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OZ Mineral snap up improved Chinese offer

Posted on: June 12, 2009


AFP – Friday, June 12

SYDNEY (AFP) – – Australia’s OZ Minerals overwhelmingly backed an improved 1.396 billion US dollar offer from China’s Minmetals Thursday, just days after mining giant Rio Tinto walked away from a separate Chinese deal.

Minmetals’ last-minute decision to sweeten its offer with an extra 180 million US dollars proved decisive in winning over OZ Minerals shareholders, securing 92 percent of votes at the company’s annual general meeting.

The improved offer helped Minmetals see off two rival bids for the miner, ensuring it succeeded where another state-owned Chinese firm, Chinalco, failed last week when Rio snubbed its offer of a huge cash injection.

Chinalco had refused to revise its 19.5 billion US offer despite recent rises in commodity prices, leading Rio to opt for a rights issue and a joint venture with former rival BHP Billiton instead.

The OZ deal finalises a courtship that began in February, when Minmetals offered 2.6 billion Australian dollars (2.1 billion US) for a complete takeover of the debt-laden miner.

Canberra rejected that bid on national security grounds because it included OZ’s flagship Prominent Hill gold and copper mine, which is located near a military rocket testing range in South Australia.

But it gave the green light to a second offer from Minmetals to buy all of Oz’s assets barring Prominent Hill, which was the deal ultimately passed by shareholders in emphatic fashion Thursday.

Chairman Barry Cusack said before the vote that the Minmetals offer “will deliver considerable additional value to shareholders.”

He also warned shareholders against alternative refinancing proposals put forward over the past week, saying the Chinese deal offered certainty.

“There is a material risk that OZ Minerals may not be successful in refinancing its debt, which could potentially lead to it being unable to continue as a going concern,” Cusack said of the alternative proposals.

The OZ deal may help patch up relations between Australia and China that were left frayed by Rio’s abrupt decision to walk away from Chinalco, once hailed as the Anglo-Australian mining giant’s white knight.

Beijing’s move to shore up its commodity supplies by buying into Australian resources firms hit by the global downturn had caused intense debate in Australia.

China faced a bruising campaign from Australian rights activists and some politicians that used evocative images such as the Tiananmen crackdown to oppose selling strategic resource assets to a “brutal military regime.”

In an editorial this week, Beijing’s state news agency Xinhua blamed the deal’s collapse on anti-China sentiment in Australia.

“This kind of prejudice will not only stall the pace of economic cooperation between China and Australia, but also hurt the interests of the Australian enterprises themselves,” it warned.

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