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Barry FitzGerald
June 11, 2009
OZ MINERALS will proceed with a shareholder vote today on its controversial $1.5 billion refinancing deal with China’s Minmetals after a last-minute $1.4 billion alternative proposed by Macquarie Group last night fell over in embarrassing fashion.

Macquarie told OZ it could not deliver the “degree of certainty” its board would have required to support the proposal. It is believed that Macquarie was unable to secure sub-underwriting support from a market yet to be fully convinced that recent commodity price strength will stick.

OZ said that without the necessary guarantees in the Macquarie proposal, it would have been faced with the same dire consequences it would have faced if the Minmetals deal had collapsed – the prospect of its banking syndicate forcing a move into administration.

But OZ’s chairman, Barry Cusack, faces a tough assignment in herding shareholders towards the Minmetals vote. This is likely to prompt a heated debate at today’s meeting in Melbourne on OZ’s dismissal of Macquarie’s initial alternative proposal, and a $1.5 billion recapitalisation proposal put forward by the RFC Group and the Royal Bank of Canada.

OZ said earlier this week it was convinced the Minmetals deal remained the best solution to its debt woes following a “scrupulous” assessment of competing recapitalisation plans. The deal involves OZ selling all its assets to Minmetals with the exception of its new Prominent Hill copper and gold mine in South Australia.

OZ said that while the board considered Macquarie’s original equity recapitalisation proposal to be better than the RFC-RBC proposal, neither was superior to the Minmetals deal.

Like Rio Tinto’s now aborted $US19.5 billion refinancing deal with China’s Chinalco, the OZ deal with Minmetals was struck in February when the cloud over commodity prices from the global economic crisis was at its darkest.

Commodity prices have since rebounded, convincing Rio to refinance itself through a heavily discounted rights issue and an iron ore joint venture in the Pilbara with BHP Billiton.

But OZ’s refinancing needs have been more pressing than Rio’s, with the company raising the prospect of having to go into administration if it could not deal with the $1.1 billion debt repayment demands of its banking syndicate.

An early deadline was recently extended to June 30 to allow time for the Minmetals deal to happen.

An independent expert has previously valued the assets to be sold to Minmetals at up to $2 billion, $500 million more than on offer from Minmetals. But the expert said that the deal was in the best interests of shareholders. OZ shares closed down 2c at 89c yesterday.

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