latest news - the deal is agreed by ozl & mm

Oz Minerals is in last-minute talks with banks to repay $1.3 billion due tomorrow as it scrambles to work out a fresh deal to sell its assets, with the exception of its Prominent Hill copper and gold mine, to China Minmetals Group (Minmetals).

The Sydney Morning Herald said the two companies have agreed on a revised deal but did not give details of the offer, and OZL remains in trading halt pending an announcement.

On Friday, Treasurer Wayne Swan blocked the state-run Chinese company from buying Prominent Hill, saying the sale would be against the national interest owing to its proximity to the Woomera missile-testing site.

Prior to Swan's decision, Minmetals' bid was $2.6 billion, or 82.5 cents a share.

"If Minmetals takes all the other assets plus the debt, that will still be an excellent outcome," Morningstar senior resources analyst Mathew Hodge said.



Prominent Hill must fetch at least $1.2bn

Hodge values Prominent Hill at 30 to 50 cents per OZL share, so a revised bid should be 32.5 to 52.5 cents. OZL last traded at 55.5 cents before trading of its shares was halted on Friday.

Prominent Hill is expected to fetch 30 to 50 cents a share, or about $1 billion to $1.5 billion, Hodge said. He added that exploration at the mine has uncovered ore grades significantly better than the grades on which the original estimates were based.

"That can make a huge difference to cash costs," Hodge said.

OZL shipped its first loads of concentrate from Prominent Hill, ending a protracted development period which pushed construction costs above $1 billion.


"Capex for Prominent Hill is $1.15 billion, so basically, if they sell for less than that, value has been destroyed," Hodge said.

A separate sale of Prominent Hill has sparked fresh speculation that BHP Billiton (BHP) will throw its hat in the ring but the world's biggest miner has declined to comment.



Clock ticks on OZL debt

In the meantime, OZL has $1.3 billion worth of debt due tomorrow. Whatever happens, Hodge said it will be difficult for chief executive Andrew Michelmore to continue.

"If Oz Minerals somehow gets rid of its debt and continues to trade, I would expect Andrew Michelmore to step down," he said.

With Michelmore at the helm, the company paid $852 million for Allegiance a year ago. Allegiance's main asset is the Avebury nickel mine, which OZL shut late last year.

The company was caught out by debt-fuelled investment and an unprecedented collapse in commodity prices. The merger between Oxiana and Zinifex to form OZL gave the banks an opportunity to reset the terms of debt. "The banks basically got a get-out-of-jail-free card and they used it."