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On December 6, Australian miner Riversdale Mining Ltd. (RML) issued a statement saying that Rio Tinto offered it a $15/share takeover offer.
Just six months ago, WISCO also signed a non-binding memorandum of understanding with RML. According to the agreement, WISCO will subscribe for an 8% stake in RML and pay in three stages to purchase a 40% stake in the Mozambique Zambezi coal mine project.
Rio Tinto's shot means that once its acquisition is successful, the contract between WISCO and RML will be automatically revoked, but the two sides are only in the initial stage of contact. And a non-binding agreement also means that WISCO also has the option of advancing and retreating - whether it is to expand the bidding acquisition.
On December 7, the reporter learned from a person familiar with the transaction that after WISCO investigated the mine, it believed that the previous offer of AU$10 per share was relatively reasonable and it was difficult to report more than AU$15 per share. the price of. Riversdale is so proactive that there is also a suspicion of raising prices among competitors.
Rio Tinto began to be interested
According to the announcement of RML on the 6th, Rio Tinto offered an offer of approximately AU$15 per share to RML for a total purchase price of A$3.5 billion (US$3.48 billion).
The company also stated: "These discussions were conducted in secret, and Rio said that the company has not yet been able to submit a proposal for a possible acquisition of Riversdale."
On the same day, Rio Tinto also stated that its negotiation with RML was not completed, and no conditions were imposed, and there was no guarantee that the two parties would negotiate a proposal.
Despite this, Riversdale's share price on the 6th soared 15.67% in a single day, closing at 16.31 Australian dollars per share. On the other hand, Rio Tinto's share price fell 0.49% on the day and closed at A$86.00 per share.
According to publicly available information on the RML website, it has two coal projects in Mozambique – BENGA and ZAMBEZE, and an anthracite coal mine in South Africa.
Among them, Mozambique's BENGA project RML holds 65%, and the other 35% is held by India Tata Steel Co., Ltd., which has 400 million tons of coal resources and 5.02 million tons of coal reserves. At present, the first phase of the mining area (annual production of 53,000 tons) has begun and is expected to be completed in the second half of 2011. The ZAMBEZE project is adjacent to the BENGA coal project and has been confirmed to have 900 million tons of coal resources.
In June this year, when WISCO announced its contract with RML, WISCO described RML as “a coal producer with good development potential in the world†in a statement. It has rich experience and considerable experience in the development of resource projects in southern Africa. Influence. Its Mozambique Zambezi coal mine resources amount to 9 billion tons, most of which are scarce main coking coal and fertilizer coking coal, which are the basic coal types for metallurgical coking.
WISCO to be considered
Rio Tinto's shot was thrown to WISCO for a multiple-choice question.
On June 23 this year, WISCO International Resources Development and Investment Co., Ltd. and RML Company signed a memorandum of understanding on the Mozambican coal project. According to the agreement, WISCO will subscribe for an 8% stake in RML at a price of AUD 10 per share, and will pay in three stages to purchase a 40% stake in the ZAMBEZE coal mine project in Mozambique; and have the right to buy an RML owned At least 10% of the coking coal reserves in the BENGA coal mine, the total investment amount is as high as 800 million US dollars.
At that time, Michael O'Keeffe, president of RML Mining, said in a statement: Through joint ventures with Chinese partners, RML obtained funds for developing coal mines and buying some products from the Zambezi coal mine. WISCO hopes to use the coking coal resources in Mozambique to supply its anti-city project and the steelmaking needs of the Brazilian steel mill project.
At that time, a senior member of the WISCO Group also told this reporter that this was the first time WISCO invested in coal resources overseas.
Until October of this year, RML Chairman Michael O'Keeffe also said that he was preparing to sign a preliminary investment agreement with the Zambeze project signed by WISCO as a binding agreement.
He said that WISCO Group has completed due diligence on the investment and expects the agreement to be approved by the Chinese regulatory authorities and the Australian Foreign Investment Review Board.
However, within 120 days of the signing of the formal agreement, Rio Tinto made a higher offer than the WISCO Group and made it halfway. If successful, this will be Rio Tinto's most significant acquisition since the $38 billion acquisition of Alcan in 2007.
“Because the previous sign was a non-binding agreement, the price is variable.†On December 7, a person familiar with the transaction told reporters that “the key is to see if Rio is true. The purchase of WISCO at a price of 15 Australian dollars per share is very embarrassing. But WISCO also believes that the price of 10 Australian dollars per share is already a relatively favorable purchase price."
From iron ore to coking coal
On the 7th, a senior person in the M&A industry pointed out to reporters that Mozambique’s project is a green land mine, and the current competitors are also from the perspective of resource hoarding.
“The subsequent development of the greenfield mine requires a lot of money. But the demand for coking coal is very high, so the good coking coal mine has been very tight now,†he said.
Like iron ore, coking coal is also an important raw material for steel companies. According to cost, 1 ton of iron requires about 0.55 tons of coke, while 1 ton of coke requires 1.4 tons of coking coal.
Domestic coking coal has also been in short supply. A coal expert told this newspaper that China's coking coal resources are scarcer compared to thermal coal. In recent years, domestic coal production capacity is basically not coking coal, which has led to an increase in dependence on foreign coking coal. On the other hand, with the construction of large blast furnaces, the demand for high quality coking coal abroad will be further enhanced.
At present, under the breakthrough of WISCO, the road of overseas exploration of China's steel industry is also extending from iron ore to coking coal.
The above-mentioned senior officials of the WISCO Group have told reporters that WISCO has achieved better iron ore resource allocation overseas, including South Australia, Canada, Brazil, Venezuela, Liberia, Madagascar, or has completed project handover or has already established management. team. In the future, unless there is a large and excellent iron ore investment opportunity, the basic existing pattern is already relatively stable.
It is understood that China's steel enterprises dependence on foreign coking coal is about 25%. The current source of imports is mainly Australia, of which BHP Billiton is the largest supplier of coking coal.
Previously, Bill Champion, executive director of Rio Tinto's Australian coal division, said that the process of urbanization and industrialization in developing countries is pushing up demand for steel. The current mining of metallurgical coal may not be able to keep pace with demand growth.
“But coking coal is also the most scarce resource for WISCO. The domestic resource supply is insufficient. Although the cost of overseas coal transportation will increase, it will be considered as reasonable after overseas calculations.†The above-mentioned executives believe that coking coal is also common among domestic steel enterprises. Resources that are relatively scarce, and resource competition with suppliers will become fierce.
Rio Tinto WISCO bids to acquire Australian miner Riversdale
From iron ore, to coking coal, mining companies and steel mill customers in the battle for resources, and then climax.