RIV Riversdale Fpo

Closing in on a majority stake in takeover target Riversdale Mining Ltd. (RIV.AU), Rio Tinto PLC (RIO) has taken three seats on the coal mining company's board as it prepares to launch a detailed review of assets that include two promising projects in southern Africa.

Rio Tinto has secured at least a 49.53% interest in Sydney-based Riversdale, after late Wednesday surpassing the 47% threshold it sought and triggering a 14-day extension of the offer deadline to April 20. In a statement Thursday, Riversdale said three Rio nominees have now joined as board directors, and executive Chairman Michael O'Keeffe and a non-executive director will step down.

Rapid industrialization in Asia, especially China and India, has prompted miners to bid aggressively for undeveloped deposits of commodities that are essential to manufacturing steel. Riversdale's assets include billions of metric tons of coking coal in Mozambique, which could be shipped eastward once key infrastructure including rail links and a port are built.

Riversdale's board, which has backed the proposed deal since Rio made its offer in December, have recommended other shareholders accept the offer that values the company at about US$4 billion. Riversdale's shares ended the day at 16.51 Australian dollar (US$17.29) a share, 1 cent above the offer price.

Riversdale said Chairman O'Keeffe and Andrew Love will resign from its board when Rio's stake passes the 50% mark or the offer closes. Effective immediately, Douglas Ritchie, the chief executive of Rio's energy business, will be added to Riversdale's board. He will be joined by David Peever, managing director of Rio Tinto Australia, and Matthew Coulter, chief development officer of coal at Rio.

The appointments bring the number of directors to nine, including Narendra Misra, who also is head of mergers and acquisitions at Indian steel producer Tata Steel Ltd. (500470.BY), which has an agreement for 40% of the coal produced by Riversdale's Benga mine that is scheduled to begin production this year. Tata last month raised its stake in Riversdale 2.9 percentage points to 27.1% after rival steel maker Cia. Siderurgica Nacional (SID) of Brazil increased its holding to 19.9%.

CSN officers have said the company was open to possibilities for its stake, but for now intended to keep the investment in Riversdale as a "hedge" to cover part of its own coking coal needs. Coking coal is a key raw ingredient in making steel.

Spokespeople for CSN weren't reachable when telephoned out of business hours. A spokesman for Tata didn't immediately respond to a request for comment.

Rio, meanwhile, is poised to begin a review of Riversdale.

Rio in January said it would evaluate the performance and prospects of Riversdale's operations and projects when the takeover is successful, although it expected to sell the company's Zululand colliery in South Africa. It also plans to close Riversdale's head office eventually and seek the resignation of directors, while retaining key management and staff. It didn't give an estimate for cost savings, but has said it expected to lower corporate costs.

Key to the acquisition are two coking coal mines being developed in Mozambique's Tete province, an area that has attracted the interest of steel and mining companies including Brazil's Vale SA (VALE).

Riversdale has estimated at least US$400 million will be needed for its share of costs for the second and third stages of developing the Benga project and at least US$2.9 billion for the Zambeze project. Benga has a resource of 4 billion metric tons and Zambeze, which is at an earlier stage of development, has a resource of 9 billion tons.

Rio has the financial might to push the projects onward and said it would use its experience in rail, port and barging to provide infrastructure.

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

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