Tata Steel Studying Rio Tinto Bid for Riversdale

India Business News December 24, 2010, 5:29 A.M. ET By Ashutosh Joshi and Saurabh Chaturvedi
MUMBAI -- Tata Steel Ltd. Friday said it is studying Rio Tinto Ltd.'s 3.9 billion Australian dollar ($3.91 billion) takeover offer for Riversdale Mining Ltd., in which the Indian company owns a 24% stake, a day after a consortium of Indian state-run companies appointed an advisor for a counter-bid.In a regulatory filing, Tata Steel said it would "evaluate the takeover bid in the context of other alternatives available to Tata Steel." It didn't say what the other alternatives were.Meanwhile, the chairman of Indian consortium International Coal Ventures Ltd. denied that the group had initiated talks with Tata Steel for a possible counter-bid for Sydney-based Riversdale."No. Any decision on bidding will be taken after the merchant banker's report," ICVL Chairman C.S. Verma said.ICVL -- a joint venture between Steel Authority of India Ltd., NTPC Ltd., NMDC Ltd., Rashtriya Ispat Nigam Ltd. and Coal India -- Thursday named Citibank as its merchant banker to advise on a possible counter-bid for Riversdale.If the Indian consortium decides to go ahead, it will have to top Rio Tinto's offer price of 16 Australian dollar a share for the Mozambique-focused miner.Rio Tinto's cash offer was endorsed by Riversdale's board Thursday after it improved its bid from an original indicative offer of A$15 a share announced on Dec. 6.But analysts said the diversified mining giant may have to again sweeten its offer. Two major shareholders told Dow Jones Newswires on Dec. 6 that they would be unlikely to sell for less than A$20.Mr. Verma said ICVL has enough time to decide whether or not to make a counter-bid as a Riversdale shareholders' meeting on Rio Tinto's offer will only take place after 30 days.Citibank will submit its report within two weeks."Let us wait for the report of our merchant banker, and immediately after that we will call a board meeting of ICVL," Mr. Verma said.Separately, Indian Steel Minister Virbhadra Singh said Friday that ICVL should buy some coal mines before the end of this financial year in March. ICVL was specifically created (in May 2009) to acquire coal assets abroad, but it hasn't struck any deals yet."It has been some time since its incorporation. It is high time for them to show results," Mr. Singh told Dow Jones Newswires.However, he didn't name Riversdale as a potential target.Riversdale has 13 billion metric tons in coking and thermal coal reserves in its Benga and Zambeze projects in the southern African country of Mozambique. Acquiring the miner would help Indian companies secure much-needed coal supplies, as production in India falls well short of demand.Steel and mining analyst A.S Feroze said it would be difficult for Tata Steel to join hands with the consortium of five-state run companies.
"Theoretically I see difficulty in it. ICVL is a consortium and taking a decision after talking to the partners will not be a smooth process," Mr. Feroze said.But he added that it wouldn't be hard for either Tata Steel or ICVL to finance a counter-bid as bankers would be willing to provide funds "if it's a good deal."In a separate statement to the Bombay Stock Exchange, Tata Steel said it has got shareholders' approval to raise long-term finances, though it didn't provide a reason for the move.India's coal demand is forecast to rise to 713.24 million tons next financial year beginning April 1, when supply will likely be 629.91 million tons. To meet the shortfall and secure supplies, state-run and private companies are scouting for assets in places such as Africa, Indonesia and Australia.In a regulatory filing, Tata Steel said it would "evaluate the takeover bid in the context of other alternatives available to Tata Steel." It didn't say what the other alternatives were.Meanwhile, the chairman of Indian consortium International Coal Ventures Ltd. denied that the group had initiated talks with Tata Steel for a possible counter-bid for Sydney-based Riversdale."No.. any decision on bidding will be taken after the merchant bankers' report," ICVL Chairman C.S. Verma said.ICVL -- a joint venture between Steel Authority of India Ltd., NTPC Ltd., NMDC Ltd., Rashtriya Ispat Nigam Ltd. and Coal India -- Thursday named Citibank as its merchant banker to advise on a possible counter-bid for Riversdale.If the Indian consortium decides to go ahead, it will have to top Rio Tinto's offer price of A$16 a share for the Mozambique-focused miner.Rio Tinto's cash offer was endorsed by Riversdale's board Thursday after it improved its bid from an original indicative offer of A$15 a share announced on Dec. 6.But analysts said the diversified mining giant may have to again sweeten its offer. Two major shareholders told Dow Jones Newswires on Dec. 6 that they would be unlikely to sell for less than $20 Australian dollar.Riversdale has 13 billion metric tons in coking and thermal coal reserves in its Benga and Zambeze projects in the southern African country of Mozambique. Acquiring the miner would help Indian companies secure much-needed coal supplies, as production in India falls well short of demand.Steel and mining analyst A.S Feroze said it would be difficult for Tata Steel to join hands with the consortium of five-state run companies."Theorotically I see difficulty in it. ICVL is a consortium and taking a decision after talking to the partners will not be a smooth process," Mr. Feroze said.But he added that it wouldn't be hard for either Tata Steel or ICVL to finance a counter-bid as bankers would be willing to provide funds "if it's a good deal."
In a separate statement to the Bombay Stock Exchange, Tata Steel said it has got shareholders' approval to raise long-term finances, though it didn't provide a reason for the move.
India's coal demand is forecast to rise to 713.24 million tons next financial year beginning April 1, when supply will likely be 629.91 million tons. To meet the shortfall and secure supplies, state-run and private companies are scouting for assets in places such as Africa, Indonesia and Australia.
Tag : Tata steel, Rio Tinto, Riversdale, Bid, ICVL

