smh article

Expert gives nod to OZ cut-price sale
Barry FitzGerald
May 9, 2009
http://business.smh.com.au/business/expert-gives-nod-to-oz-cutprice-sale-20090508-ay18.html

OZ Minerals' urgent need to address its debt problem means that the group's $US1.2 billion ($1.6 billion) in asset sales to China's Minmetals is in the shareholders' best interests - even if the sale price is as much as $US400 million short of "underlying value".

That was the finding of the independent expert advisory group, Grant Samuel, appointed by OZ to assess the Minmetals deal ahead of the proposal being voted on by shareholders on June 11. The proposed sale to Minmetals strips OZ of all of its assets with the exception of the new Prominent Hill copper-gold mine in South Australia.

Grant Samuel said it valued the deal with Minmetals in a range of $US1.38-$US1.6 billion. In a comment that has implications for Rio Tinto's controversial $US19.5 billion compact with China's Chinalco, Grant Samuel said the valuation had taken in to account the "substantial strengthening" in base metals prices and equity market values since the original Minmetals proposal (February 16, and February 12 for Rio-Chinalco).

Rio is under intense pressure to rework its proposal with Chinalco to take account of the market improvement. But in the case of OZ, Grant Samuel it has not removed the urgency in OZ's need to see off its banks, which are owed about $1 billion.

"In the absence of the financial pressure facing OZ Minerals, the [Minmetals] proposal would not be in shareholders' best interests," Grant Samuel said. "However, the reality is that OZ urgently needs to reduce its bank debt. There are no obvious alternatives to the Minmetals proposal capable of implementation in current circumstances."

The group said that OZ's banks - which include the Commonwealth Bank, ANZ and NAB - have "made it clear they require a significant reduction in OZ's debt".

Since November 2008, OZ has only been able to secure one- and two-month extensions of its debt facilities, leaving voluntary administration or receivership as possibilities.

The banks have refused to give anything more than short-term loan extensions, accepting no risk on the completion of the Minmetals deal.

The notice of meeting for the shareholder vote shows that since December 1, OZ has paid the banks $94.5 million in fees, incremental interest charges, legal and adviser costs.

The reporter owns OZ shares