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Rio Tinto sells Australia coal mines to China's Yancoal

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Rio Tinto has sold most of its Australian coal assets to China-backed Yancoal in a deal worth up to US$2.45 billion as part of the mining giant's divestments to boost its bottom line.

[SYDNEY] Rio Tinto has sold most of its Australian coal assets to China-backed Yancoal in a deal worth up to US$2.45 billion as part of the mining giant's divestments to boost its bottom line.

Under the deal announced late Tuesday, Coal & Allied, which operates several mines in New South Wales state, will be sold to Yancoal Australia for either US$2.35 billion, to be paid upfront, or for US$2.45 billion.

The second option would see Yancoal - which has China's Yanzhou Coal as its major shareholder - make an initial payment of US$1.95 billion followed by a further US$500 million to be paid over five years.

Yanzhou Coal is one of China's largest mining groups by market capitalisation and already operates several mines across Australia.

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"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 chief executive Jean-Sebastien Jacques said in a statement.

"Our world-class assets, strong balance sheet and relentless focus on cash will ensure that we deliver superior returns for our shareholders."

Shares in Rio, the world's second-biggest miner, were up 2.30 per cent to A$66.25 in early trading in Sydney on Wednesday. Shares in Yancoal rose 4.17 per cent to A$0.50.

The agreement is subject to regulatory approvals in Australia, China and by the New South Wales government. It is expected to be completed in the second-half of this year.

Rio has now agreed to more than US$7.7 billion in divestments since early 2013.

The miner has embarked on cost-cutting and has tightened capital expenditure amid uncertainty and a supply glut in the commodity market.

Rio reported in August that its underlying profits - investors' preferred measure - fell 47 per cent from a year earlier to US$1.56 billion during a six-month period ending June 2016.

The results were the lowest since 2004.

AFP

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