Copper miner Oz Minerals all but ‘on the market’

For Oz Minerals directors to tick off on a takeover offer, it really has to be very close to $30 at the bare minimum.

An OZ Minerals staff member at the Prominent Hill Mine in South Australia.

Oz Minerals is not quite at that point you see in most property auctions – when the auctioneer emerges after ‘consulting with the owner’ to announce that ‘the property is now on the market’.

That the property will be sold to the current highest bidder; so anyone else has to bid now or miss out.

But it is very, very close.

It’s at the point where the price now offered – significantly above BHP’s opening $25 salvo – will get the offer or, almost certainly BHP again, inside OzMin to look at the books, and with a guaranteed unanimous director endorsement of the deal and the price.

As with most takeover offers these days, BHP doesn’t just want directors to endorse its offer and price; it wants OzMin to execute its own takeover via a scheme of arrangement.

That’s because a scheme only requires a 75 per cent ‘yes’ at an OzMin general meeting, as opposed to the 90 percent acceptance needed in a conventional takeover to guarantee 100 per cent of the target.

When BHP launched its bid in early August, it was entirely opportunistic and it started lowball – but not too lowball - at the $25.

Although BHP had significant operational synergistic reasons for acquiring OzMin – its major mine sits right next to BHP’s Olympic Dam – the $25 was low enough to all-but invite counter-bidders.

That’s to say, bidders seeing the appeal of OzMin as a standalone proposition in the copper-hungry future of ‘batteries being included in everything’.

In three months though, no other bidder has emerged – with BHP’s main industry rival Rio Tinto absorbed in trying to tidy up the almighty mess it created and allowed to fester with its Oyu Tolgoi copper mine in Mongolia.

Two earth movers pass each other while retrieving copper mineral deposits from the base of Oz Minerals’ Prominent Hill open pit mine in South Australia. Picture: Carla Gottgens/Bloomberg via Getty Images

The upfront Oyu Tolgoi dollars Rio is trying to spend to tidy up the mess aren’t that huge – around $5bn – and Rio could easily afford to be bidding for both.

The issue keeping Rio away from OzMin is more Rio’s hopeless management, a legacy of the awful period under then-chief executive Jean-Sebastien Jacques and his hapless, hopeless chairman Simon Thompson.

It was clear in August that $25 was too low a price for anyone to pay for OzMin; and even more so for BHP. As I described it then and still: “opportunistic”.

After the bid, the copper price rose 14 per cent in line with Wall St and expectations of a Fed ‘pivot’.

More recently the copper price has slipped back but is still above its early-August level.

All OzMin would say Wednesday, in seeking a trading halt, was that there was a “potential change of control transaction”.

Those words used suggest two major things.

First and critically that the price offered was now significantly higher than the $25.

For OzMin directors to tick off on the price, it really has to be very close to $30 at the bare minimum.

Personally, I would suggest it needs to be higher.

But secondly, that it would be signalling also the start of a process rather than a ‘done deal’ – again, whoever is the bidder, a process of due diligence before a committed bid and a bid by way of a scheme.

So, when OzMin comes back with its disclosure of what is being offered and agreed; it will be the auctioneer, so to speak, saying ‘the property is now on the market’.

As for the news from the Australian Bureau of Statistics that wages rose by 1 per cent in the September quarter and by 3.1 per cent for the year – but stronger, in the private sector – is neutral for RBA interest rate decisions.

It would, though, have been very significant if 2022 inflation had turned out the way the RBA expected a year ago, and its official rate was still at zero.

Originally published as Copper miner Oz Minerals all but ‘on the market’