Australian copper mining group OZ Minerals has given diversified mining company BHP the permission to conduct due diligence ahead of a potential multibillion-dollar merger, it said on Friday.
This comes after OZ Minerals’ board said it will recommend the latest offer from BHP to its shareholders after it rejected the initial A$8.4-billion (R97.8-billion) takeover bid from BHP, which has offered to acquire all of the company’s shares at A$25 a share.
BHP is now offering A$28.25 per share, valuing OZ Minerals at about A$9.6-billion.
OZ Minerals board chair, Rebecca McGrath, said: “The revised proposal from BHP follows a period of board-level engagement, securing a circa $1.1-billion increase to the initial proposal.
“It is the board’s view that progressing the revised proposal, including providing BHP with access to due diligence, is in the best interests of OZ Minerals’ shareholders and other stakeholders. The board will continue to update shareholders as appropriate.”
Analysts believe that BHP’s main reason for pursuing OZ Minerals is a desire to consolidate the copper mining province in south Australia’s Gawler Craton, where OZ Minerals’ Prominent Hill mines and Carrapateena are located either side of BHP’s Olympic Dam.
The Olympic Dam is the fourth-largest copper deposit and the largest known single deposit of uranium in the world. BHP bought it in 2005 when it purchased its parent company WMC Resources in an A$9.2-billion takeover.
BHP has a licence to mine the Olympic Dam until 2036 and it is extendable for 50 more years thereafter.
BHP CEO Mike Henry said BHP’s proposal represents a highly compelling offer for OZ Minerals shareholders, providing certainty at a time of macroeconomic uncertainty and market volatility, and increasing risks for the industry.
“The combination of BHP and OZ Minerals’ assets, skills and technical expertise provides a unique opportunity not available under separate ownership, with complementary resources including the Oak Dam exploration prospect and existing facilities within close proximity, backed by BHP’s strong balance sheet, capital discipline and commitment to sustainable development,” said Henry.
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