Glencore confirmed to ICN that discussions were continuing with an outcome expected soon as pressures mounted to rein in unit costs of production and reduce employee numbers.
Glencore CEO Ivan Glasenberg said when asked on the matter, that “it’s clear, everyone knows it in the Hunter Valley there’s a lot of synergies between us and Rio Tinto in their Hunter Valley assets.
“There’s a lot to be done. We can get substantial synergies. So we’re talking to Rio Tinto but it takes time for both sides to assess each other’s assets. But it’s something we look at.
“We’ve been talking to them for a long time. How far we’ll get and how soon we can reach an agreement, I don’t know. But it’s something that clearly makes a lot of economic sense.”
When asked in December about the talks with Glencore, Rio Tinto CEO Sam Walsh said: “If somebody wants to come to us with a proposal that physically makes sense and values our assets accordingly, then of course we will look at it, but at this point in time we don’t [have that].”
Rio Tinto is under pressure to reduce costs across its operations but has been hemmed in by a decision in the Land and Environment Court that has stopped it from its expanding its Mt Thorley Warkworth complex.
On October 25, Rio Tinto reached a binding agreement for the sale of its 50.1% interest in the Clermont Joint Venture in Queensland to GS Coal, a company jointly owned by Glencore Xstrata and Sumitomo Corporation, for $A1.015 billion.
The transaction is expected to complete this quarter.
Glencore expects its coal operations will have lower unit costs as it uses capital sparingly to implement brownfields expansion and shelve inefficient projects.
The company also believes the growing trend to return funds to shareholders instead of investing in capital expansion will be good for medium-term commodity prices because it will curtail over-investment in production.
At the company’s annual financial results, Glasenberg said Glencore’s energy products division’s 2013 total adjusted earnings before interest, tax, depreciation and amortisation was $US4 ($A4.4) billion, 12% below 2012, as lower realised coal prices impacted the coal industrial business.
