Yancoal and Rio Tinto announced January 24 they had entered into a binding agreement for Yancoal to buy Rio Tinto's NSW thermal and semi-soft coking coal producer, Coal and Allied. The deal is transformational for Yancoal, propelling it to become Australia's fourth largest coal producer. However nothing comes for free, and Yancoal have paid a significant premium to secure the assets, making it an attractive deal for Rio Tinto. The total upfront consideration of US$2.35 billion (assuming Yancoal elects to pay the entire amount upfront) represents a 60% premium to our valuation of US$1.46 billion. We estimate the deal was struck at an implied long-term benchmark thermal coal price of US$74/tonne and a hard coking coal price of US$124/tonne (flat real 2017 terms).