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Jamie Freed
March 30, 2009

CHINA MINMETALS put a proposal to OZ Minerals last night to acquire the bulk of the company, excluding the Prominent Hill copper-gold mine, in a move that could help save the miner from administration.

The Herald understands an offer was given to OZ after a weekend of frantic work by advisers from both sides who hoped to agree on a restructured deal after the Department of Defence’s decision on Friday to bar the state-owned Chinese company from buying Prominent Hill.

“We would respond to any proposal we receive as soon as we evaluated it,” OZ’s executive manager of business support, Bruce Loveday, said last night.

OZ could resume trading as early as today if it agrees to the revised proposal from Minmetals, although it is understood no strict deadline had been set under which OZ needed to reply to the proposal lodged last night.

OZ has $1.3 billion of debt due to be repaid to its banking syndicate tomorrow, which has left it on the brink of administration. That means it is not in a particularly strong bargaining position over any offer from Minmetals.

The Prominent Hill copper-gold mine is OZ’s most valuable asset. The Federal Government has allowed Minmetals to proceed with a bid for the remainder of the company, but it remains subject to Foreign

Investment Review Board approval.

A Deutsche Bank analyst, Paul Young, said he thought the banking syndicate would be willing to grant a 30-day extension on OZ’s debt if the company could strike a revised deal with Minmetals by tomorrow.

He said OZ could be worth 50c a share, compared with the previous Minmetals offer of 82.5c a share, if Prominent Hill was excluded from the mix.

“If Minmetals decide to not revise their offer, then we see no alternative for OZ than administration,” Mr Young said, adding he valued OZ at 33c a share under a liquidation scenario.

It could take months for OZ’s banking syndicate to recover their funds if the company enters voluntary administration or receivership.

OZ and Minmetals spent the weekend working as fast as possible to come up with a new deal, which would include assets such as the Century zinc mine in Queensland, the Sepon copper-gold operation in Laos and the Rosebery zinc mine in Tasmania.

“There are a lot of issues to be sorted through,” Mr Loveday said. “Tuesday is an interesting day for two reasons. That is when the trading halt is over and it is the bank day. It would be great to resolve it before then, but it is about doing the right deal, not just any deal.”

OZ is unable to solicit offers for Prominent Hill under its existing deal with Minmetals, but it is open to considering approaches from potential acquirers such as BHP Billiton and Canadian miner Barrick Gold. BHP owns the Olympic Dam mine located about 150 kilometres from Prominent Hill and has already purchased copper concentrate from the OZ mine.

Mr Young said Prominent Hill could fetch $941 million, but that figure would include $600 million of associated project debt. The mine is not expected to be cash-flow positive until the June quarter.


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