Global miner Rio Tinto has cut a deal to sell its Australian coal assets to China's Yancoal for $3.2 billion — if the sale is approved by the Federal Government.

Key points: Yancoal Australia is owned by Chinese company Yanzhou Coal Mining, which already runs other mines in the Hunter Valley region

Yancoal Australia is owned by Chinese company Yanzhou Coal Mining, which already runs other mines in the Hunter Valley region Local leaders are hopeful this is a vote of confidence in regional New South Wales' floundering coal industry

Local leaders are hopeful this is a vote of confidence in regional New South Wales' floundering coal industry The sale will need the approval of the Foreign Investment Review Board

The $US2.45 billion ($3.2 billion) sale of Coal & Allied includes Rio Tinto's largest Australian coal operation, located in the Hunter Valley.

Yancoal Australia is owned by Chinese company Yanzhou Coal Mining.

The coal properties that would end up majority-owned by the Chinese company are Mount Thorley, Warkworth and Hunter Valley Operations, as well as a stake in Newcastle's Port Waratah coal loaders.

The deal is still subject to approvals from the Australian Government, Chinese regulatory agencies, and shareholder approval.

The Government tightened the laws around foreign investment last year after the Northern Territory Government controversially leased out the Port of Darwin for 99 years to a Chinese-owned company.

Now critical assets worth more than $250 million need to be approved by the Foreign Investment Review Board (FIRB).

Treasurer Scott Morrison's office would not say if an application for the deal is before the board yet.

"The Treasurer will consider a wide range of issues in any decision-making regarding foreign investment review decisions," a spokesman for Mr Morrison said.

Mining analyst Giuliano Sala Tenna from Bell Potter Securities believes the FIRB is likely to approve the deal.

"It's always going to be a risk but it'd be difficult for the regulators to step in this instance because if they step in then really it's saying to the big miners that they could potentially step in on other transactions of this nature," he said.

"I think with companies when you ask them to commit large sums of capital for long life projects they also have to have the flexibility to monetise their equity holdings if their corporate strategy changes."

Rio Tinto's share price has already jumped on the back of the announcement.

Protesters 'pleased to see Rio Tinto depart'

Bulga residents protesting against a mine expansion in 2015. ( ABC News: Caitlin Furlong )

The fight continues for residents of Bulga who have been trying to stop the expansion of the Mount Thorley Warkworth mine for several years.

"We are certainly pleased to see Rio Tinto depart from these two mines," said John Krey, the president of the Bulga Milbrodale Progress Association.

"We've been battling [Rio Tinto] now for seven-and-a-half years … we don't know Yancoal's reputation, we don't know their style of management or their community approach, but we think it will be better than Rio's anyway."

'Coal has a future'

Federal MP for Hunter, Joel Fitzgibbon, said Yancoal already owns several Hunter region mines, and so the purchase is a vote of confidence in the industry and the area.

"It shows that the Chinese think that coal has a future, and they're prepared to increase their stake in it," Mr Fitzgibbon said.

"On the potential downside, Yancoal obviously believes it can make a quid as well, therefore probably believe it can run the mines more efficiently," he said, adding there is concern about the new owners cutting costs at the mines by shedding employees.

"There are many ways you can achieve efficiencies, but often it's about workforce … I hope not, but you've got to look at both sides of the equation and the possibilities."

The local union president shares Mr Fitzgibbon's hope for the future.

"I think it's a great shot in the arm for the coal industry here in the Hunter Valley that other interested parties can see a future in both those operations as well as the coal industry in general," said Peter Jordan, the northern district president of the CFMEU.

"They're like any other big employer — we have our differences of view over a number of issues, but they employ our members.

"Provided that they're a good community partner for the local mining communities of the Hunter Valley and continue to respect and look after their workers, I'm sure that we're going to have a long relationship with Yancoal."

Rio Tinto keeps selling

Rio Tinto has sold at least $US7.7 billion of its assets since 2013, including the Clermont coal mine, the Bengalla coal mine and the Mount Pleasant coal project.

The company took apart its energy division in 2015 and has since cut its coal assets as a supply glut and slowing growth in China has pressured commodity prices.

Coal prices jumped last year after China slashed production, but major companies including Peabody Energy and Rio Tinto have been trying to exit coal assets as investors turn cautious over the emergence of renewables.

"We are confident that Coal & Allied will continue to contribute to the New South Wales economy and the communities of the Hunter Valley under a new owner," Rio Tinto chief executive JS Jacques said in a statement.

The deal is made up of an initial cash payment of $US1.95 billion and $US500 million in annual instalments over five years after completion.

Rio Tinto is entitled to potential royalties after the sale, which is expected to be completed in the second half of this year, subject to FIRB approval.