UPDATE: Riversdale In $200 Million Deal To Sell Coal To Trafigura

Riversdale Mining Ltd. (RIV.AU) said Friday it has struck a deal to sell thermal coal from its developing Benga mine in Mozambique, securing revenue for the largely coking coal operation as it ramps up output.

The Australian company, which is majority owned by mining giant Rio Tinto PLC (RIO), said it has a entered a "take-or-pay" agreement with commodities trader Trafigura for all thermal coal that will be produced in the first stage of developing the Benga mine, which is due to start production later this year.

The agreement is worth more than US$200 million at forecast prices.

The coal will be linked to the benchmark reference price for coal exported out of South Africa's Richards Bay terminal, and the deal includes options to increase the tonnage as production increases at the mine, Riversdale said.

"The agreement assists in underwriting the critical first stage of growth and production at Benga and provides us with exposure to the strong fundamentals of the seaborne thermal coal market," Steve Mallyon, managing director of Riversdale, said in a statement.

Coal is a relatively new business for Trafigura, which has agreements to source the fuel from Australia, Colombia, Indonesia, Russia and South Africa. Demand for both coking coal used in producing steel and thermal coal for power stations is strong from rapidly industrializing economies in Asia, particularly China and India.

Rio Tinto has secured a slightly more than 73% stake in Riversdale in an offer launched in December that is due to close Friday, although it has been extended several times in an effort to mop up the few shares not held by the Anglo-Australian company or India's Tata Steel Ltd. (500470.BY). Tata has a stake of about 26%, as well as one member on Riversdale's board and an agreement for 40% of the coking coal produced at Benga.

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 in Mozambique, which is at an earlier stage of development. The two projects together have an estimated resource of 13 billion metric tons of coal.

-By Robb M. Stewart, Dow Jones Newswires; [phone]; [e-mail]