Steel-cap wearing mining investors and analysts finally have something to cheer about.
After years of losing mid-market coal names in rounds and rounds of M&A;, it looks like there will be a credible player in front of them for the first time in years.
Yancoal Australia is expected to launch a $2 billion-plus equity raising in coming months, as part of its deal to acquire Rio Tinto's Coal & Allied Hunter Valley mining operations.
Yancoal and Rio were expected to sign and announce the $3.2 billion deal on Tuesday night.
While Yancoal is listed on the ASX and its assets are well known to local mining analysts and fund managers, it has been a no-go for institutional investors because of its illiquid nature, shareholder register and gearing.
That may soon be about to change, though, with Yancoal expected to get out on the road in coming months and ask fund managers to take a second look.
It's pitch is expected to centre around its cashflow generation and high quality assets, which would offer investors protection through the commodities cycle.
Interestingly, Yancoal's major shareholder Yanzhou Coal Mining Company Ltd is understood to have committed to at least a $1 billion portion of the raising, which is likely to be done via a rights issue among other components.
Noble Group is Yancoal's second largest shareholder with 10 per cent of the shares on issue.
It is understood Yancoal and Rio Tinto were in talks for more than 12 months. Deutsche Bank advised Rio through the process, while Morgan Stanley and JPMorgan tended to Yancoal.
It means the three banks are off to a flying start in terms of the local M&A; league table, while JPMorgan and Morgan Stanley would also be early favourite to gain a spot on Yancoal's pending equity offer.
The three investment banks are likely to rocket to the top of Dealogic's announced M&A; league table. Of course Morgan Stanley was already up there alongside Macquarie Capital, having advised on DUET Group's $7.4 billion announced takeover.
For Rio, Tuesday's signing marked an on-again off-again sale process for its Hunter Valley coal assets. Rio shopped its Hunter Valley thermal coal assets in early 2015, and managed to sell the Bengalla mine to New Hope Corporation for $US616 million and the undeveloped Mt Pleasant asset to Mach Energy for $US224 million plus a share of future royalties.
Yancoal also tapped Deloitte Corporate Finance to advice its independent board committee. While Herbert Smith Freehills and Gilbert + Tobin did its legal work.
