Reports published by a British newspaper over the weekend have suggested that mining giant Rio Tinto Ltd is eyeing Sydney-based Riversdale Mining Ltd for a billion-dollar acquisition deal.

The report, according to the Daily Telegraph, said that Rio Tinto is set to dangle a takeover proposal of up to $3.55 billion or about $15 per share, which is a value higher of six percent from Riversdale's last week closing price of more than $14.

The UK daily said that the coal producer has a current market capitalisation of up to $3.3 billion and is currently engage in African mining activities.

At present, Riversdale maintains two mining operations in Mozambique and South Africa and is 22 percent co-owned by Indian firm Tata Steel.

Tata Steel also keeps a 35 percent interest on Riversdale's Bengal coal project in Mozambique.

Analysts said that Rio Tinto's interest on Riversdale could be largely motivated by the junior miner's activities in the African continent, which the giant firm is hoping to capture to ramp up its coal production in anticipation of the growing demands from the expanding economies of the Asian region.

Economists are projecting that coal prices would further increase in 2011 and beyond as resources-hungry China expands further and drives up global demand for coking coal, which is an industrial essential in firing up steel furnaces.

The Telegraph report also clarified that while Rio Tinto and Riversdale are conducting negotiations in relation to the possible takeover, no agreement has yet to be forged and suggestions are ripe that the coal producer may also consider an offer from Brazilian mining company Vale, which analysts said could enter the picture soon.