Rio Tinto agrees $2.45 billion sale of Coal and Allied to Yancoal Australia

Rio Tinto agrees $2.45 billion sale of Coal and Allied to Yancoal Australia

Metals and mining giant Rio Tinto (ASX:RIO) has announced the sale of its Hunter Valley coal mining division Coal & Allied to Yancoal Australia Ltd (ASX:YAL) for US$2.45 billion.

An initial $1.95 billion cash payment will be made to the Australia-based, Chinese-controlled firm, followed by $500 million in aggregate cash payments, to be paid in annual instalments of $100 million over five years.

Rio Tinto will be entitled to potential royalties, after the transaction is completed.

The Hunter Valley Operations and Mount Thorley Warkworth mines together produced 25.9 million tonnes of coal in 2016, while Yancoal produced 16 million tonnes of coal in Australia last year.

“This sale delivers outstanding value for our shareholders and is consistent with our strategy of reshaping our portfolio to ensure the most effective use of capital,” Rio Tinto chief executive J-S Jacques said.“Our world-class assets, strong balance sheet and relentless focus on cash will ensure that we deliver superior returns for our shareholders.”

Jacques ensured the local community that the project would continue to provide jobs and taxes for the region.

“We are confident that Coal & Allied will continue to contribute to the New South Wales economy and the communities of the Hunter Valley under a new owner,” he added.