China Minmetals Gets OK to Buy Australia's Oz

China’s Minmetals won Australian government approval Thursday to buy most of miner Oz Minerals’ operations in a deal that excludes a mine in a sensitive military area.

Minmetals promised to use mostly Australian managers and to expand production at some sites as conditions of the 1.7 billion Australian dollar ($1.2 billion) purchase, Treasure Wayne Swan said in a statement announcing the approval.

The deal adds to a string of foreign acquisitions by China’s cash-rich metals and energy producers. They have been welcomed as saviors by some struggling foreign companies but the spending has sparked debate over whether Chinese state-owned enterprises should be allowed to control key mineral resources.

Minmetals Nonferrous Metals Co. will acquire Oz Minerals mining operations in five areas that produce zinc, copper, lead and silver, Swan said.

Oz Minerals will retain the Prominent Hill gold and copper mine, which lies in a military area, the treasurer said.

Minmetals had offered to buy all of Oz Minerals for 2.6 billion Australian dollars ($1.7 billion) but Swan rejected that on national security grounds because it included Prominent Hill.

Employees who answered the phone at Minmetals’ Beijing headquarters referred questions to company spokesman Jiao Jian but said he was not available.

The deal is a lifeline to indebted Oz Minerals, the world’s second-largest zinc producer and Australia’s third-largest mining company. It has said the deal would allow it to pay its debts, with 600 million Australian dollars ($410 million) left over.

Prominent Hill was seen as one of Oz Minerals’ most valuable assets, and analysts questioned whether Minmetals would want the company without it.

China’s mining and metals companies are flush with cash from its industrial boom and are acquiring assets abroad to profit from future demand.

They have made several high-profile bids to buy all or part of several Australian mining companies. That has prompted opposition from some Australian lawmakers.

Australian regulators are considering a proposal from another Chinese state-owned company, Aluminum Corp. of China, or Chinalco, to invest $19.5 billion in Anglo-Australian miner Rio Tinto Group.

In March, Swan approved a 645 million Australian dollar ($440 million) deal for China’s state-owned Hunan Valin Iron and Steel Group to increase its stake in Australia’s Fortescue Metals Group from 9.8 percent to as much as 17.55 percent.

4/23/2009 5:51 AM CANBERRA, Australia