Yancoal, which is majority owned by Chinese coal giant Yanzhou, received approval from China's National Development and Reform Commission and the anti-monopoly bureau of the Ministry of Commerce for the deal, it revealed in a filing.

Rio Tinto now has to decide whether to stay with Yancoal’s original bid, which has cleared all its regulatory hurdles, or accept Glencore ‘s bid and hope that Yancoal will come up with a counter-bid.

Under the January deal it struck with Yancoal, Rio Tinto can talk to any other third party if it believes, in good faith, that a superior bid will arise.

“The Glencore decision puts Rio Tinto in a very difficult situation,” Argonaut Securities analyst Helen Lau reportedly told investment newsletter Seeking Alpha. “It’s hard for the board to reject a higher offer, with better terms, but at the same time, it could be even more difficult to reject Yanzhou Coal, which has got almost all government clearance for the deal."

The other consideration is Glencore’s bid is fully funded but Yancoal needs to seek financing for its bid. 

If Rio Tinto accepts the bid, Yancoal will have five days to come up with a superior offer.

Rio Tinto shareholders are due to vote on the divestment of Coal & Allied on June 27.

Glencore has agreed to buy that stake, as well as Mitsubishi’s 28.898% interest in the Warkworth joint venture for US$920 million cash, conditional on the C&A acquisition completing.

Yancoal offered $720 million for the Mitsubishi stake and Mitsubishi has accepted its offer.