Australia rejects China's bid for OZ Minerals

27 March 2009

The Australian government has rejected Minmetals' $1.8-billion acquisition of the world's second-biggest zinc miner, the debt-ridden OZ Minerals on grounds of national security. The rejection may weigh on Chinalco's proposed deal with Rio Tinto.

Australian treasurer Wayne Swan, who has the last word on all acquisitions in the country, rejected the deal since OZ Minerals' Prominent Hill mining operations were in close proximity to the Woomera weapons testing site.

Swan said in a statement, "OZ Minerals' Prominent Hill mining operations are situated in the Woomera Prohibited Area in South Australia and the weapons testing range makes a unique and sensitive contribution to Australia's national defence."

But he added that the acquisition could still be approved if the Prominent Hill mine is excluded from the deal as the government was open to alternative proposals.

This rejection comes just four days after the Australian regulators decided they needed another three months to assess the $1.8-billion acquisition of Minmetals, throwing Oz Minerals to the mercy of lenders who are owed $1.3 billion by 31 March. (See: Lenders may give OZ time amid Minmetals bid)

The Prominent Hill, a copper and gold mine, is a jewel in OZ Minerals asset portfolio and the company had earlier warned that it would be put under an administrator if the acquisition bid of Minimetals fails.