ICVL may bid for Riversdale Mining

International Coal Ventures Ltd (ICVL), a company floated by five Indian public sector companies — SAIL, NMDC, NTPC, RINL and Coal India — may bid for Australia’s Riversdale Mining.

Rana Som, chairman-cum-managing director, NMDC, India’s largest iron ore miner, told Business Standard, “Bidding for Riversdale is beyond our personal capacity and authorised limits; hence, we have referred the proposition to ICVL. It is an independent company formed by the five PSUs and it will now examine the deal.”

SAIL chairman and head of ICVL, C S Verma, confirmed the proposal had been placed with ICVL. “It is a discussion between the board members, currently at an informal level. No formal proposal has been tabled as of now,” he said, refusing to give more detail.

Som had earlier indicated the company was interested in picking up a 10 per cent stake in Riversdale. However, he now said, “Riversdale’s African coal mine is a very futuristic deal and will involve a lot of investment to develop the infrastructure, which is beyond our limits. It is a good project with sizeable reserves, but has a few negatives like logistics cost, too.”

ICVL was formed on May 20, 2009, with an initial authorised capital of Rs 10,000 crore (over $2 billion). SAIL and CIL each hold 28 per cent share and RINL, NMDC and NTPC, 14 per cent each.

According to its website, ICVL has been empowered with the autonomy currently accorded to Navratna companies without formal Navratna status. The company was floated by the PSU majors to scout for coal mines overseas. The venture, headed by SAIL chairman, C S Verma has been actively looking for coal properties in Australia, Indonesia, Mozambique, etc, but with little success till now.

Apart from coking coal, the prime raw material used in making steel, Riversdale’s coal properties are expected to churn out thermal coal, too, a prime ingredient in power plants, that could be used by NTPC.

In Riversdale, Tata Steel is the second largest shareholder at 24.1 per cent stake, followed by investment firm Passport Capital with 13.3 per cent and Brazil’s CSN at 13.2 per cent. The three companies together hold more than 50 per cent stake.

In early December, Riversdale admitted the company was approached by Rio Tinto for a $3.5-billion takeover for the remaining stake. However, Riversdale had said a formal bid by Rio Tinto hadn’t been mad yet. Therefore, if ICVL had to bid for the remaining stake in Riversdale, it would have to bid for more than $3.5 billion.

At this stage, it is unclear if ICVL would like to bid for the remaining share of Riversdale or will initiate talks for a minority stake. The Australian company, on its website states, “Riversdale will actively seek partnerships and consider minority shareholdings on an incorporated JV basis for outstanding investment opportunities.”

Tata Steel, with its 24.1 per cent stake in Riversdale Mining, has a 35 per cent in Riversdale’s Benga Coal project in Mozambique with a 40 per cent offtake agreement. This means, of the total coal produced at Riversdale’s Benga project, Tata Steel will have right over 40 per cent of it. Benga project has 4 billion tonnes of coal.

Riversdale has another coal property in the neighbourhood of Benga, the Zambeze project, which holds 9 billion tonnes of coal and is touted to be one of the largest undeveloped coking coal resources in the world.

Tata Steel continues to maintain that Riversdale is a strategic investment for the company. In a recent interview to Business Standard, Koushik Chatterjee, group CFO, Tata Steel, had said, “We are looking for a 25 per cent raw material integration for Tata Steel Europe.”

He had said, “Tata Steel Europe’s coal consumption is 12.5 million tonnes. So in Riversdale, at 25 per cent it is 3 million tonnes. Once Riversdale’s stage two is done, we will get 3 million tonnes of coal.”