OZ Minerals Ltd, the world’s second-largest zinc mining company, won a two-month extension to refinance debt after burning through A$1 billion (US$689 million) in cash in six months as metal prices plunged.
The company received approaches seeking a majority stake in the A$2.5 billion Prominent Hill copper and gold mine as it proceeds with assets sales to meet refinancing requirements, Melbourne-based OZ said today in a statement. It’s also seeking bridging finance to meet cash shortfalls at three of its projects and has agreed to give Societe Generale, one of its lenders, security over its biggest zinc mine.
OZ Minerals’ market value slumped by US$6.5 billion, or 79 percent, this half as metal prices plunged almost 60 percent. Credit markets worldwide have been squeezed after financial companies booked more than US$1 trillion in writedowns and credit-market losses since last year.
“It’s an ongoing concern that they even got themselves in this position given they had A$1 billion of cash at the end of June,” Marcus Droga, a private client adviser at Macquarie Equities Ltd, said by telephone from Sydney. “It would seem that asset sales are at minimum what needs to be done if the company has any chance of survival.”
OZ Minerals, created when Oxiana Ltd bought Zinifex Ltd in July, last traded at A$0.55 on Nov. 27, giving it a market value of A$1.7 billion. Its shares, which have been suspended since Nov. 27, may remain halted until Feb. 27 as it seeks to complete the refinancing.
“We have still a lot of work to do to achieve the refinancing,” chief executive officer Andrew Michelmore said in the statement.
The deadline to refinance the US$560 million of debt has been extended to Feb. 27, from the initial date of Monday.
The company has a loan of US$420 million provided by seven lenders including Bank of Scotland Plc, a unit of HBOS Plc; Australia & New Zealand Bank Group Ltd; Commonwealth Bank of Australia; BNP Paribas, and Bayerische Hypo-und Vereinsbank AG, OZ Minerals said on Dec. 4. A second US$140 million loan is being refinanced by Monday, the company said. ANZ and RBC provided this loan.
A third loan with Societe Generale has a limit of A$250 million and is drawn down to A$85.8 million, OZ Minerals said on Dec. 10. Societe Generale will be granted security over former Zinifex assets in exchange for extending the loan. Zinifex owned the Century zinc mine as well as the Avebury nickel mine in Tasmania that was shut this month because of declining prices.