HomeEnergy MineralsRio Tinto bid for Riversdale imminent

Rio Tinto bid for Riversdale imminent

Drill team at work
at Riversdale’s Benga
project in Mozambique
Sydney, Australia — MININGREVIEW.COM — 22 December 2010 – ASX and LSE-listed mining giant Rio Tinto is finalising a US$3.8 billion (R25.8 billion) takeover bid for Australian-listed coal mining company Riversdale Mining Limited, ahead of a possible bidding war for the African-focused target.

This was revealed here by sources who, according to Reuters, said the takeover bid had been raised as Rio Tinto sought to gain key coking coal supplies amid soaring demand from India and China.

Rio Tinto is locked in talks with Riversdale Mining over a A$16 per share takeover offer, but a final deal has not yet been completed because of some last minute wrangling over price, one source familiar with the matter said.

An announcement is expected either later today or tomorrow, one source said, confirming media reports that Rio Tinto had offered around A$16 per share for Riversdale. The two sources could not be identified as they were not authorised to speak to the media.

An A$16 per share bid would be a 13.5% premium to Riversdale’s close on 3 December before news of Rio’s interest was announced, but lower than its last trading price of A$16.30.

A successful bid for Riversdale would give it access to what is expected to be the world’s second-largest coal exporting market in coming years. Rio is currently underweight in the commodity. Its large reserves of thermal coking coal have relatively low costs and are well situated to serve China and India’s booming markets.

Riversdale “’ which has two major coking Mozambique-based coal projects in Mozambique “’may eventually supply 5 to 10% of the global market for the key steel-making material, analysts say.

Riversdale is also being eyed by other large mining companies, potentially sparking a bidding war, according to sources close to the deal, although some analysts said they might be unable to match a A$16 per share bid.

Potential interested parties include Anglo American, ArcelorMittal and Xstrata, they added.

Last week five state-run Indian firms also confirmed that they were considering an offer. Brazil’s Vale, which owns nearby coal mines in Mozambique was not expected to bid.

Riversdale’s large shareholders are seen as potential obstacles to a deal. India’s Tata Steel owns about 24% of Riversdale. Brazilian steelmaker CSN and U.S. Investment firm Passport Capital are also large shareholders.

Rio was making the offer alone and not part of a joint venture with another party, one source said.