Minmetals May Use OZ Minerals as Base to Acquire More Resources

Feb. 22 (Bloomberg) -- China Minmetals Corp. may use its A$2.6 billion ($1.7 billion) takeover of OZ Minerals Ltd. as a base for further acquisitions, the Australian company’s chief executive officer told the Australian Broadcasting Corp.

The board of the world’s second-largest zinc mining company agreed to a cash takeover offer from state-owned Minmetals on Feb. 16. OZ Minerals shares traded at 65 cents at the close of Sydney trading on the Australian stock exchange on Feb. 20, less than the 82.5 cents a share Minmetals offered, on speculation the Australian government may block the deal.

“They want this as their offshore vehicle to grow their base metals business,” OZ Minerals CEO Andrew Michelmore told ABC when asked if his Melbourne-based company would be used as a base for more acquisitions in Australia. “I certainly think so, I think they are going to see this as a platform to really grow their business.”

China, the world’s top metals consumer, has acquired $22 billion of commodity assets this year after a 70 percent drop in metals and oil since July ended a six-year boom in raw materials.

Australia may hold an inquiry as early as next week to scrutinize potential acquisitions by Chinese state-owned companies led by Aluminum Corp. of China’s proposed $19.5 billion investment in Rio Tinto Group. Treasurer Wayne Swan last week moved to change the Foreign Acquisitions and Takeovers Act to allow for greater government oversight of such investments.

National Interest

Aluminum Corp., known as Chinalco, on Feb. 12 said it will buy $7.2 billion of Rio’s convertible bonds and acquire stakes in projects for $12.3 billion in Chile, Australia and the U.S. The transaction is China’s largest single overseas acquisition.

The bid needs approval from Australia’s foreign investment regulator and from Swan.

Any decision on Chinalco’s investment in Rio would be taken “on its merits, looking very closely at the national interest criteria that I must apply under the law,” Swan told Network 10 in an interview today. “We do look very carefully at proposals from foreign customers, if you like, where there is to some extent an amount of potential control impacted on a domestic producer.”

Swan can reject the Minmetals and Chinalco bids on national interest grounds. Former Treasurer Peter Costello invoked those powers in 2001 to block a bid by Royal Dutch Shell Plc for Woodside Petroleum Ltd.

Minmetals failed to reach an accord to buy Noranda Inc. in 2004 after some Canadian politicians raised objections.

Minmetals wants OZ Minerals to secure supplies of minerals by acquiring zinc, copper, gold and nickel mines in Australia, Laos and Indonesia. Beijing-based Minmetals, a Fortune Global 500 company, agreed to repay OZ Minerals’ A$1.2 billion debt should it get 100 percent ownership.