Rio Tinto plc (RIO) - Get Rio Tinto plc Sponsored ADR Report shares fell modestly Monday despite rival Glencore (GLNCF)  outbidding Yancoal (YACAF)  for the miner's Coal & Allied Industries unit in Australia.

Rio Tinto acknowledged an approach from Glencore, the world's biggest commodity trader, in statement published Monday which values the unit at $2.55 billion and offers the seller a coal price linked royalty, making for a superior offer to that already put forward by Yancoal.

"Rio Tinto acknowledges that it has received a proposal from Glencore to acquire Rio Tinto's wholly-owned Australian subsidiary, Coal & Allied Industries Limited," the company said. "The Rio Tinto board and management will give the proposal appropriate consideration and respond in due course."

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Rio and Yancoal had agreed the sale of Coal & Allied for $2.45 billion in January, although the terms of the deal meant that Rio was afforded a so-called 'go-shop' period where it could entertain other prospective bidders. Glencore's move now paves the way for a possible bidding war between the two suitors.

Rio stock slipped around 0.5% in early London trading taking the shares further off a two month high and to an intraday low of 3,222.0 pence while Glencore shares fell 0.4% to around 294.1 pence in the opening hour. The Stoxx Europe TMI Mining index was down by 0.96% during early trading, quoted at 595.03, marking its lowest level for June so far.

Under the terms of the two proposed deals, Yancoal would pay around $500 million of its bid price in $100 million installment payments, while Glencore would also make five matching installment payments but its cash-up front offer is also greater.

Glencore has also agreed to buy Mitsubishi (MSBHY) out of its minority stakes in two Coal & Allied mines, for a total of $920 million, if it is successful in its offer to Rio.

The miner plans to sell other coal assets as part of its effort to fund the transaction.