The Chinese owner of WA’s biggest coal mine is weighing a $2.5 billion buyout of east coast miner Yancoal.
Yankuang Energy Group has told the Hong Kong stock exchange it is considering offering convertible bonds to buy the remaining 37.7 per cent of Sydney-based Yancoal it does not already own.
The bonds, worth about $US3.60 a share, would convert to Yankuang shares, valuing the offer at $US1.8b.
Yancoal’s mine portfolio includes management of the Yankuang-owned Premier Coal business in Collie, which is a key provider to the electricity grid in WA’s South West.
The buyout could provide a first test of the Albanese Government’s refreshed relationship with China amid the political and trade tensions of the past two years.
The deal would have to be approved by the Foreign Investment Review Board and signed off by new Federal Treasurer Jim Chalmers.
Yancoal shares were put into a trading halt on Thursday morning, having last traded at $6.08.
Premier fell back into the red last year with a $702,000 loss on sales of $203.6m after a $6m profit previously.
The company is the subject of a convertible loan that could see State-owned power group Synergy emerge with a 25 per cent equity stake at the end of the decade.
Under an agreement struck under Colin Barnett’s government in October 2014, Synergy agreed to subsidise Premier by paying more for its coal, helping prop up the miner and alleviating the risk of power disruptions in South West WA.
Under the convertible loan, capped at $50m, taxpayers effectively subsidise Premier by lending the company a portion of the contract price for every tonne of coal supplied until the end of June 2030.
Premier’s 2021 annual results, filed with the corporate regulator, show the miner’s debt to the State increased by $2.6m to $29m last year.