As expected OZ Minerals has agreed to sell the bulk of its assets to China Minmetals in return for $1.75 billion in cash, avoiding the reasons for last Friday’s ban and leaving open the possibility that the company could continue.
OZ Minerals also got a month’s extension on around $1.3 billion in bank debt to allow this latest deal to be firmed up and possibly complete,
The deal with the rejected Chinese buyer might be enough to get OZ back on the lists as a full fledged, but reduced miner, with its best asset, the billion dollar prominent Hill mining operation, in its balance sheet.
Under the proposed deal revealed yesterday OZ gets to keep Prominent Hill mine, the Martabe gold project in Indonesia, specific exploration assets in Cambodia and Thailand, and its listed equity interests, including its interest in uranium explorer Toro Energy.
Last Friday, Federal Treasurer Wayne Swan blocked the takeover by halting sale of the Prominent Hill mine to the Chinese state-owned company, citing security concerns.
The new structure gets around that, hence the suggestion that it could work.
After FIRB and the Treasurer approved the Fortescue Metals-Valin deal on Tuesday night, there doesn’t seem to be a case for rejecting the rebuilt Minmetals offer.
OZ said in yesterday’s statement that if it retired all of its debt, except for $US105 million of convertible bonds on issue, it would have a cash balance of about $600 million if the revised Minmetals offer was approved and completed.
Due to a timing problem, the announcement wasn’t released until 10.24 am, 24 minutes after ASX trading started. The statement had been promised before trading started.
The trading halt was lifted and the shares tumbled to a low of 47 cents, down 8.5 cents from the close of 55.5 cents before the halt was called Tuesday. But after the statement was released, the shares recovered to finish square on the day.
OZ and Minmetals have signed an exclusivity deed that means they will use their best endeavours to finalise the formal legal agreements on the asset sales by April 13.
OZ’s chief executive, Andrew Michelmore, later told analysts it was unclear whether the company would sell Martabe project or continue to own it in the longer term.
Former OZ Minerals director and Oxiana founder, Owen Hegarty has been an interested possible buyer with his new company called Tiger Gold.
Media reports quoted Mr Michelmore as saying that said the banking syndicate wanted OZ to continue with the Martabe sales process as part of its agreement to extend the deadline on the $1.3 billion of debt that was due on Tuesday night ”subject to a number of conditions subsequent that must be satisfied on or shortly following the date of this announcement”.
The new deal will need to be approved by OZ’s shareholders. OZ expects to hold a shareholder meeting in May or June and as it only needs a simple majority to approve the deal, approval is considered likely.
A special resolution would have needed 75% approval or more. A simple majority is 50.01%.
Mr Michelmore said OZ remained subject to "no talk/no shop” provisions as part of its deal with Minmetals, but that would not stop interested third parties from bidding for the remainder of OZ, including Prominent Hill.
Minmetals is proposing to buy the Century and Rosebery zinc mines, in Queensland and Tasmania respectively, the Avebury nickel mine in Tasmania, which is on care and maintenance, and the Sepon copper and gold operation in Laos.
The deal also includes a suite of exploration and near-development assets in Canada and Australia, including the Dugald River project in Queensland. Zinifex and then Oz had been working to prove the Dugald River project to the point where it would replace Century around 2014-2016 onwards.
"While this is a structurally different proposal to the previous cash proposal from Minmetals of 82.5 cents per share, we believe it represents an attractive offer for OZ Minerals and our shareholders," OZ Minerals chairman Barry Cusack said in the statement to the ASX yesterday morning.
Meanwhile shares in Fortescue Metals jumped by more than 9% yesterday after the Government approved the Valin deal.
Federal Government’s approval of the $1.2 billion Chinese investment in FMG, under very strict rules, saw the shares rise 15 cents to $2.70.
Hunan Valin Iron & Steel will buy up to 17.55% of Fortescue.
Valin is controlled by the Hunan provincial government. Fortescue is separately seeking $3 billion in funds from the China Investment Corp to expand its iron ore operations in the Pilbara.
