Filing its bidder’s statement overnight, the world’s second largest miner said it also intended consolidating Riversdale’s corporate head office function into its own, leading to a possible $7.9 million saving annually from administration expenses.
Its decision to sell Riversdale’s interest in the colliery [if its bid is successful], which produces 500,000 tonnes of coal per annum, followed an extensive period of due diligence.
In August, Riversdale posted a $A779,000 net loss for the 2009/10 financial year due, in part, to lower production levels from the colliery, with total run-of-mine production 7% down on the previous year at 753,600 tonnes.
The Benga coal mine was officially opened in April and is on track to start first exports of premium hard coking coal in the second half of this year at the rate of 5.3 million tonnes per annum as part of its stage one development.
Riversdale’s plan is to complete the stage two and three ramp-ups to reach 20Mtpa ROM coal by 2013, while its $2 billion Zambeze coal project is located next door.
Rio plans to fund the $16 a share cash offer for Riversdale through cash reserves of $US8.79 billion and also has access to a $US6 billion revolving credit facility.
It plans to fund its capital expenditure commitments going forward with a combination of equity, commercial standalone finance and internally generated funds.
Rio’s offer, which has received pre-bid acceptances accounting for 14.9% of the Riversdale register is contingent on receiving 50.1% in shareholder acceptances and becomes unconditional when acceptances reach 90%.
Riversdale directors have recommended shareholders accept the offer in the absence of a superior proposal with a number of its senior executives, including executive chairman Michael O’Keefee, managing director Steve Mallyon and chief financial officer Niall Lenahan, already signed off on pre-bid documents.
India’s Tata Steel controls 23.6% of Riverdale along with a 25% stake in the Benga project, and Tata-appointed director N.K. Misra has to date abstained from voting either way on the offer.
Rio expects Riversdale’s target statement will contain a statement from Misra as to which way Tata Steel will go, either for the takeover, or detailing reasons against it.
In its bidder’s statement, Rio said it intended to work closely with Tata Steel in the development of Benga, in accordance to the terms of the joint venture agreement.
“Rio intends to using its considerable technical, financial and project management resources and expertise to augment and optimise Riversdale’s current development plans to bring both projects into production as soon as practicable,” it said.
“In addition, Rio intends to use its existing expertise and experience in rail, port and barging to provide infrastructure solutions for the Benga and Zambeze projects.”
Another Riversdale shareholder Brazilian steelmaker Companhia Sidurgica National, with a 16.3% interest, is also yet to vote.
It also intends to maintain Riversdale’s ASX listing and will seek to appoint Rio nominees to its board of directors, representative of its proportional interest.
Shares in Rio Tinto were down 0.57% in morning trade to $83.88, while shares in Riversdale were down 1.32% to $16.43.
