UPDATE:Tata Steel Not Averse To Rio Tinto's Bid For Riversdale
27 Dezember 2010 - 5:42PM
Dow Jones News
Tata Steel Ltd. (500470.BY) isn't averse to Rio Tinto Ltd.'s
(RIO.AU) bid for Riversdale Mining Ltd. (RIV.AU) as it considers
Rio Tinto "a well-managed company," a senior executive at the
Indian steelmaker said Monday.
"We have invested in Riversdale not for financial incentives,
but for securing coking coal supplies for our Indian and European
operations...so good management of Riversdale is essential for us,"
Managing Director H.M. Nerurkar told reporters at the site of the
company's plant in the eastern Indian town of Jamshedpur.
He said the Tata group will cooperate with any company that
eventually takes over Riversdale.
Nerurkar added that the agreement with Riversdale to offtake 40%
of the output in Mozambique's Benga mines could be renegotiated
once new management takes over the company. He didn't
elaborate.
He said that Tata Steel hasn't yet decided on making a bid for
Riversdale: "One needs deep pockets for making a counter bid...we
are at present watching the situation closely."
Rio Tinto has made a $3.9 billion takeover offer for Riversdale,
a company in which Tata Steel holds 24% stake at present.
Riversdale, which has 13 billion metric tons in coking and thermal
coal reserves in its southern African mines, is a strategic
investment for Tata Steel to meet coking coal needs for both its
Indian plant as well as its Anglo-Dutch unit, Corus.
With India producing hardly any coking coal, steelmakers eye
overseas mining assets to secure their raw material supplies and
guard against rising cost of imported coal.
Nerurkar said the company is constantly on the look-out for new
coking coal mines, but said purchasing mines has become expensive
as valuations of such assets are quite high at present, largely due
to high Chinese demand.
"We are scouting for mines in Australia, Canada and South
Africa. If we get a good proposition, we will certainly consider
buying," he added.
Turning to the company's European operations, Nerurkar said the
sale of Corus' casting products plant in U.K.'s Teesside to Thai
company Sahaviriya Steel Industries PCL (SSI.TH) would be completed
in the next 2 to 3 months.
"There is in-principle approval on the sale with SSI. We are
currently helping them achieve financial closure on the deal," he
said. SSI will pay $500 million for buying the Teesside plant.
He said that Corus' turnaround over the past two quarters seemed
sustainable as the company has shed 6,500 jobs over the past two
years, as well as introduced other measures to improve efficiency
and control costs.
Nerurkar added that he's confident Corus' steel plants in Europe
will operate at 85%-90% capacity over the next 3-4 months, though
he said if severe winter conditions are prolonged in Europe, that
could affect production. Nerurkar added the company will invest
$500 million in further improving Corus' operations in the
financial year beginning April 1, 2011.
On Tata Steel's Indian operations, Nerurkar said the expansion
of the company's only Indian steel plant in Jamshedpur, set up in
early 20th century, is expected to be completed by December 2011.
The plant's production capacity will rise to 10 million tons a year
from 6.8 million tons a year at present.
"We don't see any further expansion of the Jamshedpur plant.
There is constraint of space and logistics," said Nerurkar.
However, he said the Jamshedpur plant will house a facility to
make high-grade steel in an equal joint-venture with Japanese
steelmaker Nippon Steel.
"The joint venture agreement will be signed in January, and
total investment on the project will be around INR24 billion," he
said, adding production is expected to start within 28 months.
He said the company will decide on the quantum of funds it
expects to raise via the equity route by March 31: "Our
shareholders have given us approval to raise up to $1.5 billion.
How much we raise has yet to be decided."
Nerurkar, however, said that the company's founder, Tata Sons,
which currently holds 31.3% in the company, is unlikely to dilute
equity for raising funds. On the other hand, Tata Sons may buy more
shares in Tata Steel when the steelmaker floats its share offering.
Tata Steel has yet decide on an equity instrument.
-By Prasenjit Bhattacharya, Dow Jones Newswires; +91 98711
41562; satish.sarangarajan@dowjones.com
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