Rio Tinto confirms earlier recommendation of Yancoal offer for coal group

US shares are seen mixed to lower at the open

US shares are seen mixed to lower at the open

LONDON-Rio Tinto PLC rebuffed a $2.5 billion offer by Glencore PLC for its Australian coal assets and recommended that shareholders approve a previous bid by a Chinese company.

Rio Tinto on Tuesday reconfirmed its earlier recommendation of Yancoal Australia as the preferred buyer of its Coal & Allied division.

"We believe Yancoal's offer to purchase our thermal coal assets for United States dollars 2.45 billion offers the best value and greater transaction certainty for shareholders", Rio's chief executive Jean-Sebastien Jacques said in a statement.

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"The sale of Coal & Allied will create outstanding value for shareholders and is consistent with our strategy of simplifying our portfolio to ensure the most effective use of our capital".

Industry sources said they expected Glencore to continue to press its case to buy the Australian coal mines.

Following Glencore's bid, Yancoal revised its offer to make its $2.45 billion payment upfront, rather than in a series of installments.

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Yancoal chairman Xiyong Li said Moolarben continued to be delivered on time and on budget, with the underground mine producing first development coal and remaining on track to start full longwall production later this year.

Glencore said it had received clearance from Japan, which would be the destination for much of the coal involved.

Dual-listed Rio said it would put the Yancoal offer to shareholders in Britain and Australia later this month, with the transaction expected to be completed by the third quarter of this year. Although the Rio Tinto assets are in Australia, China is a major coal consuming country and its regulators often insert themselves into mining deals.

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As of 14:28 BST, Glencore's share price had lost 2.33 percent to 281.25p, underperforming the broader London market, with the benchmark FTSE 100 index now standing 0.12 percent lower at 7,514.50 points. But it said one positive aspect was greater financial flexibility to pursue plans to expand its agriculture business.

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