The Chinese resources and processing industry has made another foray into Australia, this time swooping to put the lock on the struggling OZ Minerals, which on Friday revealed possible write-downs of up to $2.8 billion.
China Minmetals Corp., the nation’s biggest trader of metals, last night said it had reached agreement to buy Australia’s OZ Minerals for $2.6 billion in cash, or 82.5c a share.
That compares to the last sale of 55c back on November 27 when OZ Minerals’ shares were suspended because it was having trouble rolling over bank debt.
It asked for the suspension to be continued on December 1 and has not been traded since.
Since then the company has staggered from one disaster to another, slashing production, staff and assets as it battled a group of banks.
At the same time more details emerged of its financial position which threw more doubt on its health and longevity, especially as it seemed that cash reserves had been materially overstated at one stage late last year.
The offer is recommended by the board of OZ Minerals, the world’s second-largest producer of zinc.
“OZ Minerals has been working with its financiers and progressing various funding options to pay down debt and maximize value for shareholders while providing greater certainty to employees and suppliers,” Chief Executive Officer Andrew Michelmore said in the statement. “This offer can resolve investor uncertainty.”
“The board has determined that Minmetals’ cash proposal is in the best interests of OZ Minerals’ shareholders and believes this is the best outcome for shareholders compared with any of the other options available to us,” chairman Barry Cusack said in a statement.
There’s a $A25.8 million break fee, so the opportunity is there for other bidders.
But no one else in the resources world would have the sort of money China can arrange: BHP Billiton was interested, but didn’t move to get what it wanted from OZ, the Prominent Hill mine in South Australia.
OZ Minerals was formed through the merger of Oxiana and Zinifex last year. Since late last year it has been pursuing asset sales and other cost-reduction measures including, job and production cuts and placing its Avebury nickel mine in Tasmania on care and maintenance.
The company said it would continue to pursue the sale of the Martabe gold and silver project in Indonesia and the Golden Grove polymetallic mine in WA’s Mid West.
OZ Minerals said its outstanding debt facilities would be repaid by Minmetals upon completion of the transaction, which would solve its “present financial issues”.
“Minmetals has confirmed that it intends to continue to operate current OZ Minerals operations, which, in turn, will benefit employees and relevant local communities and also provide certainty to businesses beyond those operated by OZ Minerals,” managing director Andrew Michelmore said in a statement today.
The transaction is subject to regulatory approvals, completion of due diligence by Minmetals, OZ Minerals’ banking syndicate agreeing to extend the term of their debt arrangements and shareholder approval.
OZ Minerals said the company would continue to be domiciled in Australia with its staff retained.
“Minmetals will provide a robust platform for OZ Minerals to realise its growth potential when market conditions permit,” Minmetals chairman Zhou Zhongshu said in a statement.
The swoop follows last Friday’s controversial proposal that would see Chinalco injecting up to $US19.5 billion into struggling Rio Tinto and taking strategic stakes in a number of mines and up to 18% of the company’s shares.
As well Sinosteel, a big Chinese resources buyer, has knocked off Midwest Corporation, an emerging iron ore group in mid-western WA.
Sinosteel also has approval to go to 49.9% of rival Midwest miner, Murchison Metals, but there are one or two other shareholders in the way
Chinese metal smelter Zhongjin has been given FIRB approval to buy a majority stake in the Broken Hill miner Perilya for around $45 million. The Chinese group will hold a maximum of 52% and have board control.
And, Gindalbie, a West Australian mining company sold China’s biggest steel producer, Ansteel, 35% of its Karara iron ore project in WA.
And late last year, China’s APAC Resources and Shougang Concord snapped up 40.1% stake in WA iron ore company Mt Gibson Iron for $162.5 million.
