that Rio Tinto’s 21-year life extension of the Mount Thorley Warkworth coal mining complex be approved without relocating the village of Bulga.

The approval of the project is expected to save around 1300 jobs.

Rio had applied to maintain existing production rates of 18 million tonnes per annum run-of-mine from the Warkworth mine and 10Mtpa ROM from the Mount Thorley open cut, with the expansion areas falling on land owned by the mines and within existing mining leases.