Rio Tinto shares have jumped nearly four per cent as analysts said the mining giant's $US2.45 billion ($A3.24 billion) sale of its NSW energy coal operations to Chinese-owned Yancoal Australia would be good for shareholders.
Rio shares were up $2.47 , or 3.81 per cent, at $67.23 on Wednesday while Yancoal shares were steady at 48 cents on the Australian Securities Exchange.
CMC Markets chief market analyst Ric Spooner said the share market was pleased with the price and timing of the sale.
He said the deal appeared to have extracted good value from the recent resurgence in coal prices, but was also viewed as a sensible exit from an industry in long-term decline.
"Assuming the sale receives regulatory approval, it will also see further improvement in Rio's balance sheet, adding to the likelihood of funds being returned to shareholders," Mr Spooner said on Wednesday.
RBC Capital Markets analyst Paul Hissey said Rio had managed to obtain a good price for assets linked to a commodity in which Rio did not see much upside.
"We see this as a very good deal for Rio," Mr Hissey said.
Rio said the sale of its subsidiary Coal & Allied Industries to Yancoal is consistent with the company's strategy of reshaping its portfolio to use capital more effectively, and delivers value for shareholders.
Coal & Allied is the holding company for Rio Tinto's thermal coal operations in NSW's Hunter Valley, while 78 per cent of Yancoal shares are held by Chinese state-owned Yankuang Group.
Coal & Allied holds majority stakes in several open-cut mines, including the Hunter Valley Operations mine, Mount Thorley and Warkworth.
The mines produced a total of 25.9 million tonnes of coal in 2016, of which Rio's share was 17.1 million tonnes.
Coal & Allied also owns undeveloped coal assets and has a large stake in Port Waratah Coal Services, which owns a coal export terminal at Newcastle.
Yancoal already owns seven Australian coal mines.
The acquisition of the Rio coal assets in the Hunter Valley makes Yancoal Australia's largest pure-play coal producer.
Yancoal says the acquisition of Coal & Allied will deliver substantial cash flows to the company, quality coal, and long-term relationships with customers in key global markets.
Yancoal intends to fund the acquisition through a capital raising and pro-rata entitlement offer of shares.
Yancoal's majority shareholder is Yanzhou Coal Mining which in turn is majority-owned by the state-controlled Yankuang Group.
The transaction is subject to approval of Rio Tinto and Yanzhou shareholders as well as regulators.
The deal is expected to be completed in the third quarter of 2017.
Share
