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China’s Yankuang Energy said on Tuesday that it was open to negotiations to buy the remaining shares in its majority-owned unit Yancoal Australia, after the Australian coal firm rejected a $1.8 billion offer.

Yankuang, which owns 62.26 per cent of Yancoal’s shares, said last month that it was considering offering Yancoal shareholders $3.60 per share in convertible bonds for the remaining 498.2 million shares not held by the company, which is a discount to the market price.

Yancoal said an independent committee it appointed to evaluate the potential transaction unanimously concluded that an acquisition by Yankuang would not be in the best interests of Yancoal’s minority shareholders.

Shares of Yancoal rose 3 per cent to A$5.58 ($3.99) in early trading.

Yankuang said in its statement that it remained open to further negotiation, adding it “looks forward to continuing its discussions” with Yancoal’s independent board committee.

The Chinese energy firm said Yancoal’s share price has inflated since the recent surge in coal prices, and its $3.60 offer was based on the stock’s historic trading price and its own evaluation of how much the firm was worth.

Yankuang said its offer would also allow minority shareholders to convert their bonds into Yankuang shares if they wanted.

Reuters previously reported the offer was “unacceptable” to Glencore, which holds a 6.4 per cent stake in Yancoal, because it “significantly undervalues” the stock.

Demand for thermal coal, the most polluting fossil fuel burned to generate electricity, is high due to power shortages in China and a European gas squeeze further exacerbated by Russia’s invasion of Ukraine.

Yancoal confirmed it had not received an acceptable formal offer from Yankuang.

($1 = 1.3928 Australian dollars)