Rio Tinto shares have jumped almost 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.
Prior to 24 February 2017, Yancoal Australia is entitled to elect an alternative purchase price structure of a single cash payment at completion of $2.35 billion.
Rio Tinto said the sale came after all avenues were explored, and that the offer from Yancoal stood alone as representing "compelling value".
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.
If it goes through, the deal would make of Yancoal Australia's largest pure-play coal producer.
Australia's Newcastle coal, an Asian thermal benchmark, surged more than 80% in 2016, snapping five years of declines. Since 2013, it has announced or completed at least $7.7 billion worth of divestments, it said Tuesday.
The sale won't have a material impact on earnings per share, the miner said.
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Rio's shares in London rose 4.37pc in afternoon trade to £36.26.
When asked whether she was comfortable with a Chinese dominated company taking control of a big portion of the Hunter Valley district, NSW premier Gladys Berejiklian said; "Foreign ownership is a federal issue".
Yancoal plans to fund the deal through a capital raising and a share sale.
The transaction must still be approved by the Australian Government, NSW Government and Chinese regulatory agencies.
"The new Yancoal will very well positioned to realize significant value for our shareholders in the years ahead". "They're likely to pay a dividend at the top end of the guidance and there's clearly scope for a decent sized special dividend".
The Hunter Valley Operations and Mount Thorley Warkworth mines together produced 25.9 million tons of saleable thermal and semi-soft coking coal past year, with 17.1 million tons being Rio's share.
Hunter Hillcoat, analyst at Investec, said Rio had achieved a "good premium" to Coal & Allied's book value. 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.