China or bust for OZ Minerals as Minmetals bid $2.6 billion for miner

CHINA'S march into the Australian resources sector gathered pace yesterday, with Beijing-based Minmetals launching a $2.6 billion friendly bid for debt-stricken OZ Minerals.

Just days after Rio Tinto unveiled a controversial $30 billion bailout from China's Chinalco, the OZ board last night presented shareholders with a stark choice: accept Minmetals' offer or risk losing everything.

The deal appears to be the final chapter in one of the most disastrous mergers in Australian corporate history -- the $12 billion marriage of mid-tier miners Oxiana and Zinifex less than a year ago.

It also caps a nightmare week for corporate Melbourne, where both Rio's Australian operations and OZ are headquartered.

And it promises to be a major policy headache for the Federal Government, as the Foreign Investment Review Board struggles to balance Australia's national interest with the need to maintain good diplomatic relations with China.

Under the terms of the agreement, Minmetals has offered OZ shareholders 82.5 a share.

That is a 50 per cent premium on OZ's last traded share price of 55 on November 27, when the stock was suspended while the miner sought a solution to its financial woes.

But it is a fraction of Oxiana's record $4.28 in November 2007.

The deal is conditional on OZ extending the repayment deadline on its loan facilities from February 27 to the end of March.

If the takeover proceeds, Minmetals will repay all of OZ's $1.1 billion in debts.

Asked if the alternative to the takeover was receivership, OZ chief executive Andrew Michelmore responded: "To be absolutely honest, there were a number of times when discussions with the banks got us very close to having to assess that."

If OZ falls into the hands of receivers, there is a chance its shareholders will end up empty-handed as creditors rank first in line to receive the proceeds from any asset sales.

The Minmetals transaction does not affect OZ's planned sale of its Golden Grove zinc and copper mine in Western Australia and the Martabe gold project in Indonesia.

Oxiana's founder and former chief executive Owen Hegarty is reported to be interested in buying back Martabe.

Minmetals plans to keep OZ's head office in Melbourne.

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