Minorco Picking Up Bp Loans To Wmc

The Age

Friday November 6, 1992

Kate Lenthall

The South African-controlled mining giant Minorco is paying $US240 million ($A344.4 million) for BP's equity stake in the massive Olympic Dam copper-uranium mine, and an additional $US216 million for loans made to Western Mining by BP, according to an internal Minorco document.

It also showed the loans currently stood at $US290 million, which meant Minorco was picking them up at a substantial discount.

Minorco said on Wednesday that it had agreed to buy the 49 per cent stake in one of the world's largest multi-mineral ore bodies from BP, but no breakdown of the price of the participating interest and loans had been issued by any party.

Minorco said it wanted to purchase the loans instead of leaving them with BP because ``BP's continued presence could lead to complications in terms of priorities (repayment and security) when Minorco is required to advance new loans to WMC".

WMC has a controlling 51 per cent interest in Olympic Dam, and has a right to pre-empt the Minorco offer within 90 days of receiving formal documentation. The documentation is expected to be served this week.

Under the original joint venture agreement, BP was required to fund its own share of capital expenditure plus, ``by way of loans on commercial terms", WMC's share of capital expenditure.

The funding agreement remains in place until production at Olympic Dam reaches 150,000 tonnes a year of copper and 4000 tonnes of uranium oxide.

Minorco will take up these obligations under the purchase agreement.

WMC's chief, Mr Hugh Morgan, said yesterday that it would cost $900,000 and $1.1 billion to expand the mine to this capacity.

Minorco did not spell out any time frame for expansion, but said ``there could be a number of intermediate stages".

The Minorco document also revealed the non-recourse loans are repaid through WMC's share of ``gross income" and ``available cash flow" from the project.

It said Minorco was unsure whether WMC would pre-empt the offer in the light of the price being offered, as WMC would not have to buy out the loans, just match the $US240 million being offered for the participating interest.

Minorco said it could fund the purchase with cash on its balance sheet but was exploring other options to maintain flexibility.

It also said the approvals necessary from the South Australian State Government and the Foreign Investment Review Board were not ``obstacles".

Elsewhere yesterday, Western Mining's chairman, Sir Arvi Parbo, told shareholders at the group's annual meeting that the board had not received details of the offer.

© 1992 The Age

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