merger of perilya and cbh resources · merger of perilya and cbh resources. ... (“perilya”) and...
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Important noticeThe purpose of this material is to provide general information about the proposed transaction between Perilya Limited (“Perilya”) and CBH Resources Limited (“CBH”). This material is not and does not constitute an offer, invitation or recommendation to subscribe for, or purchase any securities. Neither this material nor anything contained in it shall form the basis of any contract or commitment.
Reliance should not be placed on the information or opinions contained in this material. This material does not take into consideration the investment objectives, financial situation or particular needs of any particular investor. Any decision to purchase or subscribe for securities should only be made after undertaking an independent assessment and determination as to the information to be contained in the Scheme Booklet to be subsequently issued and after seeking appropriate financial advice.
No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness or correctness of the information, opinions and conclusions contained in this material. To the maximum extent permitted by law, Perilya, CBH and their affiliates and related bodies corporate, and their respective officers, directors, employees, agents and advisers disclaim any liability (including, without limitation any liability arising from fault or negligence) for any loss or damage arising from any use of this material or its contents, including any error or omission therefrom, or otherwise arising in connection with it.
Any forecasts and other forward-looking statements set out in this material are based on a number of estimates, assumptions and pro forma adjustments that are subject to business, economic and competitive uncertainties and contingencies, with respect to future business decisions, which are subject to change and in many cases outside the control of Perilya and CBH.
Any forecasts contained in this material may vary from actual financial results, and these variations may be material and, accordingly, neither Company nor their Directors can give any assurance that the forecast performance in any forecasts or any forward-looking statement contained in this material will be achieved. Neither Company undertakes to revise the material to reflect any future events or circumstances.
This material may not be lawfully published in some jurisdictions or may only be provided to certain persons and you must not view this material if to do so would be unlawful in your jurisdiction or may otherwise place either Company under obligations which it has not complied with.
All figures are expressed in Australian dollars unless stated otherwise.
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Agenda
1
2
3
Merger Summary for CBH Noteholders
Transaction Rationale
Indicative Timetable
Appendices
A Overview of Perilya
B Indicative Term Sheet
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Merger Summary for CBH Noteholders
Unanimous Board
Recommendation and Support of CBH’s Largest
Stakeholder
Merger unanimously recommended by CBH’s Board in the absence of a superior proposal and subject to Independent Expert concluding the merger is in the best interest of CBH security holdersToho (CBH’s largest shareholder (28.66%) and Noteholder (25.5%)) has publicly stated that it will support the merger in the absence of a superior proposal or material adverse change effecting Perilya or CBH
Implementation Scheme vote: 75% by value, 50% by number of CBH Noteholders votingInterdependent with CBH ordinary share scheme
CBH Noteholder Merger terms
Holders of CBH Notes (“CBH Noteholders”) will receive Perilya notes– $1,000 principal– 7.25% coupon– $1.95 conversion price reflective of the 3:1 exchange ratio offered to CBH Shareholders adjusted for the spin-out of
Kimberley Metals 1
– Full indicative terms available in appendix B
Notes: 1. Shareholder approval has been given to CBH to spin out certain non-core assets into a new company before the interdependent schemes are to take place, Kimberley Metals, that will be distributed to CBH shareholders post shareholder approval expected to take place 19 May. The value attributed to Kimberley Metals was based on the applicable accounting requirements and not a market value.
2. Not including impact of exercise of Perilya options issued as consideration to CBH shareholders and inclusive of additional shares issued through the conversion of Toho’s note.
Perilya’s shareholders will own 40.3% and CBH shareholders 59.7% of the Combined Group respectively 2
Significant balance sheet flexibility with 31 March 2008 pro forma cash of $247 million and indebtedness of $233 million (including $187 million in convertible bonds due in 2012)Approximately 491 million shares on issue upon completion of the interdependent schemes 2
Ownership and Capital Structure
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Transaction Rationale
1
Diversified operating profile and a stronger foundation for CBH Noteholders – Diversification supported by multiple cash flow producing assets
2
A different peer group – Globally significant zinc and lead producer3
An extensive operating & development portfolio – Advanced development portfolio with attractive commodity mix
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5
Enhanced Equity Value and Stronger Balance Sheet
Significant reserve and resource inventory
Value creation – Unification of Broken Hill ownership for the first time – Significant operational efficiencies
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Value Creation
Satellite PitsFlying Doctor
Potosi
North Mine Deeps
North Mine
Northern Boundary
Centenary
Western Mineralisation
Central Remnants
Southern Extension
Southern Operations
Southern Boundary
Perilya Lease Perilya LeaseCBH Lease
Unification of Broken Hill ownership for the first time - Significant operational efficienciesSignificant synergies to be realized through unification of mining leases
– $70 million in capital savings from the eliminated requirement for a dedicated mill at the Rasp mine
– Increased cash flow in FY09 and FY10 due to advanced development of Rasp
– Significantly lower milling unit costs from utilising spare capacity at Perilya’s Broken Hill concentrator
Expected to add material life to Broken Hill mining through efficient access to combined resources, elimination of tenement boundaries and access to remnant ore
Proximity between the two production centres should allow for increased flexibility regarding employees, pooling of common resources and reduction in corporate overhead across both sets of operations
10Diversified Operating Profile & a Stronger Foundation For Noteholders
Market Cap 1 $308 million (S&P/ASX 300)
$506 million (S&P/ASX 200)
CBH Standalone Combined Group
Notes: 1. Based on closing prices as of 2 May 2008 and the assumed 491 million shares outstanding in the combined group.
