Riversdale Mining Ltd. has 13 billion metric tonnes of known coking and thermal coal reserves in its Benga and Zambeze projects in Mozambique. A global battle is now hotting up for the acquisition of Riversdale and the potential bidders clearly have no doubts about the continued use of coal and are not greatly impressed by the passing fad of Global Warming alarmism.
King Coal: image pitt.edu
International Coal Ventures Ltd., an Indian state-run joint venture, is studying an offer for Riversdale Mining Ltd. to counter a A$3.9 billion ($3.9 billion) bid from Rio Tinto Group.
ICVL appointed Citigroup Inc. to examine a possible takeover offer for the Sydney-based coal company with mines in Mozambique, the venture’s chairman C.S. Verma said yesterday. London-based Rio yesterday bid A$16 a share for Riversdale, securing 14.9 percent of the company in pre-bid agreements.
Indian companies are seeking coal mines overseas to ensure raw material supplies for producing steel and electricity. Brazil’s Vale SA or Eurasian Natural Resources Corp. may make bids, according to Sanford C. Bernstein & Co., as Tata Steel Ltd., Riversdale’s biggest holder, said it will study Rio’s offer “in the context of other alternatives” available to Tata. “The A$16 cash offer is unlikely to secure acceptance from all of Riversdale’s shareholders,” analysts led by Hayden Bairstow at CLSA Asia-Pacific Markets, said yesterday in a report, raising his price target for Riversdale by 3 percent to A$18. Riversdale’s “Benga and Zambeze coal projects are world class and we believe other suitors may show an interest in Riversdale now a formal bid has been tabled,” he said.
Tata Steel holds 24 per cent stake in Riversdale and is its largest shareholder. Sources say there have been talks between ICVL and Tata Steel for a joint bid or at the very least support from Tata Steel for ICVL’s bid. However, ICVL did not confirm that any talks took place between the consortium and Tata Steel reports The Hindu Business Line.
But more bidders are appearing and it is likely that the shareholders of Riversdale can expect a much higher price than what is on the table now. The Guardian reports that:
The global battle for control of the world’s natural resources flared again when it emerged that Anglo American could gatecrash Rio Tinto’s plans to buy Riversdale Mining, the Australian coking coal group, for £2.5bn.
Headed by chief executive Cynthia Carroll and chairman Sir John Parker, Anglo has joined a list of possible counter-bidders for Riversdale, whose African business produces coal for the fast-growing Asian steel industry.
Evidence of the importance of coking coal to China surfaced recently when Riversdale signed an agreement with Wuhan Iron and Steel to jointly develop Riversdale’s huge Zambeze coal reserves in Mozambique.
Anglo, which is believed to have appointed Morgan Stanley to advise on its options, will face stiff competition, with the Wall Street Journal reporting that Tata Steel of India, which controls 24% of Riversdale, is considering an offer.
Another potential bidder is ICVL, an Indian consortium that has appointed Citigroup as a financial adviser and mandated the bank to report back on the viability of a bid that would top Rio’s promise of A$16 a share.
Tata Steel has just received shareholder approval “for raising of additional long-term resources through issue of securities, including equity shares with differential rights as to voting and dividend, up to Rs 7,000 crore ($1,550 million)”. A company press release said “Tata Steel notes the takeover bid for Riversdale Mining announced by Rio Tinto. Tata Steel will evaluate the takeover bid in the context of other alternatives available to Tata Steel.” Riversdale is important for the long-term coking coal security for Corus. Tata Steel is already entrenched in its Mozambique coal mining project with a strategic stake and long-term supply contract. With Tata Steel’s share of Riversdale valued at almost $1 billion by the Rio Tinto bid it is likely that the final selling price will be significantly higher than Rio Tinto’s bid.
An educated guess would suggest a final selling price of over $5 billion or over A$20 per share.
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