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A test of M&A nerve: Rio Tinto coal assets elude Glencore

30 June 2017

Rio Tinto Plc (RIO.L, RIO, RTNTF.PK) said that its board has now considered the latest offers received from Glencore and Yancoal in recent days.

Australian shareholders in Rio Tinto have joined their London counterparts in approving the $US2.679 billion sale of its NSW thermal and soft coking coal mines to Yancoal of China.

Rio last week said it still favoured Yancoal since the deal was expected to be completed faster due to greater funding and regulatory certainty, leading Glencore to deliver a fresh US$2, 675 billion bid.

On Monday, Rio Tinto reiterated Yancoal as its preferred buyer for Coal & Allied Industries after Yancoal further improved its offer.

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The vote saw 97 percent of shareholders agree to the sale, but, as Rio Tinto Chairman Jan du Plessis revealed, did not specify how the funds would be used in the future: "What to do with the money?"

Rio Tinto's London shareholders voted on Tuesday.

"If the Rio Tinto board decides to reject Glencore's revised proposal, then the general meeting is expected to proceed as now scheduled", it added, with shareholders voting on the Yancoal deal.

In January, Rio Tinto agreed to sell C&A to Yancoal for $2.05bn.

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Yancoal's offer includes a cash payment of $US2.45 billion plus another $US240 million in royalty payments.

Any transaction with Glencore is unlikely to be completed until the first half of 2018 at the earliest, Rio said.

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.

Yancoal is controlled by Chinese state-owned Yanzhou Coal Mining Company, and already owns seven other Australian coal mines.

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Both Yancoal and Glencore were forced to increase their offers above most analysts' valuations of about US$2 billion to remain in the running.

A test of M&A nerve: Rio Tinto coal assets elude Glencore