hbos expected to block oz minerals refinancing

OZ Minerals is bracing for bad news from its bankers today with the expectation that they will not refinance about $1.1 billion vital to the troubled miner's future.

It's understood a key bank -- WestAustralia-based HBOS -- is reluctant to roll over lines of credit and other funding, which could trigger a forced sale of assets including gold, silver and zinc mines.

"HBOS are playing really hardball on this," one source said yesterday.

Over the past year OZ Minerals shares have plunged from $1.70 to 55c, culminating in its suspension from the Australian Securities Exchange in early December.

Forced sales are likely, according to investment newsletter Fat Prophets.

It expects the company to survive, albeit with the surrender of prized assets such as the Martabe gold and silver deposit in Indonesia and the Prominent Hill copper and gold project in South Australia.

OZ, which has to refinance $US560 million ($816 million) of debt by the end of today, has said it is unlikely to meet the deadline, and will probably seek an extension to January 31.

Adding to OZ Minerals' troubles are shareholders who have begun a class action over alleged "misleading and deceptive conduct" and breaches of continuous disclosure obligations relating to its debts.

Litigation group IMF Australia, which is backing a legal action against OZ Minerals, believes shareholders who bought the company's securities between February 28 and December 3 and investors who swapped Zinifex shares for OZ Minerals shares are eligible to join the class action.

Earlier this month, former Oxiana chief executive Owen Hegarty and two other directors resigned from the board of OZ Minerals, a few days after it was revealed that the company's cash in hand had dropped to $405 million by November 30 and that its total indebtedness, excluding convertible notes, was $1.08 billion, while net debt was $678.4 million.

CEO Andrew Michelmore has denied claims of inadequate disclosure and says the company will "vigorously defend itself" against the proposed legal claims.

Fat Prophets analyst Greg Canavan said that after reading through the detail, one could only conclude there had been a lack of risk management at OZ Minerals.

"Should the company emerge from this current debacle, we hope the board and senior management take full accountability, although this may be wishful thinking," Mr Canavan said.

OZ Minerals first told the market of its debt problems on November 28, six days after it told the ASX it had no explanation for a sharp fall in its share price.

It revealed it was seeking extended time for repayment of two facilities: one of $US420 million, payable in instalments until 2012; the other for $US140 million.

OZ said the lenders to the smaller facility had agreed to an extension and that negotiations on an extension of the larger facility were advanced.

On December 1, OZ obtained a trading suspension while it attempted to refinance its debt by December 29 into a new facility that may include different lenders.

It revealed that the two loans were due to be repaid on November 30, but that it had sought an extension to January. But one bank would not agree and OZ had to settle for an extension to December 29 with an option to extend to January 31 subject to satisfying certain conditions, which have not been disclosed.

It later emerged in further disclosures that the $US140 million facility was a short-term loan obtained by gold producer Oxiana, only three days before it was announced that the company proposed to merge with the base metals producer Zinifex.

The loan matured on August 8 and to obtain it, Oxiana was forced to agree to repay or refinance the $US420 million debt facility at the same time.