Rio Tinto raises offer price for Riversdale

Australian mining major Rio Tinto PLC has raised its cash offer for Riversdale Mining Ltd, in which Tata Steel is the single-largest shareholder, following a poor response from other shareholders to its earlier offer.

Rio Tino is now offering A$16.5 per share, as against the initial offer of A$16. But the company, which seeks to acquire control over Riversdale, has ruled out any further increase in its offer price. The offer period has been extended to April 1.

Following the initial offer, Rio Tinto managed to acquire just 17.52 per cent stake in Riversdale. Tata Steel has a 27.13 per cent stake in the company and Brazil's CSN has a 19.9 per cent stake. The higher price is valid only if Rio gains control of more than 50 per cent of the shares in the company.

"The increase in the offer price from A$16 to A$16.50 gives Riversdale shareholders a highly attractive premium and now is the time for them to accept our recommended bid," Rio Tinto Energy chief executive Doug Ritchie said in a note.

"There has been no sign of a competing proposal in the 11 weeks since the bid was announced. The choice for Riversdale is clear - accept the A$16 or A$16.50 on offer or risk seeing their share price return to pre-bid levels. There is no question that Rio Tinto's expertise is crucial to overcome the development challenges of Riversdale's projects," he added.

Riversdale shares are trading a little above A$15 in the Australian stock exchange, while Rio Tinto's shares shed 2.5 per cent in London. Rio Tinto's assets are in Australia and North America and it also operates in Europe, Asia and Africa. Its businesses include open pit and underground mines, mills, refineries and smelters as well as a number of research and service facilities.

Riversdale Mining Ltd operates the Benga Coal Project in Mozambique, which is a joint venture with Tata Steel (which has a 35 per cent stake in the JV). The project has four billion tonnes of coal resources and a coal reserve of 500 million tonnes.