Rio Tinto In Deal To Invest In Australian Pacific Coal Project

Rio Tinto PLC (RIO) has struck a deal whereby it may buy a developing coal project in eastern Australia's resource-rich Bowen Basin, project owner Australian Pacific Coal Ltd. (AQC.AU) said Friday.

Rio's exploration arm has signed a non-binding letter of intent to assume financial and technical risk in examining the coal potential of the Mt Hillalong project as part of a deal that could see it acquire or enter a joint venture for the project, Australian Pacific said in a statement. If Rio doesn't exercise an option to buy into the project, Australian Pacific said it will retain full ownership.

Australian Pacific owns 16 exploration permits in the Bowen and Surat basins of Queensland state. It has previously said Mt Hillalong is an advanced exploration target, located 22 kilometers west of Rio's Hail Creek mine that produces about 6 million metric tons of coking coal a year. In March it said A$960,000 had been budgeted for further exploration over 12 months.

-By Robb M. Stewart, Dow Jones Newswires; +61 3 9292 2094; robb.stewart@dowjones.com

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