Yancoal facing $1.8bn takeover from shareholder

27th May 2022 By: Esmarie Iannucci - Creamer Media Senior Deputy Editor: Australasia

PERTH (miningweekly.com) – ASX-listed Yancoal has gone into a trading halt after its major shareholder Yankuang Energy Group Company announced plans to acquire the remaining 37.7% of the company to the Hong Kong Stock Exchange.

Yankuang Energy Group is considering offering Yancoal shareholders convertible bonds worth $3.60 each for the remaining 498.2-million shares not yet held by the company, valuing the transaction at around $1.8-billion.

The transaction would offer a premium of 2.38% over Yancoal’s average closing price for the 60 days immediately prior to Yankuang Energy flagging its potential offer, and a premium of 21.86% over the average closing price for the 90 days immediately prior.

While the potential transaction would be subject to a number of conditions, including regulatory and shareholder approval, it could see Yancoal being de-listed from the ASX.

Yankuang Energy pointed out to its shareholders that Yancoal has a significant resources reserve, with 6.013-billion tonnes of coal resources and 819-million tonnes of saleable coal reserves, and is currently Australia’s largest pure coal company with 63.2-million tonnes of raw coal production and 38.6-million tonnes of equity saleable coal production in 2021, comprising 31.1-million tonnes of thermal coal and 7.5-million tonnes of metallurgical coal.

Yancoal’s Hunter Valley Operations, Mount Thorley Warkworth and Moolarben mines are all world-class coal assets with long mine life, low operating costs and well-developed operations, Yankuang Energy noted.

The company said that the assets of Yancoal would provide complementary and risk-hedging benefits to Yankuang Energy in terms of geographical location, coal types and sales markets. The acquisition of further Yancoal shares would help Yankuang Energy to further consolidate its resources, strengthen the synergy amongst its assets, increase its core competitiveness and risk resistance and achieve sustainable development, all of which would be in the long-term interests of Yankuang Energy and its shareholders.

For Yancoal shareholders, Yankuang Energy said that the transaction would allow Yancoal the continued support to develop its operation, and would better position the takeover target to operate its assets, realise its development potential and continue to contribute to the Australian economy.

For the quarter ended March, Yancoal had reported a 21% drop in production to 13.3-million tonnes, compared with the previous quarter, as operations were affected not only by the continuing Covid-19 pandemic, but also by severe weather conditions, particularly in the Hunter Valley.

Attributable saleable coal production for the quarter was down 13% on the previous quarter, to 8.1-million tonnes.

The company’s shares are expected to remain suspended until May 30, or when an announcement regarding the Yankuang Energy offer is made.