Rio Tinto agrees $2.45bn Coal & Allied sale to Yancoal Australia

Rio Tinto has agreed the $2.45bn-plus-royalties sale of its Coal & Allied Industries thermal coal business in New South Wales to Yancoal Australia.

Rio will receive an initial $1.95bn cash payment payable at completion plus $500m in deferred cash payments payable over five years following completion.

After the sale is completed, Rio Tinto will also be entitled to potential royalties if the Newcastle benchmark thermal coal price exceeds $75 per tonne.

"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," said Rio chief Jean-Sébastien Jacques.

Coal & Allied owns and operates multiple, multi-seam open cut mines in the Hunter Valley, with a 67.6% interest in the Hunter Valley Operations mine, an 80% interest in the Mount Thorley mine, a 55.6% interest in the Warkworth mine, a 36.5% interest in Port Waratah Coal Services and other undeveloped coal assets and landholdings.

Rio announced on Tuesday an increase of its managed thermal coal resources at Mount Thorley Warkworth, with resources exclusive of ore reserves increased by 208 Mt, from 114 Mt to 322 Mt.

Last year, Hunter Valley Operations and Mount Thorley Warkworth mines produced a total of 25.9m tonnes of thermal and semi-soft coking coal, of which Rio's share was 17.1m tonnes.

The net assets subject to this sale agreement had earnings before tax of $102m in the year to 31 December 2015, and a gross asset value attributable to them of $1,895m as at 30 June 2016.