International player's mining deal could be worth billions
THE combined forces of Switzerland mining giant Glencore and Japan's Sumitomo are making a gamble that could be worth billions, with the pair owning a combined 50.1% of Central Queensland's Clermont mine through their GS Coal partnership.
Glencore and Rio Tinto each announced on Monday the deal was done.
According to Glencore, it is now Australia's biggest coal exporter, trumping BHP Billiton and its partners.
As operator, Glencore has no plans to take the knife to Clermont's 600-strong workforce, although concedes the operation would be "reviewed".
Rio Tinto was keen to offload Clermont as part of its world-wide efforts to cut costs and sell assets if it could score the right price.
Times are tough for thermal coal - used to produce electricity - with at least one in four Queensland mines running at a loss.
For GS Coal, the bet is that a little bit of patience could deliver an enormous windfall.
In mid-May, Glencore chief Ivan Glasenberg told a Miami conference Clermont was a "low risk" operation already pumping out 12 million tonnes of thermal coal a year.
While the going rate for coal might be in the toilet for now, if prices rise by just 10% or $7 - GS Coal earns an extra billion dollars[CORR] across its operations.
If the Australian dollar falls by 10% - about 9c - that could feed another $668 million[CORR] into company coffers.
Mr Glasenberg said while the market was still drowning in coal at the moment, supply could slow before the year's end.
"Coal remains the lowest cost fuel source for industrialising economies," he said.
Sumitomo - which owns not just mines, but farms, power firms, tyre factories and forests for logging - could not be reached for comment.