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Rio Tinto sells Australia coal mines to China's Yancoal
[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.
"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.