China's Yancoal looks to have sealed a deal for Rio Tinto's NSW coal operations after raising its offer price to $US2.69 billion ($A3.55 billion) to top a rival offer from global miner Glencore.
Rio Tinto confirmed it would back Yancoal's offer over Glencore because of higher value and greater transaction certainty.
The Chinese-owned company said late on Monday it will pay $US2.45 billion ($A3.23 billion) in cash as previously agreed, plus another $US240 million in royalty payments and has more than doubled the break fee, from $US100 million to $US225 million.
Its latest offer for Rio's Coal & Allied business has trumped a revised $US2.675 billion cash bid from Glencore, which upped its initial $US2.45 billion approach following Rio's rejection.
UBS mining analyst Glyn Lawcock said the deal looked to be settled, with little time left for Glencore to raise its bid ahead of a Rio Tinto shareholder meeting later on Tuesday.
News that makes sense
Your trusted source for staying up-to-date with the world around you. Get free daily news updates and analysis, straight to your inbox.
Rio will hold a general meeting of shareholders in London at 11am local time on Tuesday (2000 AEST) to vote on Yancoal's offer.
Rio chief executive Jean-Sebastien Jacques said Yancoal's latest $US2.69 billion bid offered compelling value for the Australian thermal coal assets.
The Yancoal deal was expected to be completed in the 2017 third quarter while any transaction with Glencore could not be finalised before the first half of 2018 at best, he said.
"This (Yancoal) sale process has been in progress for a long period of time and we believe it is in the best interests of our shareholders to take the greater certainty of Yancoal's strong proposal," he said.
The Yancoal deal already has NSW government approval.
Royal Bank of Canada analyst Paul Hissey said Rio seemed likely to get additional value from the deal.
"The cashflow from the transaction, in our view, increases the likelihood of additional shareholder returns, which may drive investor interest in the run-up to results," he said in a note.
Rio's Allied Coal business includes majority stakes in the Hunter Valley Operations and the Mount Thorley Warkworth mine, and a 36.5 per cent interest in the Newcastle Port coal export terminal.
Glencore had been seen as a natural owner given its existing coal operations in the Hunter Valley.
Analysts had estimated potential synergies at more than $US500 million ($A737 million) for Glencore in the deal.
Yancoal, which is controlled by state-owned Yanzhou Coal Mining Company, already owns seven Australian coal mines.
At 1305 AEST, Rio Tinto shares were down 0.2 per cent at $59.43 in a weak Australian market.
Yancoal Australia shares were unchanged at 29 cents each.