Commodity Minerals, Exports News: Iron ore prices set to rise as India's exports slow in Nov2010

Courtsey news by: G. Chandrashekhar Mumbai, Dec. 20, The Hindu Business Line
The decline in India's iron ore exports in recent months is generally attributed to the Karnataka Government's imposition of ban on movement outside the State and export from out of the ten ports.The embargo in July followed allegations of illegal mining. Slowdown in shipments from India has surely had an impact on world iron ore spot market prices which have firmed.Karnataka ports shipped out about 15.2 million tonnes of iron ore in 2008, which declined to 12.2 mt the following year. Tamil Nadu ports also handle some material from Karnataka and the export shipments totalled some 8 mt in 2009.From the time the ban was imposed, iron ore shipments from the two States have all but dried up. Extended South-West monsoon has also to some extent affected shipment volumes.However, despite ban imposed by Karnataka and slowdown due to seasonal factors, overall seaborne supply from India is down only 9 per cent in the first ten months of the year, although exports in the third quarter fell 37 per cent year-on-year and are 31 per cent down year-on-year in October-November, according to the latest Macquarie Research report.Impact on volumePointing out other factors that have impacted export volume, the report said clearances are getting considerably slow because of rigorous and complex documentation system stipulated by many States to ensure traceability of ore and to ensure taxes have been paid. Until exporters are able to meet the rigours of the documentation system or find a way to work around it, export volumes are unlikely to improve dramatically in the next few months. However, the good news is that some ore which was previously exported is now being pelletised and consumed within the country as steel demand continues to grow rapidly.According to Macquarie Research, relatively high steel prices (compared with international levels) are allowing the Indian steel mills to pay more for material thus, making export arbitrage negative.

Domestic demand for steel is widely expected to expand in the coming years given the robust economic growth and booming activity in the construction sector covering infrastructure and housing in the main. In other words, iron ore is likely to be increasingly utilised within the country, while availability for export is likely to shrink progressively.What to expect in 2011? Volume-wise Indian exports may rise in the coming months with shipments from Goa leading the way. However, spot market availability will still continue to remain tight as a result of which smaller Chinese mills which are expected to ramp up production in 2011 will have to compete aggressively for lesser supply, Macquarie remarked.Incidentally, any gain in Indian seaborne volumes may be offset by a fall in Brazilian exports due to rainy season during the first quarter. For past eight years, the first quarter shipments had fallen on quarter-on-quarter basis and this year could be no exception. Already, January cargoes are said to be pushed back as early rains have hampered ore availability.All these developments point to tightening of the ore market and further firming spot prices. There is a strong chance of a price spike towards $200 a tonne early next year as ex-China purchases come back into the market to secure material ahead of seasonally strong Q2 production in the northern hemisphere, Macquarie pointed out.
For more details visit : http://www.thehindubusinessline.com/2010/12/21/stories/2010122152701600.htm
Tag : India iron ore exports, Karnataka Government, iron ore spot market prices

Iron ore price negotiations - Chinese steelmakers seek new model on changing market

