Rio Tinto has completed the sale of its wholly owned subsidiary Coal & Allied Industries to Yancoal Australia, in a deal worth $2.69bn.
The acquisition allows Yancoal to take control of Rio Tinto’s thermal coal business in the Hunter Valley region of New South Wales.
The total deal comprises $2.45bn paid upon completion, with a further $240m of unconditional guaranteed royalty payments.
Under the sale agreement, Yancoal could offer an additional royalty based on coal price, which is capped at $410m.
Proceeds from the sale will be used to meet Rio Tinto’s general corporate needs.
Completion of the deal comes after series of competing bids from Yancoal and Glencore to acquire Coal & Allied Industries.
Rio Tinto opted for Yancoal due to a greater certainty in the transaction and other factors such as improved chances of gaining regulatory approval.
Through the acquisition, Yancoal will assume all assets and liabilities of Coal & Allied and its subsidiaries.
The acquisition comprises a 67.6% interest in the Hunter Valley Operations mine and an 80% interest in the Mount Thorley mine.
In addition, Yancoal will have access to Coal & Allied group’s 55.6% interest in the Warkworth mine, a 36.5% interest in Port Waratah Coal Services and other undeveloped coal assets.
Last month, Glencore acquired interests in the assets acquired by Yancoal from Rio Tinto.