The merged companies would have a strong presence in the Hunter Valley of New South Wales, with combined coal production of 15 million tonnes per annum, and would continue the consolidation trend in the coal industry which has seen $50 billion in deals over the last three years.
The merger would also provide Yancoal with a backdoor listing on the Australian Securities Exchange, according to a report in the AFR.
Yanzhou must float off 30% of Yancoal as one of the conditions imposed by the Foreign Investment Review Board when it bought Felix Resources for $3.2 billion in December 2009.
The deal would value Gloucester Coal at approximately $2 billion.
Gloucester Coal has been growing rapidly through acquisitions, doubling its output to 6Mtpa – 55% thermal and 45% coking coal – through the $585 million acquisition of Donaldson Coal this year.
Yancoal operates four mines in Australia and reported a net income of $415 million last year.
It has purchased a string of Australian companies since its Felix purchase, including coal developer Syntech Resources for $202.5 million.
In October this year Yancoal announced the purchase of Wesfarmers’ Premier coal mine in Western Australia for $296.8 million but its managing director Murray Bailey said coal purchases would not stop there.
As well as owning the Austar, Ashton, and Moolarben mines in NSW, Yancoal also owns the Australian rights to Yanzhou’s top coal caving underground mining methods.
