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Bids, Mergers and Takeovers

Rio Tinto sells Coal & Allied subsidiary

01 September 2017 07:30

Rio Tinto has sold its wholly-owned subsidiary Coal & Allied Industries to Yancoal Australia.

Yancoal has taken over management of Rio Tinto's thermal coal business in the Hunter Valley region of New South Wales.

Rio Tinto will receive total consideration of $2.69 billion for the sale, together with customary adjustments for net debt and net working capital at completion.

The $2.69 billion comprises $2.45 billion in cash paid today and a further $240 million of unconditional guaranteed royalty payments.

The first royalty payment of $10 million was made today and an additional $100 million will be received by the end of this year.

A further $90 million is expected before the end of 2018.

Under the terms of the sale, Rio Tinto may also receive an additional royalty linked to the coal price capped at $410 million.

Rio Tinto will use the consideration received for general corporate purposes and the group's capital allocation framework will be applied.

With production from all Hunter Valley coal operations transferring to Yancoal from today, the group's guidance for thermal coal production in 2017 has been revised to 13-14 million tonnes, from 17-18 million tonnes previously.

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