It is reported that China leading steel mills gradually accept the fact that traditional iron ore benchmark system no longer exists. They are seeking for a more reasonable mechanism pegged to steel price while keeping a close eye on a possible turning point of iron ore supply demand relationships.China appetite for iron ore is cooling down. Mr Luo Tiejun vice director of MIIT raw material section said on newly held Mysteel annual conference that China steel output and demand growth would be eased. Data also show that China crude output growth in the first ten month is far below that of Europe, Japan and Korea.The steel market turns sluggish with limited scope to go either up or down and denting demands for iron ore.Mr Gao Bo Mysteel senior researcher said “China iron ore imports hit 503 million tonnes in the first ten months this year down 8% from corresponding period last year. We expect an annual import of around 600 million tonnes, a bit lower than last year, indicating it will be the first time for China iron ore imports to fall since 2007.”Mr Xu Lejiang Baosteel Group Chairman reiterated that interim supply demand imbalance and the Big Three’s monopoly caused global iron ore to rocket for the past years.Mr Wu Dongying head of Baosteel Economics & Management Institute said “With the slowdown of China steel industry, the turning point of iron ore supply demand relationship is sure to approach. We can expect an oversupply in global iron ore market.”Mr Gao Bo said Chinese steelmakers also work out countermeasures against high iron ore risks. They increase the use ratio of domestic iron ores to wean off dependency on imports. They diversify import sources, including South Africa, Ukraine, Indonesia, Chile, etc. They also put weight on foreign mining interests by overseas investment.As for the iron ore pricing system, Mr Xu Lejiang expressed earlier that current quarterly mechanism is acceptable yet it needs to be further improved. CISA also claimed that it is necessary to study a new pricing model oriented to steel prices.This idea is echoed by related government officials. Mr Luo Tiejie expressed that although current quarterly model reduces market risks by dampening speculation, the adopted index is so easy to be manipulated that it has affected the healthy development of Chinese industry. Only when iron ore and steel form a reasonable price relation can a stable industry chain develop.(Sourced from MySteel.net Thursday, 23 Dec 2010)
Tag : Real time access to China steel news, Iron ore price negotiations, Chinese

Orissa submits response on Mines ministry's guidelines on JVs, MoUs

Courtsey news via Business Standard Reporter / Kolkata/ Bhubaneswar December 18, 2010, 0:10 IST
Pitches for recommending mineral concession cases only on merit.The Orissa government has submitted its response to the Union ministry of mines on the draft guidelines on joint ventures (JVs) and MoUs (Memorandum of Understanding) issued in September this year by the ministry."In our response, we have stated that in non-notified mining lease areas, the mineral concession cases should be recommended only on merit rather than on 'first in time' basis. We have broadly agreed with the other points stated by the ministry in its draft guidelines on JVs/MoUs”, a top official source told Business Standard.On signing of MoUs, the official said, "There has been no indiscriminate signing of MoUs by the state government. While recommending mineral concession case for an MoU signed company, we have ensured that the company does value addition within the state. Besides, the interests of the state in general and the people to be displaced in particular are factored in”, the source added.Apart from Orissa, Goa is the only other state to have sent its response to the ministry's guidelines on JVs/MoUs.In its draft guidelines on JVs/MoUs, the Union ministry of mines had stated that the signing of a large number of MoUs indiscriminately and without considering what the other party is bringing to the table, is not compatible with the use of the MoU as ‘special reasons’ for the purpose of Section 11 (5) of the MMDR Act.An MoU for exploitation of a mineral resource at a specific location (i.e. specific lease area) in anticipation of a concession or a reservation will be deemed to be incompatible with principles of fair play and equity because it will give that MoU applicant an unfair advantage in relation to other MoU applicants who apply for the same area.The ministry was of the view that it would contradict the policy of ‘first in time’ for non-notified areas or ‘most meritorious’ for notified areas, as the case may be, the Ministry of Mines had stated categorically in its guidelines.In case MoU/JV is treated as special reasons, it is necessary to make its provisions enforceable, and as such the state government must send all details of the MoU/JV along with a proposal to make it relating to the MoUs/JVs in the context of their application in both reservation and concession cases.It may be noted that while the above guidelines elaborate the process and procedures, they do not specify the policy and content of the MoUs since they have to be state specific. In order to enable this to be done, it will be necessary for the states to issue a comprehensive circular and notify it, specifying the policy and content, and including therein the details of these guidelines in so far as procedures and consequences are concerned, subject to any variation that the state government may consider desirable."The state governments will also need to enter into supplementary MoUs with existing MoU companies to enable the conditionalities to be fulfilled, and while doing so may ensure that the process of entering into supplementary MoUs filters out routine MoUs that may have been entered into earlier. The list of all qualifying MoUs (including supplementary MoUs) may then be put up by the state government on its website", the ministry had stated in its guidelines.
For more details visit
http://www.business-standard.com/india/news/orissa-submits-responsemines-ministrys-guidelinesjvs-mous/418717/
Tag : Orissa government, Union ministry of mines, MoU, MMDR Act