Rio Makes $3.5 Billion Initial Offer for Riversdale

Rio Tinto Group, the world’s third- largest mining company, made an initial A$3.5 billion （$3.47 billion） takeover proposal for Riversdale Mining Ltd., which is developing coal mines in Africa.

Rio offered A$15 for each of its shares, Sydney-based Riversdale said today in a statement. It rose to the highest in a decade and traded at A$15.81 at 11:36 a.m. Sydney time.

Rio joins Brazil’s Vale SA, China Shenhua Energy Co. and Anglo American Plc in seeking coal assets in developing nations after Chinese imports surged fivefold last year. Riversdale is developing mines in Mozambique and is spending at least A$400 million on the Benga mine.

“Riversdale has very large resources in Mozambique,” said Grant Craighead, managing director and co-founder of Sydney- based research company Stock Resource. “The challenge for Rio is finding assets big enough to make a material difference to the company and this fits that criteria.”

Rio gained 0.15 percent to A$86.55 at 11:36 a.m. on the Australian stock exchange. It’s considering small-to-medium sized acquisitions, Chief Executive Officer Tom Albanese said last week.

Support Needed

Rio would need to win the support of Riversdale’s major shareholders, including Tata Steel Ltd., which holds a 24.16 percent stake. Riversdale’s Benga project, 35 percent owned by Tata, in Mozambique, may produce about 1.7 million metric tons of coking coal and 300,000 tons of thermal coal with first exports expected in the second half of next year, according to the company’s website.

“While discussions with Rio Tinto are ongoing there is no certainty that Rio Tinto or any other party will proceed with any proposal,” Riversdale said in a statement. “Rio Tinto advised the company that it is not in a position to submit a proposal for the acquisition of the company.”

Contract coking coal prices gained this year as the global economic recovery spurred competition between steelmakers in Japan and China. Prices may be strong in the short term because of a supply shortage, Craighead said.

Rio’s biggest revenue unit is iron-ore, accounting for 28 percent of sales last year, followed by aluminum.