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Rediff.com  » Business » Tata Steel exits Riversdale, sells 26% for $1.11 bn

Tata Steel exits Riversdale, sells 26% for $1.11 bn

June 17, 2011 11:05 IST

Steel factoryTata Steel has decided to sell off its 26.27 per cent stake in Riversdale, Australia, to Rio Tinto for Australian $1.06 billion ($1.11 billion).

The move follows Rio Tinto Jersey Holdings 2010 Ltd's decision to delist Riversdale Mining Ltd, after the company's shareholding in the mining company increased to 73.20 per cent.

Tata Steel said in a statement that it was not willing to hold the stake without a joint venture agreement with Rio Tinto, the majority shareholder, in the unlisted Riversdale Mining Limited.

The company said its decision to liquidate the entire 26.27 per cent shareholding to Rio Tinto will fetch $1.06 billion — around 100 per cent appreciation in the value since Tata Steel invested in Riversdale four years ago.

In March, Tata Steel had increased its stake in Riversdale by over two per cent.

The company, on all occasions, continued to maintain that the Riversdale investment was strategic in nature and it had no plans to exit.

B Muthuraman, non-executive vice-chairman of Tata Steel, had told reporters in Delhi on April 8 that the company continued to maintain its stance on Riversdale.

The move by Tata Steel has no bearing over its 35 per cent stake in the Mozambique coal blocks owned by Riversdale Energy (Mauritius), a subsidiary of Riversdale Mining.

The company said: "Tata Steel will continue in the joint venture with Riversdale Mining in Mozambique."

"Tata Steel would look forward to work with Rio Tinto and discuss in good faith to enhance its participation in Benga joint venture (Mozambique)," the company statement added.

An industry expert said: "Tata Steel's stake in the Benga coal project in Mozambique is separate from its shareholding in the parent company Riversdale Mining.

"The company has got good appreciation for its investment and selling the stake has no material impact on its coal offtake agreement from the Benga project."

Another analyst tracking the company and the steel sector said: "Rio Tinto is a global major in mining and its move to buy Riversdale will do good to Tata Steel.

"The company has an exceptional track record in developing mines and bringing them to production in shortest possible times.

"Rio will try to bring the Mozambique coal mines to production as fast as possible and that will help Tata Steel Europe to get some sort of raw material integration."

Tata Steel has planned 25 per cent raw material integration for its European subsidiary and a lot of it depends on the coking coal that the Mozambique joint venture will supply.

In March, Tata Steel had increased its stake in Riversdale by over two per cent.

The company, on all occasions, continued to maintain that the Riversdale investment was strategic in nature and it had no plans to exit.

B Muthuraman, non-executive vice-chairman of Tata Steel, had told reporters in Delhi on April 8 that the company continued to maintain its stance on Riversdale.

The move by Tata Steel has no bearing over its 35 per cent stake in the Mozambique coal blocks owned by Riversdale Energy (Mauritius), a subsidiary of Riversdale Mining.

The company said: "Tata Steel will continue in the joint venture with Riversdale Mining in Mozambique."

"Tata Steel would look forward to work with Rio Tinto and discuss in good faith to enhance its participation in Benga joint venture (Mozambique)," the company statement added.

An industry expert said: "Tata Steel's stake in the Benga coal project in Mozambique is separate from its shareholding in the parent company Riversdale Mining.

"The company has got good appreciation for its investment and selling the stake has no material impact on its coal offtake agreement from the Benga project."

Another analyst tracking the company and the steel sector said: "Rio Tinto is a global major in mining and its move to buy Riversdale will do good to Tata Steel.

"The company has an exceptional track record in developing mines and bringing them to production in shortest possible times. Rio will try to bring the Mozambique coal mines to production as fast as possible and that will help Tata Steel Europe to get some sort of raw material integration."

Tata Steel has planned 25 per cent raw material integration for its European subsidiary and a lot of it depends on the coking coal that the Mozambique joint venture will supply.

The company expects coal from these mines to be available for shipment in 2012.

In an earlier statement to the Australian Stock Exchange, Rio Tinto had shown its intent to start working with the Riversdale team and accelerate the development of the projects in Mozambique.

Out of the two major projects of Riversdale in Mozambique, one is the Benga project, in which Tata Steel has a 35 per cent stake and an off-take agreement of 40 per cent of the mine's output.

The mine is touted to have coking coal reserves of nine billion tonnes and is expected to go a long way in providing raw material for Tata's steel operations in Europe and India.

BS Reporter in Mumbai
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