Mining Journal > Finance > Oz Minerals may be target on cash pile

Finance

Oz Minerals Ltd, the Australian metals producer with more than US$790 million in cash after selling mines to clear debt this month, may be an acquisition target, according to JPMorgan Chase & Co. and Pengana Capital.

“Someone could seek to buy them,” said Ian Henderson, who manages US$7 billion in natural-resource assets shares at JPMorgan Chase & Co’s asset-management unit in London. “Someone that needs money for a project could look at that cash pile, and it wouldn’t necessarily have to be a copper company either.”

Xstrata plc’s proposed £22.4 billion (US$37 billion) merger with Anglo American plc this week may spur consolidation among mining companies as they compete for access to resources as demand rebounds. BHP Billiton, the world’s largest mining company, and Rio Tinto may seek to buy Oz Minerals, Pengana fund manager Ric Ronge said.

“I’m sure that people are looking at it, obviously there is a truckload of cash and an asset there that is OK,” said Ronge, who helps manage the equivalent of US$1 billion at Pengana in Melbourne, including Oz Minerals stock. Oz Minerals should consider a capital return to shareholders with the proceeds of the assets sales, he said.

Oz Minerals rose as much as 1.6% to 94.5 cents and traded at 93 cents 10:21 a.m. Sydney time on the Australian stock exchange. The stock has jumped 67% this year and has a market value of A$2.8 billion (US$2.3 billion).

“Having resolved our financial problems we are now actually in a strong position,” acting chief executive officer Bruce Loveday said today in e-mailed comments sent to Bloomberg.
“We have a very well regarded copper-gold operation in Prominent Hill, some exciting exploration potential around Prominent Hill and in Asia, and we have the financial capacity to be able to maximize value from these.”

Oz Minerals, formerly the world’s second-largest zinc mining company, sold US$1.4 billion in mines to China Minmetals Corp to slash debt after a rout in commodity prices last year curbed profits. It also expects to complete next week the sale of the Martabe mine in Indonesia for US$211 million.

The sales will leave OZ Minerals with more than US$790 million in cash, the company said yesterday. It owns the A$1.2 billion Prominent Hill mine in South Australia state and mineral exploration projects in Cambodia and Thailand. State-owned China Minmetals was blocked from buying Prominent Hill by Australian Treasurer Wayne Swan in March on national security concern because of its proximity to the Woomera weapons testing range.

The likely restrictions on foreign owners may limit the number of possible acquirers for Oz Minerals, said Pengana’s Ronge.

June 26 (Bloomberg)