(Adds background) Rio Tinto RIO.L (RIO) has agreed to pay a...

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Rio Tinto RIO.L (RIO) has agreed to pay a small penalty for overstating its Mozambique coal reserves in 2012 in return for the Australian corporate watchdog dropping charges against its top two executives at the time, the Australian Securities and Investment Commission (ASIC) said on Monday.

The settlement of A$750,000 ($538,200) for a single breach of continuous disclosure obligations remains subject to approval by a Federal Court judge, an ASIC spokesperson said.

Rio Tinto confirmed a settlement had been reached but declined to confirm the agreed penalty.

ASIC's case was tied to Rio Tinto's reporting of its coal reserves in Mozambique, which it acquired from Riversdale Mining for $3.9 billion in 2011. Two years later, Chief Executive Officer Tom Albanese stepped down as the company wrote off more than $3 billion on the assets.

Hearings on the case against the global miner, Albanese and former chief financial officer Guy Elliott had been due to begin on March 1.

ASIC said on Monday the court heard submissions from itself and Rio Tinto on final orders in the case, including that a declaration be made that Rio Tinto Ltd had breached the Corporations Act "in failing to comply with its continuous disclosure obligations and an order imposing a civil penalty."

ASIC alleged that the company misled investors in its 2011 annual report, signed by Albanese and Elliott, on its coal reserves and resources in Mozambique, which were then heavily reduced the following year.

"Rio Tinto reached a prospective settlement with the Australian Securities and Investments Commission in relation to the disclosure of the impairment of Rio Tinto Coal Mozambique (RTCM), which was reflected in Rio Tinto's 2012 year-end accounts," a Rio Tinto spokesperson said on Monday.

Rio Tinto in 2017 was fined 27.4 million pounds by the UK Financial Conduct Authority (FCA) for failing to recognise an impairment loss on the value of the Mozambique business in its 2012 half year report.

The company is still fighting the United States Securities and Exchange Commission (SEC) in a civil case in the Federal Court in Manhattan for inflating the value of the Mozambique business.

($1 = 1.3935 Australian dollars)