Rio Tinto has completed the $2.69 billion sale of NSW thermal coal business Coal & Allied to Yancoal Australia.

The Chinese-controlled Yancoal took over management of the Hunter Valley-based coal business from September 1.

The $2.69 billion payment was split into $2.45 billion in cash and $240 million of unconditional guaranteed royalty payments.

The sale means Rio’s forecast thermal coal production in 2017 has dropped from 17-18 million tonnes to 13-14 million tonnes.

“Today is a significant achievement for Yancoal Australia and redefines our business as a leader within the Australian resources sector and a major competitor throughout international coal markets,” Yancoal chairman Xiyong Li said

“The completion of the strategic acquisition of Coal & Allied is a credit to the Yancoal team and will provide new opportunities for continued growth,” said Yancoal CEO Reinhold Schmidt.

“We look forward to maximising significant operational synergies from the combination of Coal & Allied’s world-class assets with our existing portfolio.”

Glencore has an agreement with Yancoal that will see it acquire a 49 per cent interest in the Hunter Valley Operations (HVO) coal mine and form a joint venture now that the sale is complete.

The agreement will see Glencore acquire 16.6 per cent of HVO from Yancoal, allowing both companies to work together to purchase Mitsubishi’s 32.4 per cent interest in the operation, forming a combined 49 per cent stake.