Minmetals Seeking ‘Better Solution’ to Blocked OZ Minerals Bid

By Jesse Riseborough and Xiao Yu

March 30 (Bloomberg) -- China Minmetals Group remains in talks with OZ Minerals Ltd. to revise its A$2.6 billion ($1.8 billion) takeover after Australia blocked the proposal last week on national security concern.

“We are in discussions with OZ Minerals, trying to seek a better solution that will benefit the company’s shareholders, employees and Australia,” Minmetals spokesman Jiao Jian said today by phone from Beijing. Details of a new proposal are yet to be decided, he said.

Minmetals, China’s biggest metals trader, last night put a revised offer to OZ Minerals that excludes the Prominent Hill mine that prompted Australia to block the bid, the Sydney Morning Herald reported today. Jiao declined to comment on the report. Prominent Hill may be worth A$1 billion, making it the most valuable OZ Minerals mine, Citigroup Inc. said today.

“Prominent Hill is the jewel in the OZ Minerals crown and this is likely to be a deal breaker,” Citigroup analysts led by Clarke Wilkins said. Blocking the proposal has also increased the risk OZ Minerals lenders will not extend a March 31 deadline on A$1.2 billion of debt, Wilkins said.

OZ Minerals, halted from trading on the Australian stock exchange on March 27, last traded at 55.5 cents. Minmetals has offered 82.5 cents a share for the company. The Chinese company may revise its offer, excluding Prominent Hill, to 36.5 cents a share, RBC Capital Markets analysts led by Geoff Breen said in a March 27 report. That values the assets at A$1.1 billion.

Repay Loans

Selling all assets excluding Prominent Hill could leave OZ with enough money to pay all loans and some remaining cash, Citigroup said. Prominent Hill may be worth about 32 cents a share, according to Citigroup.

“Discussions continued over the weekend with both companies with a view to finding a proposal that satisfied the treasurer’s requirements,” Matthew Foran, a spokesman for Melbourne-based OZ, said today by phone. Talks with lenders were continuing and were constructive, Chief Executive Officer Andrew Michelmore said March 27.

Australia is studying investment proposals from China, including a $19.5 billion investment in Rio Tinto Group, amid a backlash from politicians and shareholders.

“We would be surprised if Minmetals are still interested in doing business with OZ Minerals as a result of this decision although OZ and Minmetals will be spending the weekend trying to structure an alternative agreement,” Credit Suisse Group AG analysts led by Michael Slifirski said today in a report. “The risks of OZ Minerals falling into receivership have materially increased.”

To contact the reporter on this story: Jesse Riseborough in Singapore at or jriseborough@bloomberg.net;