Glencore is promoting its coal haulage enterprise in Australia’s Hunter Valley for A$1.14bn ($874m) to US railroad firm Genesee & Wyoming as a part of efforts to scale back its debt burden.
With the sale of Glencore Rail, the Swiss group shall be on the verge of assembly chief government Ivan Glasenberg’s goal of US$5bn in belongings gross sales in 2016.
The mining and commodity dealer stated on Thursday that upon completion of the deal, which is topic to approval by Australia’s overseas funding regulator, Genesee & Wyoming Australia would service most of Glencore’s coal haulage wants within the Hunter Valley by way of a 20-yr contract.
Glencore has already agreed $three.9bn of asset gross sales this yr, together with the sale of a forty nine per cent stake in its agricultural arm. Shares in Glencore have risen greater than one hundred sixty per cent this yr as commodity costs have rallied and the corporate has made progress with its debt discount plan.
At eleven occasions underlying earnings, the worth was “good”, stated Paul Gait, analyst at Bernstein Analysis, noting that the deal additionally secures Glencore’s rail entry for 20 years. “This isn’t one other asset disposal on the backside of the cycle,” he stated.
GWA beat out competitors from Australia’s Aurizon and Pacific Nationwide, each of which already run giant coal haulage companies within the Hunter Valley, one of many nation’s largest coal-producing areas.
Its entry into the Hunter Valley provides a brand new competitor within the coal haulage market as Glencore beforehand didn’t ship different corporations’ coal by way of its GRail enterprise.
Peter Freyberg, head of Glencore’s coal belongings, stated the corporate seemed ahead to a constructive working relationship with GWA.
“We established GRail in 2010 and have steadily grown it to turn out to be the third-largest coal haulage enterprise within the nation,” stated Mr Freyberg. “It has performed an important position in decreasing prices and enhancing the general effectivity of Australia’s largest coal chain within the Hunter Valley.”
Glencore stated in March that it was aiming for as much as US$5bn in asset disposals this yr as a part of its debt discount plan, launched final yr in response to a stoop in its share worth linked to break down in commodities costs.
The sale of GRail, Glencore’s agricultural enterprise, and silver and gold output brings the entire to US$four.7bn.
Glencore is aiming to scale back internet debt to $sixteen.5bn-$17.5bn by the top of the yr. As of finish-June, internet debt stood at $23.6bn.
GRail at present hauls about 40m tonnes per yr of coal manufacturing from Glencore’s mines within the Hunter Valley to the Port of Newcastle.