SYDNEY (Reuters) - Australia's foreign investment watchdog has cleared Chinese- backed coal miner Yancoal Australia Ltd (>> Yancoal Australia Ltd) to pursue its $2.45 billion acquisition of Rio Tinto's (>> Rio Tinto Limited) (>> Rio Tinto plc) Coal and Allied Division, Yancoal said on Thursday.

The approval by Australia's Foreign Investment Review Board (FIRB) marked a critical milestone for Yancoal, representing the government's support for investment in the resources sector, Yancoal said.

Yancoal said it expects to complete the deal in the third quarter of 2017. Its purchase of the Rio Tinto coal assets had not led to any political controversy in Australia.

FIRB has yet to approve a A$7.37 billion bid for utility firm DUET Group (>> DUET Group) led by Hong Kong’s Cheung Kong Infrastructure Holdings (CKI) (>> Cheung Kong Infrastructure Holdings Ltd.).

DUET’s assets include a state electricity grid. CKI and China’s State Grid Corp last year had their bid for a larger state electricity grid, Ausgrid, rejected by the Australian government based on unspecified national security concerns.

Australia in January set up a new body to vet foreign investment in critical infrastructure assets, which include power grids but not coal mines.

(Reporting by James Regan and Jamie Freed; Editing by Sandra Maler and Stephen Coates)