SINGAPORE, Jan 14 (Reuters) - India's Tata Steel , the world's...

SINGAPORE, Jan 14 (Reuters) - India's Tata Steel , the world's seventh-largest steel maker, said on Friday that it would hold on to its shares in Australian miner Riversdale, calling it a strategic stake.

Riversdale, an Africa-focused coal miner, is facing a $3.9 billion bid from Rio Tinto in an agreed deal as it seeks to secure coking coal reserves sought after by steelmakers.

'Riversdale is strategic for us. We are there for the long term, we will stay,' Tata Steel Vice-Chairman B. Muthuraman told Reuters in Singapore. Tata Steel owns 24 percent of Riversdale.

A rival Indian consortium of five state-run firms is also eyeing Riversdale, and has hired Citigroup to conduct due diligence on the miner.

Muthuraman also said proceeds from a $800 million public share sale which will begin next week will be used to for expansion of steel plants in the Indian states of Jharkhand and Orissa.

Muthuraman said he expects steel demand to remain robust this year, partly fueled by natural disasters in Australia and other regions.

Extreme weather in Australia and the southern Pacific has shut dozens of coal and nickel mines, halted aluminium smelting and threatens to disrupt iron ore and oil and gas production.

Australia accounts for about