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Glencore ceo Ivan Glasenberg confirmed that the trading house was in talks with Rio Tinto in a call to investors accompanying the company’s 2013 full-year financial results on Tuesday March 4.
“There are a lot of synergies between us and Rio Tinto with the Hunter Valley assets,” Glasenberg said.
“We’re talking to Rio and it takes time for both sides to assess each other’s assets. How far we will get and how soon we will reach an agreement, I don’t know. It certainly makes sense,” he added.
Rio Tinto declined to comment.
Coal prices have tumbled in the past year, dropping by about 25% in 2013. Steel First’s spot premium hard coking coal index cfr China has dropped from just under $160 per tonne in early November to $134 per tonne on March 4.
In the face of falling coal prices and following a $4 billion writedown across its energy business in 2012, Rio Tinto has moved to streamline its coal assets. It put 29% of its Coal & Allied business, which owns its Hunter Valley semi-soft coking coal and thermal coal mines, up for sale last year.
The miner sold its Clermont and Blair Atholl thermal coal mines in 2013 and its coking coal operations in Mozambique, bought from Riversdale mining in 2011 for $3 billion, are also understood to be up for sale.
Glencore owns a number of mines in the Hunter Valley region, including Mt Owen, Ravensworth East and Glendell.
The company saw coking coal sales volumes in 2013 increase by 15% to 4.2 million tonnes, but higher sales volumes were offset by lower realised prices for the product.
Swiss commodity major Glencore Xstrata is in talks with miner Rio Tinto over a coal production tie-up in Australia’s coal-rich Hunter Valley in a bid to boost profitability.