China Minmetals, the nation's biggest metals trader, agreed to buy most of debt-laden OZ Minerals' mines for US$1.2 billion ($2.15 billion) after Australia last week blocked a takeover on national security grounds.

Minmetals will get the world's second-biggest zinc mine, as well as assets in Australia, Laos and Canada, OZ Minerals said yesterday.

Melbourne-based OZ Minerals also gained a one-month extension on about A$1.2 billion ($1.48 billion) of debt, it said.

The sale allows OZ Minerals to retain its major Prominent Hill copper and gold mine and pay most of its debt, which ballooned last year as the credit crunch and global recession slashed asset values.

Treasurer Wayne Swan last week rejected Minmetals' A$2.6 billion offer for the whole company as he mulled more than US$20 billion in investments by Chinese companies.

Minmetals has "left, undoubtedly, the jewel in the crown behind and are willing to accept the other assets so it just shows you their appetite to enter into transactions," Anthony Anderson, a trader at MF Global in Sydney, said.

"All the debt is paid off, they are a company with A$600 million in cash. This is a pretty good result."

The Minmetals takeover offer was worth A82.5c a share and the new proposal means no cash will flow directly to shareholders.

"There's a number of investors who'd been in the stock with the expectation that the original 82.5c cash deal would get up and are now exiting their positions," said Matt Riordan, who works at Paradice Investment Management in Sydney.

OZ Minerals, created less than a year ago by the merger of Oxiana and Zinifex, reported a A$2.5 billion loss in February. UBS values Prominent Hill, located near BHP Billiton's Olympic Dam operation in South Australia, at A$1.6 billion.

"The OZ Minerals skeleton appears very vulnerable to a takeover," said Greg Canavan, head of Australian research at Fat Prophets Funds Management in Sydney.

"BHP is an obvious contender, given Prominent Hill's proximity to Olympic Dam."

The offer needs approvals from China and Australia as well as OZ Minerals shareholders.