Miner CBH Resources has slammed the board of its takeover target Perilya over the recommendation to shareholders to approve a $45 million share placement to a Chinese company.
Miner CBH Resources has slammed the board of its takeover target Perilya over the recommendation to shareholders to approve a $45 million share placement to a Chinese company.
Earlier this week, Perilya released a supplementary target's statement in the wake of new developments with Shenzhen Zhongjin Lingnan Nonfemet Co, which is subscribing to $45.5 million worth of shares.
It also scheduled an extraordinary general meeting in early February for shareholders to approve the placement.
Should shareholders approve the placement, Zhongjin will emerge with a controlling 50.1 per cent stake, effectively making Perilya its subsidiary, CBH claimed today.
CBH says its takeover offer of 4.2 of its shares for each Perilya share is superior to the placement issue of 23 cents per share.
Shares in Perilya closed down one cent to 17.5c.
In a statement today, CBH pointed out that Perilya's financial position validated its concerns that the takeover target was "not in a sound" situation.
Perilya revealed this week that as at October 2008 last year, it had $10.4 million cash in the bank.
In addition, accountants from Ernst & Young said if the placement falls through, the company will have to source new funding early this year to continue operating.
"The Perilya board has now revealed that if Perilya shareholders do not support the placement to Zhongjin Lingnan, then Perilya may not be able to continue as a going concern beyond March 2009," CBH said.
"In addition, CBH believes that the initial $10 million deposit paid by Zhongjin Lingnan to Perilya on 24 December 2008 was required to sustain Perilya's operations through to the shareholder vote in February 2009."
The miner added that it was concerned that Perilya is pursuing a "flawed operating strategy" at its Broken Hill mine in New South Wales, with losses likely to continue during the current period of low metal prices.
"Whilst Perilya made one production cutback at Broken Hill in August last year, this was clearly an insufficient response in the circumstances of the current industry downturn and as a result Perilya has continued to incur substantial cash losses by maintaining operations at an unsustainable level," CBH said.
Additionally, the CBH said shareholders were being denied the opportunity to vote on the sale to Zhongjin of the Mt Oxide copper project, which is being sold at 40 per cent less than the asking price some four months ago to Chalice Gold Mines.
CBH said if the placement does not proceed and Perilya is unable to repay the $10 million deposit, then under a further agreement, Zhongjin has the ability to acquire Mt Oxide for a total of $15 million.
"Perilya shareholders are being denied the opportunity to vote on this disposal," CBH said.
"It is very important that Perilya shareholders recognise that under the Zhongjin Lingnan proposal, they will receive no consideration for their shares.
"Furthermore, they are being asked to vote to approve control of their company passing to Zhongjin Lingnan, with no sustainable plan being advanced for addressing the operational inefficiencies which are continuing at Broken Hill."
CBH added that it is still reviewing Perilya's target statement, and will announce its intentions prior to the stakeholders meeting in February.
Shares in CBH closed unchanged at 5.9c.
