Rio Tinto to offload Hunter Valley coal assets to China's Yancoal

Rio chief executive Jean-Sébastien Jacques said the sale

Rio Tinto Group moved closer to an exit from thermal coal after the world's second-biggest miner agreed to sell most of its mines to a company controlled by China's Yanzhou Coal Mining Co. for $2.45 billion. Yancoal also has an option to pay a single cash payment of $2.35 billion, Rio said.

Rio Tinto has extracted a good price for its Hunter Valley coal assets according to analysts, who believe Tuesday's $US2.45 sale to Yancoal will allow Rio to further cut its gearing.

"This is a transformative and exciting acquisition for Yancoal shareholders and will form the basis for our future growth and success as Australia's largest pure-play coal company", Li said.

The sale of Coal & Allied represents the culmination of an extensive assessment of all strategic options Rio said

Thermal coal surged a year ago amid mining restrictions in China. Australia's Newcastle coal, an Asian thermal benchmark, surged more than 80 percent in 2016, snapping five years of declines.

Yancoal Australia, which is listed on the ASX, operates a portfolio of seven mines and a suite of exploration assets and infrastructure shareholdings across New South Wales, Queensland and Western Australia.

Since Rio released strong December quarter production data earlier this month, analysts have been pencilling in forecasts of a share buy-back or dividend hike to be unveiled when the miner releases its December half earnings on February 8, with the sale overnight boosting their optimism that there will be more good news for shareholders over the course of the year ahead.

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Listed in 1998 in Hong Kong, Shanghai and NY, state-owned Yanzhou Coal Mining is 56 percent owned by Yankuang Group, which is controlled by China's state-owned Assets Supervision and Administration Commission of Shandong Province.

After assessing several potential acquirers, Rio said in a statement: "Yancoal Australia provided the only offer that represented compelling value for the assets".

The transaction must still be approved by the Australian Government, NSW Government and Chinese regulatory agencies.

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"I don't think they're going to be hoarding the cash", said Liberum's Knights. Coal & Allied has interests in the Hunter Valley Operations mine, Mount Thorley mine and the Warkworth mine as well as a one-third stake in Port Waratah Coal Services.

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