02/10/2008 - 08:45

CBH launches takeover for Perilya again

02/10/2008 - 08:45

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Zinc producer CBH Resources Ltd has launched a hostile $65 million takeover bid for Perilya Ltd, just over two months after the companies terminated a friendly merger proposal.

Zinc producer CBH Resources Ltd has launched a hostile $65 million takeover bid for Perilya Ltd, just over two months after the companies terminated a friendly merger proposal.

The rationale behind the deal is to combine Perilya's Broken Hill zinc and lead operation with CBH's adjacent Rasp project to share infrastructure and realise cost savings.

"What we're on about is putting their assets together with our assets at Broken Hill and seeing a much longer mine life approaching 10 years," CBH managing director told reporters on a teleconference.

"Now that Perilya has really come back to being not much more than Broken Hill we think that logic is even more compelling than what it was back in March when we first announced our merger."

CBH is proposing a two-tiered, all-scrip offer, which takes into account Perilya's intention to sell its Mt Oxide copper project in Queensland to Chalice Gold Mines Ltd.

The company is offering 2.8 shares for each Perilya share, assuming the Mt Oxide transaction goes ahead, or 4.2 shares for every Perilya share if the sale of the copper project is not completed.

The value of the takeover offer is about $65 million at CBH's closing price of 7.9 cents.

Perilya, however, said that the bid was "unsolicited" and advised its shareholders to take no action until the board made a formal recommendation.

Shares in Perilya gained 4.5 cents, or 16.67 per cent to close at 31.5 cents today.

Mr Dennis said by combining the two Broken Hill assets, annual production could be increased and Perilya's operation could be extended out from its expected two to three year mine life.

A combination would also allow CBH to process ore from its Rasp project through Perilya's existing concentrator without constructing its own facility, estimated to cost in the range of $75 million.

However, Mr Dennis said that if the takeover did not succeed, there was "sufficient value" to be able to "undertake Rasp on a standalone basis".

CBH Resources' flagship mine is the Endeavour zinc mine at Cobar, north-east of Broken Hill.

Both companies have been hit hard by the falling zinc price and have been forced to lay-off workers and significantly modify operations to remain sustainable.

Mr Dennis if the merger was to proceed the company was "offering no commitments in relation to what it means for employment numbers".

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