administration possible says oz

OZ hoping to secure $100m bridging loan
Jamie Freed
January 21, 2009

OZ MINERALS hopes to secure a crucial bridging loan of about $100 million today to help it finish constructing its $1.15 billion Prominent Hill copper and gold mine in South Australia.

The miner needs to make some final payments to suppliers within the next three weeks but has little cashflow from its other operations due to low commodity prices.

Prominent Hill should be completed within a few weeks but the mine is not expected to be cashflow-positive until the June quarter.

OZ originally sought a response from lenders about the bridging finance by January 9 but last week reported it had not yet signed a deal, even though "significant progress" had been made.

The Herald understands OZ and its lenders were yesterday close to sealing a bridging loan of about $100 million. It has not said how much it was seeking under such a facility, which is likely to be accompanied by onerous terms.

"Negotiations are progressing well and we would expect to make a statement in the not too distant future," said an OZ spokesman, Matthew Foran.

OZ has until February 27 to refinance about $1 billion of debt, of which $US420 million ($638 million) lies in a facility with a syndicate of seven banks.

At least one of those banks is believed to be seeking to pull out of the syndicate, meaning OZ needs to make, or at least agree, asset sales ahead of the refinancing deadline to stay afloat.

The Herald also understands it is likely one or two of the lenders in the syndicate will opt not to participate in the bridging facility. That may provide some indication of which banks are the most reluctant to take part in the refinancing.

The miner is believed to be hopeful of receiving binding offers for a couple of its mines within the next few weeks.

Even though OZ is considered a distressed seller, sources said directors would only seriously consider what they deem to be full-priced offers for the assets and had not yet decided which combination of assets to sell.

The OZ board is not thought to be expecting to receive the same price for the mines it would have got a year ago. But sources said if appropriate offers were not made the board would be willing to place the company in voluntary administration if it felt that would give shareholders a better outcome.

Analysts estimate OZ's assets are worth far more than its liabilities and it is possible investors would receive a better return through administration.

Societe Generale, which has a separate facility with OZ, is close to being granted security over many assets formerly held by Zinifex, which last year merged with Oxiana to form OZ.