cash for oz

Minmetals cash offer on cards for OZ Minerals
Jamie Freed
April 1, 2009

OZ MINERALS could wipe out its debt and retain its Prominent Hill mine, the Martabe gold project and its interests in listed investments if it accepts a cash offer from China Minmetals for the remainder of the company.

OZ yesterday told the stock exchange it was negotiating with Minmetals over a deal valued at least as highly as the $1.3 billion of debt owed to the Australian miner's banking syndicate.

BusinessDay was advised the deal — in the final stages of negotiations last night — was likely to go further than wiping out the debt, leaving a smaller OZ remaining a listed entity with some cash on its books.

It remained unclear whether OZ would keep the Martabe project over the longer term or if it would continue with a sale, possibly to the Tigers Gold consortium led by former Oxiana managing director Owen Hegarty.

The decision on the fate of Martabe may be heavily influenced by the banking syndicate.

OZ's debt was due to be repaid last night, and it said it expected to make an announcement this morning on whether it had received an extension due to time differences with the overseas banks.

The assets sought by Minmetals under the revised deal, including the Golden Grove mine in Western Australia that had previously been slated for a separate divestment, are valued at $2.2 billion on OZ's books.

The remaining assets, including the Prominent Hill copper-gold mine in the Woomera Prohibited Zone, the Martabe gold project in Indonesia and interests in listed entities such as uranium explorer Toro Energy, were valued at $1.9 billion.

Minmetals had previously made a bid of $2.6 billion, or 82.5¢ per share, for the entire company, but after repaying all of OZ's debt to the banking syndicate, the true cost of the offer was $3.7 billion.

A JPMorgan analyst Brendan James said the OZ assets, excluding Prominent Hill but including Martabe, were worth $2 billion. OZ had previously indicated Martabe would sell for about $200 million.

"From this depressed situation, an acceptable (albeit downgraded) outcome for shareholders may still eventuate," Mr James said.

The revised deal would need to be approved by OZ's shareholders in light of the size of the assets being sold, including the Century zinc mine in Queensland, the Sepon copper-gold operation in Laos and the Rosebery zinc mine in Tasmania, relative to that of the company.

It remained unclear whether Minmetals would seek to employ part of the OZ senior management team to run the operations it wants to buy or whether the entire team, led by Andrew Michelmore, would remain with OZ after a deal was completed.