Merger no more
Wednesday, 1st September, 2010
A merger of the city's two mining companies was now most unlikely, according to CBH Resources.
The base metal miner ceased to be an Australian company on Friday when a takeover by its majority shareholder, Toho Zinc, was completed.
But it was not that long ago that CBH, along with miner Perilya and many mining analysts, believed a merger was the best outcome for mining in Broken Hill citing financial, operating and strategic benefits.
An almost 12-month long merger deal, a failed take over bid and two foreign companies later, CBH Resources managing director Stephen Dennis said the unification of CBH and Perilya could not look further away.
"I think that's unlikely. The fact is now that a merger is not possible because of the new ownership structure," Mr Dennis said.
"Toho ... own Rasp and they will own Endeavor."
Analysts long believed a tie-up between the miners made sense, potentially saving hundreds of millions of dollars.
The year 2008 was taken up by an attempt to unite CBH Resources and Perilya, a silver, lead and zinc miner, to form a globally significant producer of lead and zinc; first through an agreed merger, valued at $489 million, and then with an unsolicited CBH takeover of Perilya.
Early in 2008, both companies admitted they were in merger discussions.
But by the end of June, Perilya had withdrawn its support for the merger saying while it was logical to combine the companies, the offer was inadequate. Perilya cited a number of reasons including better exploration results for its projects and an expected delay to the Rasp mine. By the end of July the friendly merger was terminated.
In early October CBH announced plans for a hostile takeover of Perilya who, after urging shareholders to take no action, finally, in mid-December, told them to reject the offer.
One month later, on January 20, 2009, CBH announced it had decided not to proceed with the takeover citing concern for Perilya's financial position and "continuation of unsustainable cash losses" during a period of depressed metal prices.
The potential marriage of CBH and Perilya had ended.
Not long after, a deal with Chinese zinc producer Shenzhen Zhonjgin Lingnan Nonfemet saw it take the majority share of Perilya - now extended to 52 per cent - while a battle for CBH, between Belgian-based Nyrstar and Toho, ended with the Toho acquisition.
The underlying issue for the CBH/Perilya merger was operational efficiency; Perilya had infrastructure, including an under-utilised concentrator, that could be filled by material from CBH's Rasp mine.
But Mr Dennis said with the giant Japanese zinc producer Toho Zinc now in charge of CBH it was likely that separate plant would be built to accommodate its ore.
"We're more inclined to look at a processing plant here for Rasp - a dedicated plant - and on that basis I think that makes the prospects of some kind of merger extremely unlikely."
In its final report to the market yesterday, CBH announced it had made a full year after tax profit of $9.399 million.