Aussies merge to form serious lead-zinc producer

 Perilya and CBH Resources will merge their businesses to create a globally significant producer of both lead and zinc. The merger will be implemented via interdependent schemes of arrangement for the acquisition of all the CBH ordinary shares and CBH convertible notes by Perilya and will result in the Broken Hill line of lode having a single owner for the first time in its history resulting in material operational efficiencies.

The combined group will have a more flexible and diversified production base through multi-mine operations at Broken Hill, Endeavor and Flinders and will have a strong development pipeline including the Panorama and Mount Oxide projects and the Hera deposit, according to Perilya.

Prior to CBH shareholders voting on the merger, certain pre-development assets of CBH including Mineral Hill, Sorby Hills and Constance Range will be separated into a new company, Kimberley Metals, and its shares will be distributed to CBH shareholders by way of capital reduction.

Under the terms of the merger, CBH shareholders will receive:

  • 1 Perilya ordinary share for every 3 CBH shares
  • 1 Perilya option for every 20 CBH shares
  • Shares in Kimberley Metals, expected to be approximately 1 Kimberley Metals share for each 9.2 CBH shares.

Based on the volume weighted average of the trading prices on ASX of Perilya and CBH for the month leading up to and including 19 March 2008, and the value of the Perilya option, the merger would provide a premium to CBH shareholders of approximately 27%.

In the absence of a superior proposal, the merger was unanimously recommended by the board of CBH. CBH’s directors were to vote all the shares they personally held in favour of the deal.

Toho Zinc Co, CBH’s largest holder of shares and CBH Notes, has indicated that it supports the merger in the absence of a superior proposal and any material change in circumstances.

Patrick O’Connor, Perilya’s current Chairman, will become Chairman of the combined group. Stephen Dennis, Jim Wall and a representative of Toho will join the board of the new company. The senior management team of the combined group will be led by Stephen Dennis, currently Chief Executive Officer of CBH with the remainder of the company management to be drawn from the management talent of both companies.