Mining: Lynas, Wpl, OZL, ILU

Mr Turnbull and the federal opposition, including Queensland National Party Senator Barnaby Joyce have said a lot about the Chinalco-Rio proposal (and the Senator has also mentioned OZ Minerals).

But it all seems so contrived.

Friday saw China Non-Ferrous Metal Mining Co. agree to pay $252 million in cash for a majority stake in Lynas Corp, a small rare earths miner (used in electronics and a host of other goods).

The state-owned company will buy 700 million new shares at 36c each, 22% more that the last closing price.

The shares bounced 50.8%, or 15c to 44.5c, giving the Chinese and existing holders a nice May Day present.

The deal has to be approved by the federal government, and that might be a tiny concern.

China is the dominant producer of rare earths (LCDs for computers and TVs use them, as do Ipods, etc). Rare earths are also used in compact fluorescent light bulbs, hybrid cars and wind turbines.

The deal will secure the company a total of $522 million in cash and loans to complete construction of plants in Australia and Malaysia to supply customers in North America, Japan and Europe.

The Senate is to begin an inquiry into foreign investment rules, and Rio Tinto released its submission Friday to the inquiry which argued strongly in favour of the Chinalco deal.

China Non-Ferrous will end up with 51.6% of Lynas should the transaction be approved. The Chinese company will have four directors appointed to the board of Lynas, which suspended worth on its Rare Earths project in February due to lack of funding. Lynas will have four directors and the chairman will have the casting vote.

Lynas said in its statement that the deal "shall enable the company to lift the suspension of the project and complete construction and commissioning".

"The business model remains unchanged with the Concentration Plant to be built at Mount Weld, Western Australia, and the Advanced Materials Plant to be built in Malaysia. Lynas' marketing strategy remains unchanged with a focus on Japan, North America and the European Union including fulfilling existing sales contracts," Lynas said in its statement.

"Mr Nicholas Curtis is to remain as Executive Chairman and the Lynas Board shall be expanded to eight Directors to include four Directors appointed by CNMC, with the Executive Chairman having a casting vote."

That arrangement might be enough to get the deal approved.

Since the federal opposition started complaining about this, Chinese companies have bought assets from OZ Minerals and taken a stake in Fortescue Metals. Other deals include the Sinosteel group's moves in the Midwest iron ore province of WA where it controls Midwest Corp and has a small stake in rival Murchison, with approval to go to 49.9%.

The federal government also approved the move by Chinese metals group, Zhongjin to take a 50.1% stake in Perilya, the Broken Hill miner in return for $45.5 million in cash.

Mount Gibson and a couple of other smaller iron ore players and base metals groups have done deals with Chinese companies.

But they apparently don't matter to the federal opposition.

And Woodside Petroleum says its 2009 annual profit will be lower than last year, due to lower oil and gas prices.

The company's annual meeting in Perth on Friday was told that while it was maintaining production forecasts at the range of 81 to 86 million barrels of oil equivalent, earnings would fall.

"In 2009 we are still targeting production of between 81 and 86 million barrels of oil equivalent, although the lower oil price inevitably means revenue, and therefore profit, will be lower than that achieved in 2008," chief executive Don Voelte told shareholders at the group's annual general meeting in Perth.

Woodside shares were up 4c at the close at $38.42.

Mr Voelte said Woodside faces many external challenges this year, but its core strategy remains unchanged.

He said Woodside believed, alongside forecasters, that demand for liquefied natural gas (LNG) will be underpinned by a global shift toward the use of cleaner fuel sources.

"We base our view on our own analysis of the market and our own experiences," Mr Voelte told the meeting.

"Even with the deep economic global downturn, there remain more long-term buyers of LNG than there are sellers.

"We expect the market demand for LNG to grow from its current 180 million tonnes per annum to about 400 million tonnes billion tonnes by 2020.

"This represents an annual growth rate of about seven per cent, a rate at which new projects will struggle to keep pace."

Chairman Michael Chaney said Woodside's foundation customers - in Japan, Korea and Taiwan - will continue to underpin its LNG projects, with more than 90% of the company's LNG sold under long-term sales contracts with take-or-pay provisions.

"While the majority of these contracts protect us from the bottom range of the recent movement in the oil price, it remains the case that our revenues will continue to rise and fall in line with the price of oil," he said.

In 2008, production of oil and condensate made up 50% of Woodside's total production and 68% of revenue.

Woodside made a net profit of $1.79 billion in calendar 2008, up 73.4% from 2007.

Woodside's chairman said it was critical to keep strong control over costs in light of the uncertain global and domestic economic outlook.

"To this end we have decided to defer the company's annual remuneration review which normally takes place at the start of each calendar year," Mr Chaney said.

Salaries for Woodside employees, except those undergoing promotion, will be frozen for at least the next six months.

Mr Chaney said Woodside remained well-positioned to emerge from the current economic downturn a much stronger company.

"Our early decision to focus on our core Australian business, with significant leverage to LNG, should provide good returns to shareholders," he said.

Woodside is 34% owned by Royal Dutch Shell Plc. It lifted first-quarter output by 20% after bringing on production in the US and Australia.

That partly offset the sharp fall in oil prices, but the company said in its March quarter production report that it had cut the 2009 budget by around 9%-10% to conserve funds for liquefied natural gas expansion.

In the quarterly report Woodside said that "Although sales volumes increased by 21% compared to the previous corresponding period, adverse movements in commodity prices resulted in sales revenue that was 1% lower than that of Q1 2008".

Compared to previous quarter (December, 2008), revenues were 34% lower due to lower commodity prices and sales volume.

And more good news for struggling miner OZ Minerals: it received another lifeline from its bankers on Friday which could go some way to ensuring its survival.

The extension by the banks gives OZ the chance to complete the China Minmetals deal which will raise around $1.6 billion.

The shares rose 3c to 78c at the close on Friday, the highest level since last November.

OZ Minerals told the ASX on Friday that its bankers had agreed to extend a refinancing deadline on its $1.2 billion debt by two months to June 30.

The extension was considered for a done deal, given the way the company has altered the sale of assets to Minmetals to accommodate the federal government's objection.

OZ Minerals chief financial officer David Lamont said the agreement will enable the deal with the Chinese state-owned China Minmetals Non-ferrous Metals Co Ltd to go ahead.

"The Minmetals transaction is currently the only complete solution to our refinancing issues," he said.

The deal will see OZ Minerals sell nearly all its assets to Minmetals except the Prominent Hill gold and copper mine in South Australia, and the Matarbe gold and silver mine in Indonesia.

The Matarbe mine was sold to investment holding company China Sci-Tech in a deal worth $300 million.

If Australian shareholders and Chinese regulators agree to the current deal, OZ Minerals will be debt free and about $800 million in the black.

"The extension is subject to a number of conditions subsequent that must be satisfied on or shortly following the date of this announcement," OZ Minerals said in a statement.

"The company expects that all conditions subsequent will be satisfied within the respective periods allowed."

And Iluka Resources Ltd has raised $114 million through an institutional share placement.

The mineral sands miner said on Friday that it had placed 38 million ordinary shares at $3 each, a 9% discount to the closing share price on April 30.

The company's shares rose after the announcement on Friday, and traded up to $3.32 before easing in afternoon trading to end down 5c at $3.25.

The company said that in combination with the potential proceeds from the sale of Iluka's 51% interest in Consolidated Rutile, the funding would further increase headroom during a period of unprecedented global market uncertainty.

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