Swan rejects $2.6bn takeover for OZ

China Minmetals' proposed takeover of OZ Minerals cannot go ahead if it incudes the target's mining operations in Prominent Hill because it would breach national security, Treasurer Wayne Swan says.

The Prominent Hill gold and copper operations are situated in the Woomera Prohibited Area in South Australia - a weapons testing range.

Mr Swan said under the Foreign Acquisitions and Takeovers Act, all foreign investment applications are examined against Australia's national interest.

"An important part of this assessment is whether proposals conform with Australia's national security interests, in line with the principles that apply to foreign government related investments," Mr Swan said in a statement.

OZ Minerals Prominent Hill mining operations are situated in the Woomera Prohibited Area in South Australia.

"The Woomera Prohibited Area weapons testing range makes a unique and sensitive contribution to Australia's national defence," he said.

"The government has determined that Minmetals proposal for OZ Minerals cannot be approved if it includes Prominent Hill.

"I have informed Minmetals of this decision."

He said discussions between the Foreign Investment Review Board (FIRB) and Minmetals are continuing in relation to OZ Minerals other businesses and assets.

"The government is willing to consider alternative proposals relating to those other assets and businesses," he said.

Mr Swan's announcement follows a decision by FIRB this week to extend its review of the Minmetals offer by 90 days.

Earlier today, OZ shares were placed in a trading halt as it seeks an extension to refinance $1.3 billion of debt by Tuesday.

Shares in OZ last traded at 55.5 cents.