Hail Creek Mine. Credit: Copyright © 2017 Rio Tinto.

Rio Tinto has signed an agreement to divest its interests in the Hail Creek coal mine and the Valeria coal development project in Queensland, Australia, to diversified trading firm Glencore for a total consideration of $1.7bn.

The proposed acquisition will give Glencore an 82% interest in the Hail Creek operating mine and a 71.2% interest in the Valeria project.

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Other stakeholders in the Hail Creek joint venture include Nippon Steel Australia (8%), Marubeni Coal (6.67%) and Sumisho Coal Development (3.33%), with each of them having the right to sell their share to Glencore through a ‘tag-along’ right.

Glencore expects the acquisition of the remaining 18% share in the project to cost up to $340m.

“We expect that Hail Creek will continue to perform strongly under its new owner, securing long-term jobs and continuing its contribution to the State of Queensland.”

Located 120km south-west of Mackay, the Hail Creek mine produced 9.4 million tonnes (Mt) of coal last year for export from the Dalrymple Bay Coal Terminal.

Rio Tinto chief executive Jean-Sébastien Jacques said: “The sale of Hail Creek and Valeria delivers compelling value for our shareholders and continues our strategy of strengthening our portfolio, focusing on highest returns, maintaining a strong balance sheet and allocating capital to the highest value opportunities.

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“We expect that Hail Creek will continue to perform strongly under its new owner, securing long-term jobs and continuing its contribution to the State of Queensland.”

The proceeds from the sale are expected to be used to meet general corporate needs.

Located in the central Bowen Basin, around 40km north-west of Emerald, Valeria is an undeveloped coal project, with tenements said to contain 762Mt of coal mineral resources.

The completion of the sale is scheduled to take place in the second half of this year and is conditional upon regulatory approvals.

In a separate development, Rio Tinto has commenced a strategic plan to offload its remaining Australian coal assets.