Following the announcement by the Treasurer of the Commonwealth of Australia on March 27 that he would not approve the proposed takeover of OZ Minerals by China Minmetals Non-ferrous Metals Co if Prominent Hill was part of the transaction, OZ Minerals has negotiated commercial terms for a transaction involving the sale of certain assets to Minmetals. The parties have signed a term sheet and are now working towards the execution of a sale and purchase agreement. The proposed transaction, which requires shareholder approval, involves the sale by OZ Minerals of Sepon, Golden Grove, Century, Rosebery, Avebury, Dugald River, High Lake, Izok Lake and certain other exploration and development assets to Minmetals for $1,206 million.
OZ Minerals will retain Prominent Hill, Martabe, specific exploration assets in Cambodia and Thailand and its listed equity interests (including its interest in Toro Energy). If OZ Minerals retires all its debt (except for the Convertible Bonds on issue), it is expected to also have a cash balance of approximately A$600 million immediately upon completion of the transaction.
Barry Cusack, Chairman of OZ Minerals, said: “While this is a structurally different proposal to the previous cash proposal from Minmetals of 82.5 cents per share, we believe it represents an attractive offer for OZ Minerals and our shareholders. Importantly, it also provides a complete solution to OZ Minerals’ refinancing issues.”
Andrew Michelmore, Managing Director and CEO of OZ Minerals, added: “This structure also allows OZ Minerals’ shareholders to retain full ownership of Prominent Hill, which has now commenced production and is expected to become cashflow positive during the second half of 2009. Prominent Hill has significant upside potential, and OZ Minerals will have the financial capacity to continue its development. Shareholders will now be able to retain full exposure to the long-term growth profile of Prominent Hill.”
The sale price assumes the businesses are purchased on a “cash free, debt free” basis and assuming normal levels of working capital. OZ Minerals is expected to retain all existing cash and debt obligations, and intends to use part of the cash proceeds to pay down most or all of its debt facilities.
The parties have entered into an Exclusivity Deed, which will operate until April 13 . This Deed obliges the parties to use best endeavours to agree formal legal agreements for the asset sales and grants Minmetals exclusivity in relation to corporate transactions involving OZ Minerals until April 13 (other than the Martabe gold project).