Minmetals to buy OZ assets for $1.2 billion

02 April 2009

After the Australian government rejected the Chinese state-owned Minmetals Corp's bid to take over the world's second largest zinc producer, Australia's OZ Minerals, on grounds of national security, the two companies have agreed to a revised deal under which China's largest metal trader will purchase most of Oz's mines for $1.2 billion (A$1,750 million). (See: Australia rejects China's bid for OZ Minerals) 

Though the revised deal would leave the Australian miner truncated, it would extinguish its over $1-billion debt burden and allow it to retain its independence, with continued ownership of the Prominent Hill gold and copper mine in Woomera in South Australia, the sale of which led the Australian government to debar the merger on grounds that the Chinese state-owned company could not be allowed in proximity to perhaps the most important Western intelligence facility in the world, operated jointly by the Australian and US governments. (See: Proximity to Pine Gap facility nixes Chinese mining bid)

The Australian government's opposition to the acquisition of OZ Minerals by China's Minmetals seems to be turning out to benefit OZ Minerals shareholders; in addition to the major Prominent Hill copper and gold mine - described by an analyst as "the jewel in the crown" - OZ Minerals will also retain its Martabe gold and silver project in Indonesia, which it will be free to sell in an independent transaction.

Moreover, news of the revised deal has persuaded the creditors to give the debt-laden miner a month-long extension on it's A$1.2-billion debt repayment deadline from 31 March to the end of April.

Furthermore, a debt-free OZ Minerals may be in a position to turn the tables and rebuild its portfolio. The proposed agreement between the two companies will require the approval of OZ Minerals' shareholders and the Foreign Investment Review Board.

Under the revised deal, OZ Minerals will sell its assets in Sepon, Golden Grove, Century, Rosebery, Avebury, Dugald River, High Lake, Izok Lake and certain other exploration and development assets to Minmetals, including any applicable GST, Oz Minerals said.