With no competing bids in the horizon, hedge fund Passport Capital has sold part of its stake in Australia's Riversdale Mining, the Mozambique-focused coal miner that is currently the target of a takeover by mining giant Rio Tinto.

California-based hedge fund Passport Capital holding nearly 16 per cent of Riversdale, said it had sold 1.6 per cent stake in Riversdale, bringing its holding down to 12.97 per cent. The sale comes after Passport had sold 1.1 per cent stake last week

Passport Capital has raised around $100 million by selling a total of 2.7 per cent of Riversdale since last week.

Rio Tinto, the world's third-largest mining company, had in December launched an A$3.9 billion ($3.9 billion) bid for Riversdale in order to gain control of 13 billion tones of coking and thermal coal in Mozambique. (See: Rio Tinto launches $3.9 billion bid for Riversdale Mining)

All the directors of Riversdale and Passport, which is among one of the investors in the miner, agreed to tender their combined 14.97-per cent interest to Rio Tinto's offer, of which, Passport has pre-committed 7.9 per cent.

Other major stake holders in Riversdale are Tata Steel, which holds a 24.21-per cent stake as well as a 35-per cent interest in Riversdale's Benga coking coal project and Brazilian steelmaker Companhia Siderurgica Nacional (CSN) with 16.29-per cent

International Coal Ventures (ICVL), a consortium of five state-run firms in India, were mulling to make a counter bid and had hired Citigroup to conduct a due diligence on Africa-focused coal miner.

But the coal ministry later indicated that it would like to tie up a large amount on one single project that would require an additional $1 billion upwards on infrastructure and other development costs.

Passport Capital's sale is a positive sign for Rio Tinto, which requires the backing of Tata Steel or CSN for the deal to go through.

Riversdale has 21 exploration licenses in excess of 250,000 hectares in Mozambique having high quality coal resources of over 13 billion tonnes located in the Tete-Moatize area.

It is developing the Benga and Zambeze coking and thermal coal projects, which is among one of the world's largest untapped coal reserves.

The Benga project, in which Tata Steel holds 35-per cent interest has the potential to produce 20 million mt of coal (coke strength of 71 per cent) per year for a period of more than 25 years.

The Zambeze project is estimated to hold around 9 billion tonnes coal Resource (coke strength ranging between 67-73 per cent), and has the potential to be significantly larger than the Benga project with initial production expected to commence in 2014.