UPDATE: Rio Closes On Riversdale Takeover, Appoints Directors
07 Abril 2011 - 3:10AM
Dow Jones News
Closing in on a majority stake in takeover target Riversdale
Mining Ltd. (RIV.AU), Rio Tinto PLC (RIO) has taken three seats on
the coal mining company's board ahead of a detailed review of
assets that include two promising projects in southern Africa.
Rio Tinto has secured at least a 49.53% interest in Sydney-based
Riversdale, after late Thursday surpassing the 47% threshold it
sought and triggering a 14-day extension of the offer deadline to
April 20. In a statement Thursday, Riversdale said three Rio
nominees have now joined as board directors, and executive Chairman
Michael O'Keeffe and a non-executive director will step down.
Rapid industrialization in Asia, especially China and India, has
prompted miners to bid aggressively for undeveloped deposits of
commodities that are essential to manufacturing steel. Riversdale's
assets include billions of metric tons of coking coal in
Mozambique, which could be shipped eastward once key infrastructure
including rail links and a port are built.
Riversdale's board, which has backed the proposed deal since Rio
made its offer in December, have recommended other shareholders
accept the offer that values the company at about US$4 billion.
Riversdale's shares were trading at the 16.50 Australian dollar
(US$17.27) a share offer price at 0200 GMT.
Riversdale said Chairman O'Keeffe and Andrew Love will resign
from its board when Rio's stake passes the 50% mark or the offer
closes. Effective immediately, Douglas Ritchie, the chief executive
of Rio's energy business, will be added to Riversdale's board. He
will be joined by David Peever, managing director of Rio Tinto
Australia, and Matthew Coulter, chief development officer of coal
at Rio.
The appointments bring the number of directors to nine,
including Narendra Misra, who also is head of mergers and
acquisitions at Indian steel producer Tata Steel Ltd. (500470.BY),
which has an agreement for 40% of the coal produced by Riversdale's
Benga mine that is scheduled to begin production this year. Tata
last month raised its stake in Riversdale 2.9 percentage points to
27.1% after rival steel maker Cia. Siderurgica Nacional (SID) of
Brazil increased its holding to 19.9%.
CSN officers have said the company was open to possibilities for
its stake, but for now intended to keep the investment in
Riversdale as a "hedge" to cover part of its own coking coal needs.
Coking coal is a key raw ingredient in making steel.
Spokespeople for CSN weren't reachable when telephoned out of
business hours. A spokesman for Tata wasn't immediately available
for comment.
Rio in January said it would evaluate the performance and
prospects of Riversdale's operations and projects when the takeover
is successful, although it expected to sell the company's Zululand
colliery in South Africa. It also plans to close Riversdale's head
office eventually and seek the resignation of directors, while
retaining key management and staff. It didn't give an estimate for
cost savings, but has said it expected to lower corporate
costs.
Key to the acquisition are two coking coal mines being developed
in Mozambique's Tete province, an area that has attracted the
interest of steel and mining companies including Brazil's Vale SA
(VALE).
Riversdale has estimated at least US$400 million will be needed
for its share of costs for the second and third stages of
developing the Benga project and at least US$2.9 billion for the
Zambeze project. Benga has a resource of 4 billion metric tons and
Zambeze, which is at an earlier stage of development, has a
resource of 9 billion tons.
Rio has the financial might to push the projects onward and said
it would use its experience in rail, port and barging to provide
infrastructure.
-By Robb M. Stewart, Dow Jones Newswires; +61 3 9292 2094;
robb.stewart@dowjones.com
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