Glencore is to sell its Glencore Rail (GRail) coal haulage business in the New South Wales Hunter Valley to Genesee & Wyoming Australia (GWA) for A$1.14bn ($866m).

The company’s latest move forms another part of its debt reduction programme.

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Upon completion of the sale, GWA will service the majority of Glencore’s coal haulage requirements in the Hunter Valley through a contract for 20 years for the haulage of export coal to the Port of Newcastle.

The GRail transaction will include acquisition of nine train sets, which include 30 locomotives and 894 wagons.

"We believe that our partnership with infrastructure investor MIRA will enable us to leverage our rail platform for extensive future growth within Australia."

At present, GRail hauls around 40 million tonnes per year of Glencore’s Hunter Valley coal production to the Port of Newcastle.

Glencore Global Coal Assets head Peter Freyberg said: “We established GRail in 2010 and have steadily grown it to become the third largest coal haulage business in the country.”

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The deal is set to strengthen GWA’s footprint in Australia with the addition of a presence in the Hunter Valley coal supply chain in New South Wales.

G&W president and CEO Jack Hellmann said: “We are pleased to be enhancing our existing relationship with Glencore through a two-decade rail haulage contract that provides for exclusive rights to rail shipments from some of the premier steam coal mines in the world, serving end users in Japan, South Korea, Taiwan and South East Asia.

“Furthermore, we believe that our partnership with a world class Australian infrastructure investor in MIRA will enable us to leverage our rail platform for extensive future growth within Australia.”

GRail’s coal haulage business was established in 2010 as an alternative rail service provider to the railroads in the Hunter Valley.

G&W’s Freightliner Australia subsidiary, which was acquired by G&W in March last year, has been the rail operator of GRail since inception and currently provides haulage and logistics services for arround 40 million tonnes per annum of steam coal.

These services will continue even after the GRail transaction.

Subject to Australian Foreign Investment Review Board approval, the transaction is expected to close on 1 December.