Yancoal Australia has won the auction for the Kestrel coking coal mine, agreeing to pay up to US$2.4bn (A$3.35bn) for an 80% stake in one of Australia's largest underground metallurgical coal operations.

The vendors are a consortium of EMR Capital — the private equity firm co-founded by former Fortescue chair Owen Hegarty — and Adaro Capital, a subsidiary of Indonesian-listed PT Adaro Andalan Indonesia.

Kestrel sits in Queensland's Bowen Basin and is Australia's largest underground metallurgical coal mine by production.

Rio Tinto originally sold the same 80% stake to the EMR-Adaro consortium for A$2.9bn in 2018. Mitsui & Co. holds the remaining 20% and is not selling.

For Yancoal, the acquisition is a hard-earned win on the M&A front. The company had circled BHP's Blackwater and Daunia sale in 2023, only to watch Whitehaven Coal take the prize for A$6.4bn. It was also an early bidder in Anglo American’s coal asset auction before pivoting to Kestrel.

The acquisition lifts Yancoal's metallurgical coal output from 16% to 22% of its total production mix, cementing its position as Australia's largest listed coal miner by production.

Completion is expected in the September quarter, subject to FIRB, PRC regulatory approvals, global merger clearances and Mitsui’s pre-emptive right.

Gilbert + Tobin advised Yancoal, led by partners Costas Condoleon, Mark McAleer and Kevin Ko, supported by James Fisher, Michael Van Der Ende, Angus Wong, Jin Yoo and Dan Shlager.

It continues a strong run for G+T on Yancoal mandates — the firm previously advised the miner on its US$3.4bn contested acquisition of Coal & Allied Industries from Rio Tinto and its response to Yankuang's A$7bn take-private proposal.

Mallesons acted for EMR Capital and Adaro Capital, led by partners Paul Schroder and Mark Vanderneut, supported by senior associate Jing Wang and solicitors Katherine Chork and Matthew Tuxen.

Mallesons also has prior form with EMR, having advised the firm on the 29Metals ASX IPO in 2021.

The G+T team said:

“We are thrilled to have supported Yancoal on this significant and strategic acquisition. High-quality metallurgical coal assets of this scale rarely come to market.”

Mallesons’ Paul Schroder said:

“This is a significant deal involving a high-quality, long-life metallurgical coal asset in Queensland's Bowen Basin. We are grateful for the opportunity to have assisted specialist resources private equity fund manager and operator EMR Capital, and Adaro Capital.”

Source: Yancoal, Gilbert + Tobin, Mallesons