Global miner Rio Tinto raised its offer for Africa-focused coal miner Riversdale Mining to $3.9 billion on Thursday in a final bid to woo key shareholders, a move that Riversdale said was helping to sway institutions.

Riversdale Chief Executive Steve Mallyon said the higher bid was helping to win over institutional shareholders, but he did not know how Riversdale's two biggest shareholders, India's Tata Steel and Brazil's CSN , would respond.

I can say that from the institutional calls that I've made in the last few hours that there's some growing support for Rio Tinto, Mallyon told Reuters in an interview.

I think there's momentum building with the institutions, which is important in terms of convincing groups like Tata that Rio's going to be successful, he said.

Rio Tinto raised its bid by 3 percent to A$16.50 a share and extended the offer period for a third time, to April 1, but said the new offer was final if no rival bids emerged.

Riversdale's shares seesawed in a wide range after Rio raised its offer, last trading up 2.8 percent at A$15.55, but remained below the offer price as investors questioned whether Rio Tinto would meet its 50.1 percent acceptance condition.

The market's clearly a bit skeptical that it will get across the line, said Peter Chilton, analyst at Constellation Capital Management, which owns shares in Rio Tinto.

Mallyon played down the chances of any competing offers.

I don't think there's anyone else out there despite all of the rumors. It's been well-tested since the bid was announced in mid-December, he said.

Standing in Rio's way are Tata Steel, the world's No. 7 steelmaker, and top Brazilian steel producer CSN, who have increased their stakes in Riversdale since the bid and now hold a combined 47 percent.

Without their support, Rio would need nearly 100 percent acceptances from the rest of Riversdale's shareholders to get majority control.

It's going to be quite hard, Chilton said.

As of March 4, Rio Tinto only had acceptances on 17.9 percent of Riversdale's shares.

Tata Steel and CSN have both said they are mainly interested in securing coking coal from Riversdale. Tata, which already has a stake in Riversdale's Benga coking coal project in Mozambique, has said it was talking to Rio about a range of options.

CSN has not publicly revealed its intention over the Riversdale stake or about its possible talks with Rio Tinto.

Analysts said the two firms would probably like to see Rio Tinto, with deeper pockets and more technological skills than Riversdale, develop Riversdale's Mozambique mines and infrastructure.

There is no question that Rio Tinto's expertise is crucial to overcoming the development challenges of Riversdale's projects, Rio Tinto Energy chief executive Doug Ritchie said in a statement.

If Rio did not take over Riversdale, shareholders would be likely to face big equity raisings by Riversdale to help fund the development of its coking coal projects, a factor that could spur the steel-makers to sell out.

It's difficult to see that Tata Steel and the Brazilians really want to be involved in what would be very expensive coal development projects, Chilton said.

Mallyon said the company would need to raise around A$3 billion just to fund the first stage of its massive Zambeze project, which he said could come from U.S. bond investors as well as Riversdale shareholders.

We are looking at a significant amount of money, he said.

Mallyon said he had not spoken to CSN about its intentions, but he said given Riversdale's shares had risen sharply since CSN bought into the company in November 2009, the Brazilian company should be a willing seller at A$16.50 a share.

At some point logic prevails...The fact that Rio does bring to the table not just money but some expertise to progress these projects a little bit faster than Riversdale, I think that's important if you're a steel-maker, because it's a pretty bleak landscape out there if you're sourcing coking coal, Mallyon said.

(Reporting by Sonali Paul and Balazs Koranyi; Editing by Mark Bendeich and Dhara Ranasinghe)

India Mozambique