surprise surprice, page-13

BullJack - thanks for the comments -

Dogboy - Below is an article which I have copied and pasted which, whilst brings up the past sort of shows where I was coming from, Hopefully we are on the same wavelength.

Regards

Geoff



A sharp mineral deal for China let the voters at OZ decide

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If last week's rejection by Rio Tinto was interpreted by Beijing as an act of betrayal by Western capitalism and the Australian Government, this week's vote by OZ Minerals shareholders may just reinforce those suspicions..

Sydney Morning Herald - 9th Jun 2009 - Ian Verrender

If last week's rejection by Rio Tinto was interpreted by Beijing as an act of betrayal by Western capitalism and the Australian Government, this week's vote by OZ Minerals shareholders may just reinforce those suspicions..

On Thursday OZ Minerals will vote on a deal to sell most of the company's mines to China Minmetals.

The deal, forcibly rejigged by the Foreign Investment Review Board, will leave shareholders with their best asset, the Prominent Hill mine and about $500 million in cash, and save the company from collapse.

But it also has been done at a serious discount to the book value of OZ Minerals' assets. The $US1.6 billion ($2 billion) in assets will be sold for a $US400 million discount.

Proxies for the crucial vote must be lodged this morning although shares bought until 7pm tonight can be voted at the meeting in Melbourne.

A rather large spanner was thrown into the works last week, however, when a rival offer to recapitalise the company emerged from RFC, a local advisory and finance group backed by the Royal Bank of Canada.

The plan, which involves injecting $US1.2 billion into the company enough to repay its crippling debt would negate the need to sell assets.

Deciding on which bid is superior ultimately boils down to whether you believe metal prices will keep rising.

Those punting on a resumption of the resources boom would probably vote against China Minmetals. Those who think the current uptick is only temporary may be more inclined to go with the certainty provided by the China deal.

Unfortunately, the OZ Minerals board which is embroiled in more conflicts than the Middle East has rejected the rival offer out of hand.

Andrew Michelmore, the chief executive at OZ and the man who played a not insubstantial role in the company's sudden reversal of form from sharemarket darling to a company on the verge of collapse has a job lined up with China Minmetals once the deal proceeds.

And the OZ board, having narrowly escaped the undertaker and the prying eyes of liquidators, is backing the China Minmetals offer like there is no tomorrow.

Just like Rio Tinto, the problem for OZ Minerals and China Minmetals is that the world has changed dramatically since the deal was struck in April.

Metal prices and OZ's prospects have recovered significantly ironically mostly because of the demand from China which has been busy rebuilding its stocks.

Rio's decision on Friday to abandon its controversial $US19.2 billion rescue deal with Chinalco has left Beijing embittered and resentful, particularly towards Australia and especially towards the Australian Government, hinting that the deal should somehow have been forced through.

But just as with Rio Tinto, the OZ Minerals tilt was a cheeky, perfectly timed bid to take advantage of a distressed situation to grab key strategic assets for a song.

Chinalco failed because it was trying to extract the best deal for itself at the expense of Rio's other shareholders. Ultimately, the other shareholders won. If China Minmetals fails, it will be for the same reason.

China has embraced the global capitalist system with zeal, but its Government still operates as an authoritarian single-party regime, as evidenced by last week's crackdown on protests at the 20th anniversary of the Tiananmen Square massacre.

The sulking comments and veiled threats from Chinese industry spokesmen over the weekend about directing cash elsewhere, bears out this inner turmoil.

The OZ Minerals deal has the blessing of the Australian Government and the backing of the OZ board.

But it has to go to a shareholder vote it needs democratic approval.

This is where China Inc has a problem. The term "free market" usually is accompanied by "democracy".

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