The battle for control of the struggling OZ Minerals is about to heat up.

Chinese group, Minmetals has made an agreed $2.6 billion offer at 82.5 cents a share, but investors are not taking it seriously, keeping the OZ share price well under the offer price. OZ shares traded at 66.5 cents late this morning.

Tomorrow, Oz Minerals will try and up the price by revealing several deals designed to get the Minmetals offer higher.

The offer allows for a higher price if OZ manages to sell assets before the deal is done. Some assets such as Avebury in Tasmania, a nickel mine and the Martabe gold project in Indonesia, have been on the market. Now some buyers have appeared, but not for all.

They will feature in tomorrow’s announcement, according to a source who writes: “Oz Minerals will announce on Friday the sale of two assets which will result in slight increase to current Minmetals takeover offer price: the Martabe gold project in Indonesia will be sold to Owen Hegarty-led consortium (Tiger) for $US 200 million.”

Hegarty was the founder of one of the OZ Minerals partners, Oxiana (the other was Zinifex, so far nothing from there is on the market) and what he is buying back are old Oxiana assets he well knows.

Hegarty stuffed up the disclosure of a margin call on his OZ shares late last year, which effectively put the company in the gun with investors who wondered about other problems. The company then staggered to a trading suspension amid further poor disclosure of its cash position and loans with its bankers. The source writes:

Your colleague, Adam Schwab, mentions that it was valued by Grant Samuel at $707 — $815 million early last year. Correct, but no one believes that any mining asset is worth anything like they were last year, as evidenced by other asset sales in the industry of late.$US 200 million is much more than any other offer, and probably ‘over the odds’ in current market).

Evidence of reduced asset values in mining industry is the OZ nickel mine (on care and maintenance) at Avebury in Tasmania. The exclusive preferred bidder is (Hegarty associated) Range River Gold Ltd, as previously advised. The offer price of $US 80 million is a fraction of book value and as a consequence, the operation may be retained by Minmetals rather than sold.

Range River would have to raise funds from the market to complete purchase, but the Hegarty affiliation (i.e. potential shareholder support based on Oxiana success), will help in this regard.

The “sale is not concluded, so will not be included in Friday announcement.

The Golden Grove mining operation in Western Australia will be sold to a consortium headed by Kerry Harminis, the former executive Chairman of Jubilee Mines Ltd, which was taken over by Xstrata at the top of the mining boom in late 2007. He wants to return to mining and is familiar with the project and has an affinity to the general area.

Gold Grove was one of the foundation assets of Oxiana and has a number of prospective future deposits in the ground nearby.

Like Hegarty, Harmanis has big potential shareholder support based on earlier company success. Both have a large group of followers in the small shareholder part of the market who would support both, even in the current economic climate.

Peter Fray

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