Rio Tinto PLC (RIO) has failed to reach the majority stake it was chasing in its almost US$4 billion bid to bolster its coking coal assets with an extensive deposit in Mozambique, but continues last-minute negotiations with a key shareholder in Riversdale Mining Ltd. (RIV.AU).

A person familiar with the bid said the Anglo-Australian mining company was negotiating to buy shares from Brazilian steel producer Cia. Siderurgica Nacional (SID), which earlier this year increased its stake in Riversdale to 19.9%.

Rio said Tuesday it has raised its interest in Sydney-based Riversdale and received acceptances that would give it a 41.04% stake, short of the more than 50% threshold Rio had set for a sweetened offer of A$16.50 a share by a late Monday deadline.

Costas Condoleon--a partner at law firm Minter Ellison Group, which represents Rio Tinto--in a letter released through the Australian stock exchange said Rio is in talks with a major shareholder in the coal company to secure a sufficient number of shares to gain it a majority stake. Trading in Riversdale shares has been halted.

A spokeswoman for Rio Tinto said the company remained hopeful its takeover offer would be successful.

A successful deal would mark Rio Tinto's first major acquisition since its ill-timed US$38 billion takeover of Canadian aluminum producer Alcan Inc. in 2007 and would have landed it control of two major developing coking coal projects in an area of Mozambique attracting interest from mining and steel companies around the world. The success of the deal rested in large part on Riversdale's two largest shareholders, two steel producers that together own a 47% stake but have remained quiet since the offer was first made in December.

The offer has been extended four times and was earlier this month lifted from A$16. Under the terms previously set out by Rio, the offer should revert to the earlier price and is set to close April 6.

Rio Tinto in a statement said it now has an almost 21% interest in Riversdale and has received acceptances for slightly more than 20% of Riversdale's shares.

Minter Ellison's Condoleon said if Rio secures Riversdale shares from the major shareholder, it is likely the offer would immediately be declared unconditional--a step fund managers have said would free funds with shares in Riversdale to accept the takeover offer. Condoleon in the letter said the discussions between Rio and the shareholder are likely to reach an outcome early Tuesday.

Riversdale operates a colliery in South Africa and is developing two projects in neighboring Mozambique. The company's executives in January said that should Rio's offer fail, Riversdale would need to turn to its shareholders, the bond market and other sources to raise more than US$3 billion needed to fund the projects.

Support for the offer has slowly gained traction in recent weeks but was always going to be a close call without either Indian steel producer Tata Steel Ltd. (500470.BY) or CSN selling some or all their shares to Rio. CSN in February edged up its stake in Riversdale to 19.9% and then Tata Steel early this month raised its stake 2.9 percentage points to 27.1%.

Analysts have speculated that CSN and Tata increased their stakes to ensure they can negotiate for supplies of coking coal, a key raw material in steel making. The two clashed in early 2007 with the takeover of British steelmaker Corus Group PLC, bidding that was only settled by a nine-round sudden-death auction that pushed the price for winner Tata up by several billion dollars to US$12.2 billion.

CSN spokespeople weren't immediately reachable when telephoned out of business hours, and a spokesman for Tata declined to comment late Monday.

-By Robb M. Stewart, Dow Jones Newswires; +61 3 9292 2094; robb.stewart@dowjones.com
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