* KKR says Oz undervalued
* Rare move by private equity into mining
* Deal comes amid low metals prices (Adds analyst comment and share price move)
By Byron Kaye and James Regan
SYDNEY, Oct 1 (Reuters) - U.S.-based KKR & Co LP has bought a 10 percent stake in Australian copper miner Oz Minerals Ltd, a relatively rare step by private equity into mining that sent Oz shares soaring to their biggest one-day gains in 14 years.
The disclosure by KKR followed media reports that a term sheet had been sent to Oz shareholders late on Wednesday requesting stock at a price of A$3.55 ($2.50) a share, a 7.2 percent premium to the last traded price.
Oz shares stood 20 percent higher at A$3.97 at 0435 GMT. It was their biggest one-day rise since the 47 percent jump in April 2001.
In a statement, KKR Asia Pacific public affairs director Steven R. Okun said the firm bought the stock since Oz Minerals was “a good company that was undervalued in the public markets when we made our investment”.
KKR is buying into mining at time when many investors are turning away from the sector due to a sharp downturn in metals prices, underscored by the dramatic drop in shares of miner and trader Glencore this week.
The price of copper, from which Oz derives most of its revenue, ended the third quarter with a loss of 10.5 percent - the weakest quarterly performance in more than two years.
“Oz Minerals certainly has some good assets and like most mining companies is undervalued at the moment, which can offer an opportunity,” said Fat Prophets mining analyst David Lennox. “It could be KKR is simply stirring the pot.”
Under a new chief executive appointed last December, Oz Minerals has indicated it is willing to take greater risks and was pursuing acquisitions and partnerships to broaden its mining footprint beyond its limited existing holdings. ($1 = 1.4186 Australian dollars) (Editing by Muralikumar Anantharaman)