SYDNEY -- Australian diversified miner OZ Minerals Ltd. said negotiations to refinance part of its debt are unlikely to succeed, potentially triggering default on all its debt.
OZ Minerals also said the situation could force the company to pursue asset sales, noting it had been approached for a gold project in Indonesia and that it may enter joint-venture pacts for the Prominent Hill mine in South Australia.
The Melbourne-based miner said one lender in talks to refinance two debt facilities by a Dec. 29 deadline had pulled out. The two debt facilities consist of one that is drawn to $420 million and one to $140 million.
OZ Minerals said lender Societe Generale is alleging default on a third debt facility, dubbed Facility C. That facility is worth 250 million Australian dollars (US$164.5 million) and drawn to A$85.8 million.
OZ Minerals said it has a provision in its debt facilities that default on one of the company's facilities may trigger default on all other facilities and convertible bonds. In a Dec. 4 update on its financial position, the company said it was planning to repay its debt with Societe Generale by a Dec. 31 deadline. But Wednesday, it said it was seeking a "mutually agreeable solution to this issue," adding it didn't accept Societe Generale's allegation of default.
OZ Minerals inherited this debt from Zinifex, which in July merged with Oxiana to create OZ Minerals. At that time, OZ Minerals had a combined market capitalization of A$12 billion, compared with A$1.7 billion when it last traded at the end of November.
As of Dec. 8, OZ Minerals had cash on hand of A$279.4 million, down from A$405 million as of Nov. 30, leaving it with a net debt position of A$802.6 million.
Oz Minerals suspended its shares from Nov. 28 until Dec. 29 as it continues talks with lenders over refinancing of the debt.
"We are obviously under pressure from the refinancing. But we're still in talks for the Dec. 29 deadline, and we are not precluded from extending that deadline. There are a number of options open to us," an OZ spokesman said.
Banks participating in the refinancing talks include Australia & New Zealand Banking Group Ltd., Commonwealth Bank of Australia, National Australia Bank Ltd. and Royal Bank of Scotland among others.
Since its creation in July, OZ Minerals' share price has been hit by concerns over the impact of falling commodity prices, as prices of its key commodities, copper and zinc, dropped to multiyear lows. That has raised concerns over the company's cash burn.
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