China’s number three zinc miner to acquire Aussie Perilya

21 September 2013 | 13:35 Code : 21896 Geoscience events
Perth-based miner Perilya (ASX:PEM), which owns the famous Broken Hill lead-zinc....

Perth-based miner Perilya (ASX:PEM), which owns the famous Broken Hill lead-zinc-silver mine that gave birth to BHP Billiton, confirmed Wednesday it had received a takeover offer from its majority shareholder, China-owned zinc miner Zhongjin Lingnan.The Asian country’s number three zinc producer is looking to buy Perilya in a deal that values the mining company at just under A$270 million, much lower than the miner’s share price in January, when falling commodity prices began hurting the stock.However, Zhongjin’s offer represents a 59% premium to the stock’s closing price on August 30, when Perilya went into a trading halt on the Australian Stock Exchange quoting a "potential control transaction.”In a press release, the Aussie firm said its independent directors would unanimously support the proposal if an independent report found the deal to be in the best interest of minority shareholders, and no other offers emerged.Zhongjin Lingnan first bought into the Australian firm in early 2009 through a share placement and strategic alliance agreement, which included financial support during the global financial crisis and access to Zhongjin’s market intelligence on China.In October last year the Land and Environment Court found that Perilya’s three mines in Broken Hill, located west of outback New South Wales, were worth $5.9 million rather than the $21 million they had been valued at by the Valuer-General.Earlier this month, Australia’s Supreme Court ruled that both the Valuer-General and the mining company made errors in working out the value of Perilya’s mines in Broken Hill.The Australian mining company said it expected shareholders to vote on the proposal at a meeting in December.BHP is also working on completing the Broadmeadow mine extension before year-end and, in July, it cancelled the sale of its Gregory Crinum mine after making operational improvements.Australia’s coal sector has been struggling under lower commodity prices, high costs, union disputes and even flooding in recent years. All factors that cost the alliance important market share.However, CEO Andrew Mackenzie said last month that the metallurgical coal business has returned to profitability, thanks to several cost cutting measures.  A big part of them was achieved by dismissing mining contractors, applying efficiency measures and reducing in the number of days lost to strikes.BHP’s combined coal business, headquartered in Brisbane, includes 20 operations around the world and a workforce of approximately 30,000 people.


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