RIV Riversdale Fpo

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

Riversdale Mining (ASX:RIV)
Historical Stock Chart
Von Jun 2024 bis Jul 2024

Riversdale Mining (ASX:RIV)
Historical Stock Chart
Von Jul 2023 bis Jul 2024