Rio Tinto struck a deal to sell its Australian subsidiary Coal & Allied Industries Ltd. to Yancoal Australia Ltd. for up to US$2.45 billion, the companies said Jan. 24.

The amount comprises an initial US$1.95 billion in cash payable at completion and US$500 million in deferred cash payments payable over five years after the deal closes.

The Yanzhou Coal Mining Co. Ltd. unit has until Feb. 24 to choose to make a single cash payment of US$2.35 billion at completion, rather than opting for the deferred payment structure. Rio Tinto is also entitled to a coal price-linked royalty.

Coal & Allied holds an 80% stake in the Mount Thorley coal mine, a 55.57% interest in the Warkworth mine and a 67.6% in the Hunter Valley Operations, along with a 36.5% stake in a coal export terminal at Newcastle port.

Apart from shareholder approval, the deal is also subject to various Australian and Chinese approvals and is expected to close in the second half of 2017.

Including this transaction, Rio Tinto has divested at least US$7.7 billion worth of assets since 2013.

Yancoal Australia plans to fund the transaction through a capital raising and a pro rata entitlement offer. The Chinese coal major is in talks with professional underwriters and third-party investors to underwrite the balance of the capital raising.

Separately, Rio Tinto said mineral resources at the Mount Thorley mine increased by 208 million tonnes to 322 million tonnes, on a 100% ownership basis.

Likewise, mineral resources at Warkworth have increased by 353 million tonnes to 966 million tonnes.

This increase in mineral resources was based on an examination of leases that included a reinterpretation of the geological model, employment of new datasets and adopting improved mineral resource estimation methods.

The mineral resources were reported on a 100% basis and exclude ore reserves.