Rio Tinto this week reached a binding agreement for the sale of its wholly-owned Australian subsidiary Coal & Allied Industries Ltd to Yancoal Australia Ltd for up to A$2.45 billion comprising an initial A$1.95 billion cash payment, payable at completion; and A$500 million in aggregate deferred cash payments, payable as annual instalments of A$100 million over five years following completion. Prior to 24 February 2017, Yancoal Australia is entitled to elect an alternative purchase price structure of a single cash payment at completion of A$2.35 billion. After the sale is completed, Rio Tinto will also be entitled to potential royalties.Rio Tinto Chief Executive J-S Jacques said “This sale delivers outstanding value for our shareholders and is consistent with our strategy of reshaping our portfolio to ensure the most effective use of capital. Our world-class assets, strong balance sheet and relentless focus on cash will ensure that we deliver superior returns for our shareholders. We are confident that Coal & Allied will continue to contribute to the New South Wales economy and the communities of the Hunter Valley under a new owner.”In addition to the sale consideration and potential royalties linked to the coal price, Rio Tinto will continue to benefit from earnings and cashflow generated by Coal & Allied until completion of the transaction. The Coal & Allied operations will also continue to use Rio Tinto Marine freight services following completion of the transaction. The transaction is subject to certain conditions precedent being satisfied, including approvals from the Australian Government, Chinese regulatory agencies and the NSW Government.As a result of the shareholding levels of various Chinese state-owned entities in each of Yankuang, Yanzhou and Chinalco (Aluminium Corporation of China), and Chinalco being a 10.1% shareholder in the Rio Tinto Group, Yancoal Australia is considered to be a related party of Rio Tinto for the purposes of the UK Listing Rules and the ASX Listing Rules. Accordingly, approval is also required from a majority of independent Rio Tinto shareholders (that is, not including Chinalco and any other entities considered to be associates of Chinalco under the UK Listing Rules). Subject to all approvals and other conditions precedent being satisfied, it is expected that the transaction will complete in the second half of 2017.“The sale of Coal & Allied represents the culmination of an extensive assessment of all strategic options for these assets. Rio Tinto has conducted a comprehensive market testing and price discovery process and has held extensive discussions with several potential acquirers of the asset but Yancoal Australia provided the only offer that represented compelling value for the assets.” Rio Tinto has now announced or completed at least A$7.7 billion of divestments since 2013. These transactions include the sale of Rio Tinto’s interests in the Clermont coal mine, the Bengalla coal mine and the Mount Pleasant coal project. In addition, the restructuring of ownership of the Coal & Allied assets was completed with our joint venture partner Mitsubishi Development Pty Ltd in 2016.Coal & Allied is the holding company for Rio Tinto’s thermal coal business in the Hunter Valley region of New South Wales. Coal & Allied owns and operates multiple, multi-seam open cut mines in the Hunter Valley. It has a 67.6% interest in the Hunter Valley Operations mine, an 80% interest in the Mount Thorley mine, a 55.6% interest in the Warkworth mine, a 36.5% interest in Port Waratah Coal Services (which owns a coal export terminal located at the Port of Newcastle) and other undeveloped coal assets, including various landholdings.The Hunter Valley Operations and Mount Thorley Warkworth mines together produced 25.9 Mt of saleable thermal and semi-soft coking coal in 2016 (17.1 Mt Rio Tinto share). The net assets subject to this sale agreement had earnings before tax of A$102 million in the year to 31 December 2015, and a gross asset value attributable to them of A$1,895 million as at 30 June 2016.