Kolkata: UK-based Rio Tinto Plc has said in its takeover bid document for Australian coal miner Riversdale Mining Ltd that it intends to work closely with Tata Steel Ltd to develop the Benga coal project in Mozambique, which is a joint venture (JV) between the Indian and Australian firms.

Priced asset: A file photo of Riversdale’s Benga project in Mozambique. The project is expected to yield both coking coal and thermal coal, used by steel makers and power plants. Photo:Scott Douglas/Bloomberg

Under an agreement signed in August 2007, the Indian steel maker also has the option to buy more from the mine on “commercial terms", which effectively means it could be buying the mine’s entire coking coal produce even without controlling the joint venture or Riversdale. This, according to some analysts, who declined to be named, could have been an irritant for Rio Tinto.

Described by Tata Steel in a recent stock market statement as a “world-class project", Benga is expected to yield both hard coking coal and thermal coal, used by steel makers and power plants.

Besides its interest in the JV, Tata Steel, through its indirect subsidiary Tata Steel Global Minerals Holdings Pte Ltd, also owns 24.21% of Riversdale’s shares; it is currently the largest shareholder in the firm, followed by Brazilian steel maker CSN, which owns 15.61%.

Rio Tinto has bid for all outstanding shares and options of Riversdale that could cost it up to A$3.9 billion in cash. The bid, however, is conditional upon Rio Tinto managing to acquire at least 50% stake in the firm, failing which it wouldn’t buy any share at all.

The primary objective for acquiring Riversdale is “to pursue optimum development and commissioning of the Benga and Zambeze projects in Mozambique", Rio Tinto said on Monday in its statement to shareholders of the Australian firm.

“The Benga project is governed by an independent JV agreement," said Koushik Chatterjee, Tata Steel’s group chief financial officer, adding that Riversdale’s “current situation" was unlikely to have any bearing on Tata Steel’s interest in the Benga project.

He refused to comment on how Rio Tinto’s bid to acquire 100% stake in Riversdale could impact Tata Steel’s interest in the Australian firm.

Tata Steel, though, is expected to soon make a statement on Rio Tinto’s bid through Riversdale in what is known in the Australian securities market’s parlance as “target’s statement".

“In the absence of a superior proposal", Riversdale’s management recommended on 23 December that its shareholders accept Rio Tinto’s offer, priced at A$16 a share.

Though Riversdale’s shares are trading higher than the price offered by Rio Tinto—they ended at A$16.65 on Monday—the UK miner’s offer represented a 24% premium over the one-month volume weighted average price of Riversdale’s shares till it was announced on 6 December that Rio Tinto was likely to launch a takeover bid.

Though it isn’t immediately known what other key shareholders in Riversdale such as Tata Steel and CSN are going to do, a consortium of Indian public sector companies, led by Steel Authority of India Ltd, has appointed the investment banking division of Citibank NA to advise it on a potential counter bid.

Under Australian takeover laws, Tata Steel, on its own, can buy only up to 3% of Riversdale’s shares every six months without making an open offer, its stake having crossed 20%.