UPDATE 1-China's Minmetals seals $1.4 bln OZ Minerals deal

* Acquisition largest by Chinese in Aussie mining sector

* Rio rejection of Chinalco had raised fears of deal failing

* OZ Minerals shares suspended, up 62 pct in 2009 (Adds details, comments)

By Denny Thomas

SYDNEY, June 11 (Reuters) - Shareholders in debt-laden Oz Minerals Ltd on Thursday approved the purchase of most of the company's assets by China's Minmetals for about $1.4 billion, the largest acquisition by a Chinese company in the Australian mining sector.

State-owned Minmetals raised the offer by 16 percent only hours before the vote at OZ Mineral's annual meeting in Melbourne. [ID:nSYD448811]

The deal gives Minmetals access to hefty portfolio of mining assets, including the Sepon copper and gold mine in Laos and the Century and Rosebery zinc mines in Australia.

The deal comes less than a week after fellow miner Rio Tinto Ltd Ltd dropped a planned $19.5 billion investment by another state-owned Chinese company, Chinalco, aimed at helping it pay off billions of dollars in debts brought on by a bust in commodities markets.

OZ Minerals nearly collapsed after last year's crash in commodity prices. It was left at the mercy of its lenders who set June 30 deadline to pay its A$1.1 billion ($880 million) bank debt.

"Given where OZ Minerals was six months ago, this is a damn good outcome," said Rob Patterson, managing director of Argo Investments Ltd, which owns OZ Minerals shares.

"OZ Minerals shareholders get to keep the interest in Prominent Hill, which is the best asset in the company," he added.

Shares in OZ Minerals were suspended on Thursday, having last traded at A$0.89. The stock is up about 62 percent in 2009, after coming out of a three month voluntary suspenion in February.

FEAR OF FAILURE

The Australian government blocked Minmetals original plan to buy the whole of OZ Minerals, saying one of OZ Minerals key mine was near a sensitive military facility. Minmetals came back with a revised proposal, excluding Prominent Hill.

"That's good news," Feng Guiquan, senior vice president of China Minmetals Corp, told Reuters on the sidelines of a business event in Taipei.

"We've already settled our funding. A part of it will come from our own capital, while the other will be from banks," he said, adding that the company was looking for acquisitions in Mauritania and possibly more deals in Australia. [ID:nTP273074]

He said the failed Rio/Chinalco deal had caused some worries that some "irrational feeling might rule over commercial interests."

The recent rally in OZ Minerals shares and signs of life in commodities markets encouraged investment banks to lodge counter proposal for OZ Minerals. But OZ Minerals rejected last minute recapitalisation offers, saying they were inferior to Minmetals proposal.

Chinalco's split with Rio was fuelling speculation other Chinese firm would target smaller miners in hopes of securing its future supplies of natural resources. [ID:nSYD478005].

Fortescue Metals Group jumped as much as 21 percent on Thursday as investors bet the world's fourth largest iron miner would next attract investment capital from China.

Rio Tinto, emboldened by a sharp rally in its own share price, called off the Chinalco deal last Friday, instead forging a new $116 billion iron ore alliance with mining rival BHP Billiton . ($1=A$1.25) (Additional reporting by Lee Chyen Yee and Lin Miao-jung in Taipei; Editing by James Regan and Lincoln Feast)