* Final offers for Kestrel and Hail Creek due on March 12
* Three bidders expected to make offers for the mines
* Outlook for coking coal to impact value of bids
By Sonali Paul and Clara Denina
MELBOURNE/LONDON, March 9 (Reuters) - At least three bidders are expected to submit final offers for global miner Rio Tinto's Hail Creek and Kestrel coal mines in Australia, which could fetch up to $2.5 billion, people familiar with the process said.
The Anglo-Australian mining company made a strategic decision in 2017 to exit coal and focus on growth in iron ore, copper and its aluminium division.
Hail Creek and Kestrel are Rio Tinto's last two coal mines, following the $2.7 billion sale of its Hunter Valley coal operations in Australia to Yancoal last year.
Australia's Whitehaven Coal is expected to bid, as well as Australian private equity firm EMR Capital along with Indonesia's Adaro Energy. A consortium led by U.S. private equity firm Apollo Global Management is also expected to be in the running.
Final bids for the two mines that mostly produce coking coal, used in steel mills, are due on Monday, March 12.
All sources declined to be named as the bids were subject to confidentiality agreements.
The sale is eagerly awaited by investors, who are hungry for more cash returns after a bumper payout for 2017, as the company is no longer looking to cut debt and has no plans for any big new investments.
"If Rio were to sell these assets, the likely outcome for the use of proceeds would be to direct them to shareholders," UBS analysts said in a note this week, adding that the mines could hand back more than $9 billion over the next 12 months.
EMR Capital has lined up Indonesia's second biggest coal producer Adaro as a partner on the bid, after talks with Chinese wealth fund CIC fell through, according to two people close to the process.
Adaro did not respond to telephone calls and written requests for comment.
EMR Managing Director Jason Chang declined to comment on whether it is bidding.
"Our themes haven't changed. We're still looking for coking coal, potash and copper assets," Chang said.
Apollo Global Management is bidding with pension fund Canada Pension Plan (CPP), U.S. coal company Xcoal Energy & Resources and a former Glencore executive for the assets.
Apollo and CPP declined to comment. Xcoal Resources was not immediately available to comment.
Whitehaven declined to comment, but is seen in a position to make acquisitions for the first time in several years, with its gearing slashed to just 4 percent.
However, for a A$4.3 billion ($3.4 billion) company, Hail Creek and Kestrel would be a huge bite, and analysts expect it would need to either sell new shares to help fund a deal or line up a partner in the mines.
UBS speculated that Mitsui, which co-owns the Kestrel mine, "may have a desire to increase their stake".
Mitsui Australia's spokesman declined to comment.
China-backed Yancoal Australia looked at the assets, but as of late Friday was no longer in the race, according to a lending source.
Yancoal declined to comment.
Rio's partners in Hail Creek are units of Nippon Steel and Sumitomo Metal Corp, Marubeni Corp and Sumitomo Corp, while Kestrel is minority-owned by Japan's Mitsui & Co.
The final price Rio gets will all hinge on bidders' outlook for coking coal prices.
UBS values the two mines at $1.94 billion, based on a long-term price of $120 a tonne for hard coking coal, while Macquarie values them at $2.7 billion based on $125 a tonne.
Those coking coal prices are well below current levels around $209 shored up by a number of factors, including capacity curbs imposed by Australia's top coal hauler, congestion at one of the country's key ports, and problems at some mines.
"Rio Tinto are in a position where they can call whatever price they want," said one person close to the process.
Rio, which is being advised by Credit Suisse, declined to comment on the sale.
$1 = 1.2825 Australian dollars Reporting by Clara Denina and Sonali Paul; Additional reporting by Fergus Jensen in Jakarta, Sharon Klyne in Sydney, Kane Wu in Hong Kong and Yuka Obayashi in Tokyo; editing by David Evans