PERTH-BASED zinc miner CBH Resources has flagged a likely $100 million expansion of its stalled Rasp mine in Broken Hill to re-establish itself as one of Australia’s leading zinc producers.
PERTH-BASED zinc miner CBH Resources has flagged a likely $100 million expansion of its stalled Rasp mine in Broken Hill to re-establish itself as one of Australia’s leading zinc producers.
CBH last week secured final government approvals to proceed with Rasp, with limited mining set to begin by the middle of the year.
About 240,000 tonnes of ore will be mined at Rasp and trucked to CBH’s Endeavor mine at Cobar for processing in the first two years, yielding 12,000t of zinc and 8000t of lead in concentrate annually.
The Rasp development was shelved in late 2008 when markets dived and CBH’s friendly bid for Broken Hill neighbour Perilya turned sour. The merger had been aimed at consolidating their adjoining Broken Hill leases and fully utilising Perilya’s existing plant.
With zinc prices in freefall, CBH subsequently restructured and downsized its Endeavor mine at Cobar to get back on an even keel. Meanwhile, Chinese miner Zhongjin Lingnan bought a controlling interest in Perilya for $45 million.
Zinc prices have since rebounded strongly, and CBH managing director Stephen Dennis said the company was plotting an aggressive rebound over the coming year.
In particular, CBH was looking at a stage two expansion of Rasp, including construction of its own processing facility, to significantly increase production from 2012.
“It’s more likely than less that we will build our own plant at Rasp … it’s the logical and sensible thing to do at a project with a 15-year life,” Mr Dennis told WA Business News.
CBH has previously estimated the cost of the Rasp plant at about $65 million, indicating the total cost of the expansion will top $110 million.
Mr Dennis said building a dedicated plant at Rasp would also enable CBH to process extensive tonnages of high grade zinc “sands” mined, but not processed, by past operators. The material grades up to 20 per cent zinc.
Underpinning the plan is last month’s landmark agreement with Japanese zinc giant and 23 per cent shareholder Toho Zinc to inject $67.5 million into CBH.
Toho will pay $57.5 million for a half share in Rasp and $10 million for an extra 50 million CBH shares at 20 cents each, well above the stock’s current price around 13.5 cents.
As a result, Toho’s stake will increase to around 31 per cent, only marginally more than the 28 per cent stake it held before being diluted in a capital raising last year.
On completion, CBH will also buy back almost $100 million of outstanding convertible note debt at a big discount, leaving it with net debt of $22 million and over $60 million in cash.
Toho struck the deal after CBH received an informal takeover proposal from refining giant Nyrstar pitched at just 13.5 cents per CBH share last month. Nyrstar is seeking to avert a looming shortage of zinc supply from the middle of the decade.
Meanwhile in WA, Mr Dennis said CBH expected to have a partner for its $150 million Panorama copper-zinc project in the Pilbara by the end of April.
He said an information memorandum would be finished shortly, enabling adviser PCF Capital Group to start marketing the project to prospective partners.
Mr Dennis said he expected strong interest in the project.
