Oz Minerals will sell out to China Minmetals

In the wake of the global recession, Chinese interests are taking advantage of low metal prices by going bargain hunting for financially -troubled Western mining assets.

Oz Minerals, the struggling Australian zinc producer that owns the lucrative Izok Lake and High Lake mineral properties in the Kitikmeot region of Nunavut, will likely be taken over by the Beijing-based China Minmetals Corp., pending approval by Chinese and Australian regulators.

The board of Oz Minerals voted unanimously last month to accept a deal under which Minmetals would pay $1.7 billion US for all of Oz's outstanding shares.

The Chinese news service, xinhuanet.com, reported last month that Minmetals, owned by the Peoples' Republic of China, is seeking "to ensure adequate supplies of non-ferrous metals."

The deal, likely to close in June, would give Minmetals ownership of the huge lead-zinc deposit at Izok Lake, as well as the High Lake, Gondor and Hood base metal deposits and the old Lupin Mine site.

Those properties were first assembled by a small Canadian firm called Wolfden Resources. In 2007, Wolfden sold itself to Zinifex Ltd. for $360 million.

Less than a year later, Zinifex merged with another Australian firm called Oxiana Ltd. to create Oz Minerals.

Oz, now staggering beneath the weight of a $1.2 billion debt, has been hit hard by declining base metal prices and has been forced to cut production at its working mines and delay development of other properties. Its share price, measured in Australian currency, has plummeted from $4 to about 55 cents.

Their long-term plan in the Kitikmeot was to develop mines at High Lake and Izok Lake that would be connected to the ocean by a road and docking facility at Grays Bay on Coronation Gulf.

Right now, it's unclear how the Minmetals acquistion would affect those plans. However, in an interview with the British Broadcasting Corp., Zhou Zhongshu, the chairman of Minmetals, said "Minmetals intends to continue to operate Oz Minerals' portfolio of assets."

Before it can take effect, the proposed takeover must be approved by Australia's Foreign Investment Review Board and China's National Development and Reform Commission.