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Who will win Australian Riversdale Mining
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Saturday, 11 Dec 2010
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On December 6, the Australian Stock Exchange listed mining company Riversdale Mining Limited has publicized that it has received a takeover offer from Australian mining mega Rio Tinto who's preliminary offer for each share of the formal one is AUD 15. The total acquisition price quoted by Rio Tinto is AUD 3.5 billion.

In fact this June, Riversdale Mining signed a non binding memorandum of understanding with Chinese steelmaker Wuhan Iron and Steel Co Ltd for the joint development of Riversdale Mining's Zambeze project in Mozambique, where a coal resource of nine billion tonnes has been identified.

WISCO has intended to buy 40% of the Zambeze project. Based on the MOU, the Chinese steelmaker will buy at least 10% of coal produced from Riversdale Mining's Benga coal project which is located close to the Zambeze project. According to the MoU, WISCO also intended to buy eight percent of RML for a consideration of AUD 10 per share.

WISCO has said that it still intends to conclude the coal deal with Riversdale Mining, adding that it is too early to say whether its planned deal will be affected by a possible takeover bid by Rio Tinto.

One insider however the agreement signed by Wuhan Steel and RML before is a non-binding one, so the deal is changeable. It said that "The key is whether Rio Tinto and the coalminer finalize the deal of AUD15 per share. If it is true, WISCO is almost hopeless."

Riverdale's three major owners are TATA Steel, steelmaker CSN of Brazil and US hedge fund Passport Capital, who together own more than half the firm.

Riversdale's Zambeze project holds 9 billion tonnes of certified resources, one of the largest undeveloped coking coal resources in the world. It also owns 65% of the neighboring Benga project.

Rio's decision to make a tilt for the mid-sized miner, despite its complex ownership, not only underscores its hunger for scarce quality coking coal assets, but also marks a tacit recognition that Mozambique may be the new frontier for coking coal.

An marketer said that “The project needs a huge investment input. Now the coking coal demand remain robust, which makes the miner hot.”

Similar to iron ore, coking coal is one of important raw materials in steelmaking. Producing one tonne pig iron needs around 0.55 tonne of coke, while one tonne coke is made of around 1.4 tonnes of coking coal.

China the world largest steelmaker, is especially lacking in the coking coal reserves, compared to thermal coal. The newly developed capacity of coal in the country mainly belongs to thermal coal (used for power generation), and China 's reliance over imported coking coal is more and more stronger. Meanwhile the big-scaled blast furnaces to be started up in the future will need more high quality coking coal sourced from overseas markets. Australia is one of biggest coking coal producing bases worldwide.
It is reported that China's dependence rate on imported coking coal is around 25 percent, and major suppliers include Australia’s BHP Billiton who enjoys premium hard coking coal mines.

(Sourced from www.steelhome.com.cn)
China steel information centre and industry database

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