By staff reporter Yan Jiangning

From Caijing Online

China Minmetals Corp. agreed to pay AU$ 2.6 billion for all of OZ Minerals, the third-largest diversified resources firm in Australia, OZ Minerals said in a statement today.

This is the second time this month that a Chinese company has agreed to invest in an Australian mining company, following Aluminum Corporation of China’s announcement last week to invest US$19.5 billion in Australia’s Rio Tinto.

The investments are part of a broader Chinese strategy to take advantage of the current economic downturn and slump in commodity prices to secure future resource supplies.

The OZ Minerals purchase was priced at AU$ 82.5 cents per share, or a 50 percent premium over OZ Mineral’s last trading price. The company’s shares have been suspended since Nov. 28, when it announced that it was in financial distress and seeking a buyer.

Citigroup reports that OZ minerals has a total of AU$ 1.2 billion in debt and estimates that the company lost AUD112 million in 2008.

The statement said that the deal would provide a “complete solution” to OZ Minerals' current debt issues. OZ Minerals   is seeking to refinance or extend its current debt facilities by 27 February, 2009.

Under the deal, Minmetals will repay all of OZ Minerals’ outstanding debt upon implementation of the transaction. Minmetals also intends to allow early redemption of, or to otherwise acquire, OZ Minerals’ 5.25 percent outstanding 2012 convertible bonds, the statement said.

OZ Minerals said it would ask its lending banks to provide interim support to enable the company to complete the Minmetals deal. That support is a key condition of the Minmetals offer.

The deal allows OZ Minerals to continue efforts to sell its Martabe gold mine and its Golden Grove mines. Under the agreement, Minmetals will raise its purchase price for OZ Minerals if the net proceeds from those sales exceeds US$ 425 million.

The statement said that OZ Minerals’ Board of Directors unanimously recommended accepting the offer, provided that there is no better competing offer and that an independent expert confirms that the transaction is in the best interest of OZ Minerals shareholders. Completion of the deal is also subject to Minmetals’ completing its due diligence by Feb. 23, the approval of regulatory authorities in Australia and China, as well as the approval of OZ Minerals’ current lending banks. The deal also requires OZ Minerals shareholder and certain court approvals.

If OZ Minerals withdraws from the deal in favor of a higher offer, it is obligated to pay Minmetals $25,751,000. 

“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,” OZ Minerals’ chairman, Barry Cusack, said in the statement. He said he expected Minmetals to “provide significant financial support to OZ Minerals in pursuing developments and other growth opportunities.”

OZ Minerals’ chief executive, Andrew Michelmore, added in the statement that Minmetals has confirmed that it intends to continue to operate current OZ Minerals operations. “This offer can resolve investor uncertainty,” he said.

Zhou Zhongshu, Chairman of Minmetals, said in the statement that that Minmetals will maintain OZ’s current operations and staff, as well as its headquarters in Australia.

“Minmetals intends to continue to operate OZ Minerals’ portfolio of assets,” Zhou said, adding that the acquisition will “provide the opportunity to support the development of OZ Minerals’ assets and projects.”

He added that OZ Minerals has a number of assets that complement Minmetals’ non-ferrous asset portfolio.

Zhou said Minmetals will financed the purchase from its existing cash and bank debt. He said the company has received “indicative approval” for a long-term credit facility and has sufficient cash to fund the remainder of the purchase price.

Full article in Chinese: http://www.caijing.com.cn/2009-02-17/110069561.html