Japanese company seeks half of the Rasp Mine
Friday, 22nd January, 2010
By Stefan Delatovic
CBH Resources expects to be "quite a different company" by the middle of next year after a deal was made with Toho Zinc yesterday.
Toho, a Japanese company, is CBH's biggest shareholder with a 23.1 per cent stake. The deal signal's CBH's rejection of a takeover bid launched by Belgium company Nyrstar last month. In a statement, the CBH board said yesterday that they felt the Toho deal was superior.
If shareholders approve, CBH will sell a 50 per cent share in the Rasp Mine to Toho for $57.5 million and sell 50 million shares to them for $10 million. Toho will also offer cash and shares for CBH's available convertible notes, which would shrink the company's debt by $98.8 million, down to $22.6 million.
CBH General Manager of Corporate Affairs, Kevin Gallagher, said the deal gave the company the money to fund their share of the Rasp zinc and lead mine, now under development. CBH plans to open a small scale mine on the site by the middle of the year and, during its 18-month lifespan, begin production at a second, larger site which is expected to operate for 15 years.
The Rasp mine will be accessed through the bottom of the Kintore Pit and will mill ore left over from the previous operation.
Rasp will not be an open cut mine - any plans for that are years away - but material will be crushed on the surface. Approval has been given by the State Government. The Broken Hill City Council will consider their approval at a meeting next week, weighing it against community concern about dust levels. Mr Gallagher said yesterday's deal recognised the value of the Broken Hill resource, which he said CBH believed to be very high, but not recognised in the company's share price.
Toho's willingness to spend $57.7 million for a 50 per cent stake in Rasp implied an overall value of $115 million, Mr Gallagher said. The company was also buying shares at a premium, he said, in the belief that they were a good investment. Mr Gallagher said the deal would allow CBH to shed debt, gain flexibility and strengthen the balance sheet.
CBH's Cobar mine is also being expanded, so by the middle of next year, Mr Gallagher said CBH would benefit from two operational mines and look quite different. Once Rasp is up and running it will employ about 150 people - with 40 to 60 contractors needed during the set-up. A processing plant is also planned at a cost of $65 million.
Mr Gallagher said CBH was using a mine that had been worked before and that all stages would conform to approval and environmental constraints."The (Broken Hill City) Council is new and is taking into consideration the views of all parties. I think they're acting in a sensible manner. I do hope this doesn't hold the project up. We certainly don't plan to do anything that contravenes the environmental concerns," he said.