China’s Minmetals was still in discussions with Australia’s foreign investment regulators about buying debt-laden Oz Minerals, a spokesman said yesterday, after a crucial part of the deal was vetoed by the government.
Australian Treasurer Wayne Swan delivered a blow to China Minmetals Nonferrous Metals Co’s (五礦有色金屬公司) A$2.6 billion (US$1.7 billion) acquisition offer for the world’s second-largest zinc producer when he said the state-owned firm would not be allowed to buy Oz Minerals’ Prominent Hill mine in the Woomera Prohibited Area, a military weapons testing range.
Fairfax Media newspapers reported yesterday that Minmetals handed Oz Minerals a revised plan to buy most of the company but not the Prominent Hill gold and copper mine.
Oz Minerals, which sought the original Minmetals deal as a financial lifeline, did not respond to requests for comment yesterday.
Minmetals spokesman in Australia, Ian Smith, also declined to comment on a revised plan but said the company had been talking to the Foreign Investment Review Board (FIRB) and “that remains the case.”
“Any offer put forward would be subject to FIRB considerations,” Smith said.
Oz Minerals is Australia’s third-largest mining company and the world’s second-largest producer of zinc. It also produces copper, gold, lead and silver.
It is trying to refinance A$1.2 billion (US$780 million) in debt that is due today. The debt was accumulated when Oz Minerals was formed through the merger of mining companies Oxiana and Zinifex.
Oz Minerals chief executive Andrew Michelmore said on Friday that the company had begun talks with Minmetals about possible changes to the deal.
Credit Suisse analysts said it would be surprising if MinMetals was still interested in doing business with Oz Minerals without Prominent Hill given the Chinese company’s ambition to become a major force in the Asia-Pacific region’s mining industry.
“With the jewel Prominent Hill asset now out of reach, there are probably more attractive alternatives in realizing this goal,” the analysts said in a note to clients.
The foreign investment board is also considering a proposal for another Chinese state-owned company, Aluminum Corp of China (Chinalco, 中鋁), to invest US$19.5 billion in Anglo-Australian miner Rio Tinto Group.
Swan says he will approve that deal only if it is deemed to be in the national interest.
Chinese metals companies are flush with cash from supplying the country’s manufacturing boom and are looking for investments abroad that will let them profit from future demand.
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