China Minmetals Corp (中國五礦集團), the nation’s biggest trader of metals, agreed to buy Australia’s debt-laden OZ Minerals Ltd for A$2.6 billion (US$1.7 billion) in cash, gaining copper, zinc and gold projects in Asia.
Minmetals is offering US$0.825 for each share of OZ Minerals, a 50 percent premium to the last traded price on Nov. 27, the Melbourne-based company said yesterday in a statement. The offer is recommended by the board of OZ Minerals, the world’s second-largest zinc mining company, which has to refinance A$1.2 billion of debt by Feb. 27.
Minmetals joins Aluminum Corp of China (中國鋁業), which last week agreed to a US$19.5 billion investment in Rio Tinto Group, in securing supplies as plummeting prices and the global credit crisis slashes mine valuations. OZ Minerals’ market valuation has slumped about A$6 billion since it was formed in July.
“China is trying to underwrite its raw material needs and prevent further consolidation and a shift in pricing power away from them,” said Ric Ronge, who helps manage the equivalent of US$1 billion at Pengana Capital in Melbourne. “It is a great deal for OZ Minerals shareholders because it is either this or bust.”
Minmetals, a Fortune Global 500 company, agreed to repay all of OZ Minerals’ outstanding debt, the Australian company said. The transaction needs the approval of OZ Minerals’ bankers and the Australian government, it said.
“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 company operates the Century and Rosebery zinc and lead mines in Australia, the Sepon copper and gold project in Laos and the Golden Grove copper, gold and zinc project in Western Australia state. It also owns the Prominent Hill copper and gold mine in South Australia and the Avebury nickel mine in Tasmania.