ANGLO-AUSTRALIAN miner Rio Tinto offered $3.9 billion (€2.9 billion) to buy African-focused coal miner Riversdale in an agreed deal that is likely to be challenged by rivals seeking to secure coking coal reserves.

Rio’s first big acquisition since its ill-timed Alcan buy in 2007 takes place against a backdrop of soaring Asian demand for the key steel-making ingredient, but needs the backing of at least one of Riversdale’s three large shareholders, including India’s Tata Steel and Brazilian steel group CSN.

While fund managers said the steelmakers may oppose Rio’s offer, Riversdale managing director Steve Mallyon told reporters he expected a positive response.

The company’s third largest shareholder, US-based fund Passport Capital, had committed an unspecified number of its shares to a pre-bid agreement that gives Rio Tinto options more than 14.9 per cent of Riversdale’s stock, he said.

“There has been no reaction either way although Passport has put some of its shares into the pre-bid agreement,” said Mr Mallyon.

“I would think the reaction from CSN and Tata would be generally positive.”

Tata Steel, whose Riversdale board nominee abstained from voting on the bid, declined to comment.

Rio, which wants access to Riversdale’s coking coal deposits in Mozambique, raised its offer to Aus$16 per share cash yesterday from an earlier indicative bid of Aus$15.

Resuming trade after a two-day suspension, Riversdale shares closed up 1.7 per cent at Aus$16.57, indicating investors were expecting a higher offer.

Rio shares in London fell 1 per cent by the afternoon, slightly underperforming a 0.6 per cent dip in the British mining index.

“I think there is a strong potential (for rival bids),” said Andrew Harrington, an analyst at Paterson Securities in Sydney.

“There are not that many big new coking coal assets out there and this one is very large and it’s near to production.” – (Reuters)