Chinese government-controlled Yancoal Australia has signed an agreement to acquire Rio Tinto’s Australian unit Coal & Allied Industries for up to $2.45bn in cash.

The divestment is part of in the British-Australian mining giant’s effort to sell all of its coal assets.

Coal & Allied Industries unit owns and operates multiple, multi-seam open cut mines in the Hunter Valley region of New South Wales as well as export infrastructure.

It owns 67.6% stake in the Hunter Valley Operations mining complex, 80% interest in the Mount Thorley mine, 55.6% in the Warkworth mine and other undeveloped coal assets, including various landholdings.

The firm also has 36.5% stake in Port Waratah Coal Services, a coal export terminal located at the Port of Newcastle.

Rio Tinto CEO 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.”

Scheduled to be completed in the third quarter of 2017, the transaction is subject to conditions, including Rio Tinto shareholder approval, Yanzhou shareholder approval and various regulatory approvals.

Yancoal said that the acquisition will position it as the largest pure-play coal producer in Australia and allow it realize ongoing value from its combined low operating cost portfolio.

Yancoal chairman Xiyong Li said: “This is a transformative and exciting acquisition for Yancoal shareholders and will form the basis for our future growth and success as Australia’s largest pure-play coal company.

“The substantial cash flows from Coal & Allied’s assets, combined with the anticipated synergies and proposed equity raising will materially strengthen Yancoal’s balance sheet.”

Yancoal said is also planning to make an ‘tag’ offer to Mitsubishi Development, which holds 32.4% stake in the Hunter Valley coal assets.

Image: Rio Tinto’s Mount Thorley Warkworth Mine in Australia. Photo: Copyright © 2016 Rio Tinto.