RIV Riversdale Fpo

Tata Steel Ltd. (500470.BY) Monday said it will remain as a stakeholder in Australia's Riversdale Mining Ltd. (RIV.AU) as the Indian company is keen to secure coking coal supplies from Riversdale's mines in Mozambique for its global steel operations.

"We are sustainable shareholders there," Tata Steel Managing Director H.M. Nerurkar told reporters on the sidelines of a mining conference.

Anglo-Australian Rio Tinto (RIO.LN) is looking to take over Riversdale and has earlier this month extended its $3.9 billion offer to March 4.

"We would like to remain there" as Riversdale shareholders, he said. "We are interested in coal."

Tata Steel has a 24% stake in Riversdale, which has 13 billion metric tons of coking and thermal coal reserves at its Benga and Zambeze projects in the southern African country of Mozambique.

Indian steelmakers and power generation companies desperately need coal as the expansion of domestic coal production has been hampered by strict environmental laws, and a complicated bureaucratic process to acquire mining leases.

Orrisa Steel Project

Nerurkar said that Tata Steel plans to start production from its steel plant in the eastern Indian state of Orissa by the last quarter of the year ending March 2013.

"Finances for the first phase are more or less tied up," he said, adding that the first phase would involve an investment of INR170 billion.

He said the construction work has now begun at the Orissa project, which initially faced resistance from local villagers.

The steel plant will have an initial capacity of 3 million tons a year, which will later be ramped up to 6 million tons.

Nerurkar expects steel prices to be volatile in the coming days. Coking coal and iron ore prices will determine steel prices, he said, adding that a "suspected" shortage of coal in January created panic in the market.

Indian steel prices have been fluctuating for about six months. But they have been rising steadily in the past one month due to higher raw material costs.

-By Saurabh Chaturvedi and Rajesh Roy, Dow Jones Newswires; 91-11-43563335; saurabh.chaturvedi@dowjones.com

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