Anglo-Australian miner Rio Tinto has made a A$3.5 billion bid approach for Africa-focused Riversdale Mining, in a move likely to spark a bidding war.
In a statement released today, Riversdale’s executive chairman Michael O'Keeffe confirmed the approach, saying: “The Company has had discussions with Rio Tinto concerning a possible transaction at the corporate level for indicative consideration of $15.00 per Riversdale share. These discussions were undertaken in confidence and Rio Tinto advised the Company that it is not in a position to submit a proposal for the potential acquisition of the Company.
“While discussions with Rio Tinto are ongoing, there is no certainty that Rio Tinto or any other party will proceed with any proposal for the acquisition of Riversdale or, if it does, the timing of such a proposal or the terms and conditions on which any such proposal will be made.”
The main projects of Sydney, Australia-based Riversdale are in Mozambique and South Africa. It owns a number of mines jointly with India’s Tata Steel, which holds a 24 per cent stake in Riversdale.
It is thought that Rio's offer could spark a bidding war, as Riversdale has desirable hard coking-coal projects in Mozambique that could eventually supply five to 10 per cent of the global market for the material, key to steel making. Riversdale's Zambeze project holds nine billion tonnes of certified resources—one of the largest undeveloped coking coal resources in the world. It also owns 65 per cent of the neighbouring Benga project, which is projected to produce 20 million tonnes per annum of coal by 2013.
Riversdale also owns an underground coal mine in South Africa—Zululand Anthracite Colliery—which could attract strong interest for its high-quality thermal coal.
Brazil's Vale and Tata Steel are seen to be the two most likely bidding rivals for Riversdale. It has been suggested that Xstrata, Anglo American and Peabody Energy might also be interested in making counter offers.
If Rio’s bid is successful, it would mark its first major acquisition since its ill-timed $US38.1 billion takeover of Alcan in 2007, at the height of the commodities boom, which resulted in the company acquiring high levels of debt.
