reply from oxiana pr department

Thanks for your email of 2 July, and please accept my apologies for not replying sooner.

I don’t know that I am going to be able to answer all the points you have raised to your satisfaction, as the general state of the Australian sharemarket (which, as I am sure you are aware, has declined by more approximately 25% since October 2007 and by over 15% over the last 6 weeks) is not something we are competent to comment on. What is unarguable is that tens of billions of dollars have been wiped of the value of listed Australian companies over that time, with many overseas markets facing similar proportionate declines.

As to the Oxiana-specific issues you have raised:

The Boards of both Oxiana and Zinifex were unanimously of the view that undertaking the merger would be in the best interests of all shareholders. There are only four ways that the assets, operations and shareholders of two companies can be combined (or merged):

Company A can sell all its assets to Company B for an issue of shares in Company B which it then distributes to its shareholders.
Company A can launch a takeover bid for Company B.
A Scheme of Arrangement structure can be undertaken whereby the shareholders of Company A agree to transfer their shares to the Company B in exchange for receiving an issue of new shares in Company B.
Both Company A and Company B can undertake simultaneous Schemes of Arrangement whereby each group of shareholders agree to transfer their shares in A and B for an issue of new shares in a new company (C), which becomes the merged company going forward.

Your Board considered all options and selected option 3 as the most efficient way to complete the merger. It was decided that the Scheme of Arrangement would involve Zinifex rather than Oxiana shareholders because that would produce the best outcome for all shareholders. The other options were either too costly or prone to uncertainty.


We remain convinced that the strength and enhanced market position the merged company now has – compared to either Oxiana or Zinifex on a standalone basis – will generate improved shareholder value over time. The company will, we believe, be very well positioned to participate in and benefit from the continuing growth in demand for base metals and similar commodities from the developing economies to our North.

Apart being surprised and disappointed that the market has chosen to mark down the value of Oxiana (and many other) shares as heavily as it has, we are not able to explain the share price movement. You may be aware that an Independent Expert’s Report was prepared by Grant Samuel and Associates as part of the merger process. The report has been available on the Oxiana and Zinifex websites since May. Among many other things, the Grant Samuel report assesses the equity value of the merged company at between $12.1 billion and $13.6 billion. On today’s closing price, the market value is around $7 billion, or just over half the independently assessed value of only two months ago. There have been no changes in any of the fundamental valuation assumptions on which the report was based that provide a rational explanation of the extent of the share price fall.

I realise that none of these words will have any effect on the Oxiana share price, but I can assure you that your Board and management team were and remain convinced that the merger is in the long-term interests of shareholders. Oxiana has, since it was formed in the mid-1990s, undertaken a number of transactions which were criticised at the time but which have created considerable value for shareholders over time. As a merged company, we are every bit as committed to continuing that history of delivering shareholder value.

Yours faithfully,