rio bids for riversdale @ $16.50, page-7

Rio ups ante on Riversdale Xavier La Canna
December 22, 2010

RIO TINTO has increased its multibillion-dollar bid for Riversdale Mining, according to London reports.

If Rio Tinto succeeds, it would mark its first big acquisition since its ill-timed $US38.1 billion takeover of Alcan in 2007, at the height of the commodities boom.

A Rio Tinto spokesman declined to comment on the Riversdale reports.

On December 6, Riversdale said it was in discussions with Rio Tinto about selling the company for $15 a share, which led to Riversdale's share price jumping above $16.

Britain's Telegraph reported yesterday that Rio had raised the offer to between $16 and $18 a share.

At $16 a share, the coalminer would be worth $3.78 billion.

Riversdale went into a trading halt yesterday with its shares at $16.30, pending ''a possible control transaction'', according to the company.

A spokesman for Riversdale refused to comment on the report Rio Tinto had made a formal offer.

Riversdale is 24 per cent owned by India's Tata Steel, which also has a 35 per cent stake in the Benga coal project in Mozambique.

Benga is projected to produce 20 million tonnes a year of coal by 2013.

Riversdale owns another major project in Mozambique and controls the Zululand Anthracite operation in South Africa.

Coal prices have soared in the past year, with prices tipped to rise further next year as Chinese growth spurs strong demand for coking coal used in steel furnaces.

Rio is keen to catch up to rival BHP Billiton's superior position in coking coal, a key ingredient in steel making.

Coking coal prices recently moved back to more than $US200 a tonne, with heavy rain in Queensland affecting production from the Bowen Basin, the world's premier coking coal production hub.

Unlike iron ore, new sources of high-quality coking coal are few and far between. The development of an industry in Mozambique and in Mongolia is being encouraged by the surge in prices.

Riversdale has 13 billion tonnes in coking coal resources in two projects in Mozambique.

Chinese steel producer Wuhan Iron and Steel announced plans in June to acquire an 8 per cent stake in Riversdale at $US10 a share for $US200 million and a 40 per cent stake in the Zambezi project for $US800 million. That deal is said to be close to regulatory approval.

AAP