Base metals miner CBH Resources Ltd, which is planning to merge with Perth-based Perilya later this year, is undertaking a major corporate and operational restructure to help it withstand falling commodity prices.
Base metals miner CBH Resources Ltd, which is planning to merge with Perth-based Perilya Ltd later this year, is undertaking a major corporate and operational restructure to help it withstand falling commodity prices.
The Sydney-based CBH said the planned shake up will include a reduction in capital and exploration expenditure and reductions to the workforce across all operations.
In particular its flagship Endeavour zinc-lead mine will undergo a significant workforce reduction of 37 per cent or 202 personnel to 382 employees. Additional personnel reductions of 27 have taken place outside the mine including its head office.
CBH is currently finalising environmental approvals for the Panorama zinc-copper mine in the Pilbara.
The company said the restructure is unrelated to its proposed merger with Perilya and it hoped to update shareholders in the near-term on merger arrangements.
Under the merger arrangement, CBH shareholders will receive one Perilya ordinary share for every three CBH shares they hold and one Perilya option for every 20 CBH shares.
Below is a copy of the CBH announcement:
CBH Resources is undertaking major corporate and operational restructuring aimed at positioning the Company for a more sustainable future and to insulate the Company against the recent decline in metals prices.
These initiatives include the completion of a major capital investment program at Endeavor and Rasp mines in NSW, and significant workforce reductions across all operations, in particular at Endeavor.
The restructuring program is unrelated to the proposed merger with Perilya Limited and we expect to update shareholders shortly on progress with the merger arrangements.
CBH Managing Director Stephen Dennis said while the workforce restructuring was regrettable, these measures were necessary to establish a foundation for the Company's future during the existing difficult lead and zinc market.
CAPITAL WORKS PROGRAM AT ENDEAVOR
The extensive capital works program undertaken at Endeavor over the past 12 months is nearing completion. Over $90 million has been spent on projects during 2007/8 which are designed to increase mine output, improve mine grade and lower operating costs.
The main projects which are either completed or nearing completion are
New ball mill installed and milling circuit upgraded to increase processing capacity and improve output.
New upper decline to improve mine traffic flow.
Expanded mine development to increase developed stocks and available mining areas.
Upgraded mine backfilling capability.
During the year there has been a significant increase in cemented backfill placed underground in comparison to previous periods, and this will enable higher grade ore to be accessed in subsequent years. The strategy going forward will be a very selective placement of cemented backfill and waste co-disposal to ensure optimum return with respect to higher grade ore and volume.
Commencing in the current quarter, Endeavor is well positioned to achieve sustainable increases in mine production, average ore grades, and mill throughput. This is expected to deliver increased metal in concentrate in 2008/09.
Total capital expenditure for Endeavor will be significantly lower in 2008/9, and is currently
estimated at $14 million.
At the Company's Rasp Operations in Broken Hill, the development decline being constructed to provide access to the Western Mineralisation from the Kintore Pit, will cease development at its current depth of approximately 350 vertical meters below the surface. The performance of Macmahon Holdings Limited which has undertaken this work on behalf of CBH has been excellent, and Macmahon will proceed immediately to demobilise operations at Rasp.
At its current level the Rasp Decline will provide access to three individual working levels within the Western Mineralisation orebody and access to the east into high grade lead lode remnants. The work completed allows the development of 70% of the first two years of planned production from the Western Mineralisation.
Work to secure the necessary government approvals to commence mining operations at Rasp will continue.
At the Endeavor Mine, the Company has implemented action to improve operational efficiency by reducing the total workforce (inclusive of contractors) from 602 to 382 personnel, a reduction of 220 people or 37% of the total workforce. This action will restore employment at Endeavor to approximately the same level which existed prior to the recent capital works program.
Additional personnel reductions of 27 have taken place in the Company outside of Endeavor, including at head office in Sydney where only a small corporate team now remains. This workforce restructure, when fully implemented, is expected to result in annual capital and operating cost reductions of approximately $ 100 million.
The workforce reductions being implemented at Endeavor are not expected to impact adversely on production levels in the mine. Production at Endeavour is expected to increase in the next 12 months from approximately 1.05 million tonnes in 2007/8 to 1.3 million tonnes next year, also at higher ore grades. This expected increase follows the extensive capital works program completed during the last 12 months.
With the demobilisation of the majority of contractors across the site, the Endeavor workforce will assume responsibility for many of the activities that were previously undertaken by contractors. This includes activities in the mine such as backfilling, shotcreting, production drilling, service work and charging. These changes are also expected to generate significant operating cost savings.
CBH's exploration program in 2008/9 will be reduced. The Company's exploration budget next year will be $2.5 million, down from $14 million in the current year. CBH will no longer maintain a Sydney-based team of geologists, and responsibility for ongoing exploration programs has been assigned to each of the main operations.
It is planned to maintain an exploration focus around the Endeavor and Broken Hill regions in NSW, and around the Panorama project in WA. The potential for further discoveries in these areas remains high.
CBH TO FOCUS ON ENDEAVOR AND KEY DEVELOPMENT PROJECTS
CBH will focus on delivering improved performance at its Endeavor Mine, and on developing its key projects at Broken Hill and Panorama. The overall cost base of the Company has been substantially reduced, and this has been assisted by the spin out of CBH's early stage evaluation projects into Kimberley Metals during May.
The rationalisation of growth projects and cost structure in CBH has been essential to securing a more sustainable future for the Company. We are now well positioned to deliver a step improve ment in our operational performance, and we also retain strong growth potential through the development of key projects.