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Revised Proposal for CBH Resources may thwart Toho Zinc


by Ross Louthean, Mineweb.com

CBH Resources which has the Endeavour mine near Cobar and the Rasp decline mine development in the heart of Broken Hill's Line of Lode further west in New South Wales must now make a decision on what to do about a shareholders meeting called to consider a takeover from key shareholder Toho Zinc Co on March 30.

CBH said that a decision to proceed with the March 30 meeting will be made shortly and, in the meantime, a committee of directors independent of Toho board members were evaluating the Nyrstar offer.

The company had earlier spurned a takeover bid from Nyrstar of A13.5 cents/share but was now reconsidering a A19.5c/share bid from Nyrstar, however, Nyrstar's chief commercial officer Erling Sorenson said in a letter now released by CBH that it needs to know that the Toho deal EGM will not go ahead. Nyrstar also wants a response to its offer by next Monday and CBH said a "preliminary response" would be made.

The new bid values CBH Resources at $A213.45 million (US$196.15 million) which is a shadow of what the company was worth at the beginning of 2008 and the later global financial crisis hit the zinc price in particular for a six. Like so many zinc producers CBH Resources suffered from changed mining economics, similar to established Broken Hill miner Perilya Ltd (ASX: PEM) which had to rationalise operations and bring in a partner.

A letter from Sorenson to CBH chief executive Stephen Dennis said that Nyrstar would also require a separate scheme of arrangement on 100% of CBH's convertible notes at no more than 75% of their face value.

That deal could involve cash payments to note holders or the issue to them of Nyrstar shares.

He also told Dennis there was no certainty under the Toho offer that the Rasp mine would be developed and "even if it is developed, it is unclear how CBH would fund its 50% share of the estimated project capital given the limited institutional ownership of CBH.

Earlier this month CBH released results on new drilling in the Rasp sector as part of two separate quests - to drill the upper 50 metres of the resource model and to test three crown pillars in the old workings.

In the upper levels 10 of 12 holes completed showed strong results, particularly high grade silver, while the Crown pillar targets gave a series of significant intercepts with two lode sections in one hole providing 9m @ 10.2% zinc, 9.4% lead, 292 grams/tonne silver and 3m @ 15% Zn, 13.5% Pb and 736 g/t Ag.

Rasp already has a mineral resource of 16.5 million tonnes @ 6.6% Zn, 5.1% Pb and 89 g/t Ag, including a Main Lode remnants resource of 3.6 Mt @ 11.4% Zn, 10.6% Pb and 249 g/t Ag.

Nyrstar envisaged putting forward a proposal that would result in cancellation of all of the CBH options which are on issue on terms which are consistent with the consideration for CBH ordinary shares.


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