UPDATE 2-Oz Minerals gets bank lifeline as assets go on block

* Banks toss Oz Minerals two-month lifeline

* Attempts underway to sell off mines

* May sell majority stake in Prominent Hill copper mine (Recasts with potential asset sales, adds company and analysts comments)

By James Regan

SYDNEY, Dec 30 (Reuters) - Oz Minerals (OZL.AX), which mines industrial and precious metals in Australia and Laos, was given another two months to persuade lenders to refinance $560 million in debt as it tries to raise cash by selling assets to combat sharp falls in metals prices.

The company, whose shares were suspended Nov. 28 after dropping 85 percent from their January price, was due by the end of Monday to refinance a $140 million loan and a syndicated credit line of which $420 million has been drawn.

Oz Minerals is meeting with potential buyers for some of its prized mines but is keeping the names secret while negotiations progress, according to Chief Executive Andrew Michelmore.

With the majority of the world's mining houses strapped for cash since metals markets collapsed a few months ago, the list is a short one, analysts and bankers said.

"Who could afford to buy Oz Minerals' assets now?" said Australia & New Zealand Bank chief commodities strategist Mark Pervan. "The Chinese, maybe, and BHP, that's who."

BHP Billiton (BHP.AX)(BLT.L), the world biggest miner, which withdrew a $66 billion share offer for fellow industry titan Rio Tinto (RIO.AX)(RIO.L) in November, has said it's still looking for smaller acquisitions that may surface from the sector's malaise.

Rio itself is trying to sell more than $15 billion worth of assets to pay off debt.

Oz Minerals was assembled from the merger of two medium-sized mining houses only last June when commodity markets still appeared immune from the world's mounting credit crunch. Since then, zinc has tumbled 40 percent, copper 66 percent and lead 48 percent.

Besides selling assets, Oz Minerals has already shut a small nickel mine and threatened to close its unprofitable Century zinc mine -- the world's second largest -- if conditions worsen.

It's also shelved expansion at its Sepon copper and gold mine, one of only two in Laos.

Oz Minerals said on Tuesday its banks had agreed to roll over its debt until Feb. 27. Its shares will remain suspended until then.

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