Oz Minerals has moved a step closer to being rescued by China’s Minmetals after the Australian zinc and copper miner extended a deadline to refinance A$1.2bn of debt until the end of March.
The extension was a pre-condition of the A$2.6bn bid unveiled by the Beijing-based metals producer, which launched its offer of 82.5 cents cash for each Oz share earlier this month.
Although shares in Oz Minerals rose 7 cents to 63 cents, they still trade well below the bid price. That reflects the need for Oz to secure a further debt extension beyond March, and for the deal to clear regulatory hurdles in Australia and final agreement by the Chinese.
The takeover must be approved by Australia’s Foreign Investment Review Board and can also be blocked by Canberra, which is currently considering a range of investments by Chinese entities in Australia’s resources sectors, including Chinalco’s planned $19.5bn cash injection in Rio Tinto.
However, a successful deal would also provide a neat and fast solution to Oz Minerals’ seven-member banking syndicate, which would be fully repaid their A$1.2bn of debt, and shareholders, which could see the miner fall into receivership if the Minmetals takeover fails.
Oz Minerals also reported a full-year loss of A$2.48bn, struck after asset write-downs of A$2.31bn.
The hefty write-downs on mines and developments projects reflects their much lower value after the sharp falls in global commodity prices. Zinc prices have fallen by more than half over the last year.
Write-downs included A$395m for mines in Canada and A$135m for the Avebury nickel operation in Tasmania.
The company also took a A$269m hit on listed equity investments, including Toro Energy and Nyrstar.
However, Oz Minerals also said it was close to finalising two asset sales. It is selling its Martabe gold and silver mine in Indonesia and Golden Grove zinc, copper and gold mine in Western Australia.
Excluding write-downs, the miner’s underlying loss was A$66.4m, Oz said.
Andrew Michelmore, chief executive, said the debt extension was a significant step towards the company’s goal of completing a deal with Minmetals. ”The banks have been very positive and obviously worked extremely hard ... to get these approvals through.”
He said that shareholders now had a better understanding of how close the group came to entering receivership.
”In comparison, this is providing A$2.6bn back to shareholders … they are starting to see that as very positive,” he added.