Nimble-footed Minmetals snaps up Aussie miner

A leading Chinese non-ferrous metal company yesterday won approval for its acquisition of a top Australian miner - only days after China's dominant¹ aluminum² company was thwarted³ in its bid for a bigger stake in another Australian miner.

China Minmetals Non-ferrous Metals Co Ltd (Minmetals) was dexterous⁴ in its dealing⁵ with OZ Minerals Ltd, setting an example for Chinese enterprises investing in overseas resources, experts said.

Minmetals acted quickly to raise its offer for OZ's assets from $1.21 billion to $1.39 billion, responding to increasing domestic and international metal prices in recent months, showing more flexibility⁶ than seen in the aborted⁷ deal between Aluminum Corp of China (Chinalco) and Rio Tinto.

In April, Minmetals also revised its proposal to exclude from the purchase the Prominent Hill mine, which the Australian government said was sensitive because it is close to a weapon-testing area.

Following the moves, Minmetals got overwhelming support from shareholders⁹ attending the OZ Minerals annual general meeting in Melbourne yesterday.

Zhou Zhongshu, president of Minmetals, said in a statement emailed to reporters: "This was a landmark¹⁰ for China Minmetals which can better develop its business in Australia, and will also contribute to local economic development, employment and tax revenues."

The two sides will finalize¹¹ the deal within a week, according to Minmetals. The company will register and establish a wholly-owned subsidiary in Australia, Minerals and Mining Group Ltd (MMG), to manage the assets.

Zhou said after the success, MMG will contribute to a "stronger bilateral¹² relationship" between China and Australia.

Meanwhile, addressing a press conference yesterday for the first time since the collapse¹³ of its deal, Chinalco president Xiong Weiping said that Chinalco "had been willing" to cut its shareholding¹⁴ in Rio Tinto and its stake in Rio Tinto's Hamersley iron ore operations to keep its $19.5 billion alliance.

But the two sides failed to secure the deal because of additional disagreements, such as Chinalco's presence on the board and an issue of convertible¹⁵ bonds, he revealed.

Calling the collapse a "setback¹⁶", Xiong attributed it to factors beyond the company's control, such as the recovery of the metal market and the attitude of Rio Tinto's shareholders - even though the company showed "great flexibility" in the four months of negotiation¹⁷ and "offered several amendments¹⁸".

As for Rio Tinto's planned joint¹⁹ venture with BHP Billiton, Xiong said that as the largest single shareholder⁸ of Rio Tinto, Chinalco is paying close attention to the $15.2 billion rights issue.

Chinalco's offer does not reflect the price increases in the metal market after it has turned around, said Peng Bo, analyst²⁰ at Guosen Securities. It should have considered imposing²¹ constraint²² conditions to the deal when inking the agreement when the market was low, Peng said.