Enterprise Value $366 million $493 million
Debt $219 million $233 million
Debt / Mkt. Cap 71.2% 46.2%
Debt / EV 59.9% 47.4%
Net debt $58 million ($13 million)
Operating Assets 1 – Endeavor 3 – Endeavor, Broken Hill with Rasp and Flinders
The Combined Group will benefit from multiple cash flow producing assets that will diversify the risk of CBH Noteholders principal and coupon payment (Endeavor, Broken Hill – including Rasp and Flinders)
Given the significant decrease in the historical exchange rate, CBH shareholders will own 59.7% and Perilya shareholders 40.3% of the Combined Group respectively
Diversification supported by multiple cash flow producing assets
Negative Pledge Maximum additional debt A$110 million
Same as under CBH stand alone
Exchange Ratio (CBH to PEM Shares)
0.0x
3.0x
6.0x
9.0x
12.0x
May-07 Jul-07 Oct-07 Jan-08 Apr-08
Exc
hang
e R
atio
Offer Exchange Rate Historical Exchange Rate
Current Offer: 3.0 : 112 month average: 6.7 : 1
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0 100 200 300 400 500 600 700
Teck Cominco LimitedZinifex Limited
Falconbridge LimitedHindustan Zinc Ltd
Boliden ABXstrata
Volcan Cia Minera S.A.A.Anglo American plc
Combined GroupIndustrias Peñoles SA de CVCia Mineira de Metais (CMM)
GlencorePerilya Limited
Breakwater Resources LtdHudBay Minerals Inc.
Lundin Mining CorporationBHP Billiton
Southern Peru CopperMilpo
CBH ResourcesOmnium Nord Africa (ONA)
Grupo Mexico SA de CVInmet Mining Corp
Apex Silver Mines LimitedIvernia West plc
Agnico-Eagle Mines LtdNewmont Mining Corporation
Oxiana LimitedCompañía Minera Atacocha S.A.A.
Kumba Resources
Kt payable zinc0 100 200 300 400 500 600
BHP BillitonXstrata AG
The Doe Run CompanyTeck Cominco Limited
Minera VolcanGlencore
Combined GroupHindustan ZincWestern Mining
ZinifexIndustrias PenolesAnglo American plc
New BolidenPerilya Limited
Lundin Mining CorporationShenzhen Zhongjin LingnanYunnan Chihong Metallurgy
ZGH BoleslawMengzi Mining Industry Ltd
Omnium Nord AfricainHecla Mining
Solway Investment FundVotorantim
Grupo FernadiniGansu Nonferrous Metals
Exxaro ResourcesSouthern Copper (ex SPCC)
BuenaventuraBlue Note Mining Inc
CBH Resources
Kt payable lead
A Different Peer Group
Top 30 Global Zinc Producers
Source: Zinc data taken from AME and Lead figures taken from Brook Hunt.
The merger will create a globally significant and top 10 producer of zinc and lead
Pro forma annual production (based on 12 months to December 2007 and including 96,100 tonnes from Beltana) of:– 220,100 tonnes of zinc
– 71,700 tonnes of lead
Increased ability to compete for new opportunities including acquisitions
Top 30 Global Lead Producers
Globally significant zinc and lead producer
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An Extensive Operating & Development Portfolio
Perilya assets
CBH assets
Mount Oxide
Broken Hill
Beltana / Flinders Endeavor
Panorama
Newcastle Shiploader
Hera
Advanced development portfolio with attractive commodity mix
Australian based asset focus with low geopolitical risk
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Significant Reserve and Resource Inventory Mix
Reserves (contained metal) Resources (contained metal)
Combined Group Reserves split 1 Combined Group Resource split 1
Note:1. Zinc equivalency calculation based on spot metal prices as at 20 March 2008.2. Perilya JORC reserves and resources as at 30 June 2007. Mt Oxide as at 19 February 2008 Broken Hill resources reflect Flying Doctor upgrade as at 30 April 2008.3. CBH JORC reserves and resources as at 30 June 2007. Panorama as at 18 December 2007.
34%
49%
16%1%
Zinc
Lead
Copper
Gold32%
53%
15%
Zinc
Lead
Copper
Combined
Group
Zinc (kt) 814 1,355 2,169
Lead (kt) 555 573 1,128
Copper (kt) – 186 186
Gold (koz) – – –
Total Zinc equiv (kt) 1,466 2,666 4,132
Combined
Group
Zinc (kt) 2,175 2,946 5,121
Lead (kt) 1,537 1,432 2,969
Copper (kt) 203 267 470
Gold (koz) - 241 241
Total Zinc equiv (kt) 4,677 5,643 10,320
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CBH Directors Have Recommended the Note Scheme 1:
Value Creation
Increased, higher quality portfolio of assets Significant operational synergies and capital savingsAdditional material life to Broken Hill mining through efficient access to combined resources, elimination of tenement boundaries and access to remnant oreProximity between the two production centres should allow for increased flexibility regarding employees, pooling of common resources and reduction in corporate overhead across both sets of operations
Reduced Risk
Significantly enhanced credit profileStronger balance sheet with greater financial security and flexibilityMultiple operations increases operating strength and reduces risk
Globally Significant Longer Life Producer
Top 40 mining company listed on the S&P/ASX 200 Increased equity market scale aligns the combined company with a new set of peersImproved equity option value
1. In absence of a superior proposal and provided the independent expert determines the scheme is in the best interest of CBH Noteholders.
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Indicative Timetable
1
3
6
Announcement of proposed merger
Spin-out of Kimberley Metals to occur
CBH convertible note and ordinary share scheme meetings
Court approval and scheme effective date
26 March
2 May
Late July
Early August
2
4
19 May
CBH shareholders voted on capital reduction to approve separation of Kimberley Metals
Scheme booklet for proposed merger despatched
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Late June
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Appendix A: Background to PerilyaPerilya Limited is an S&P/ASX 200 company and a leading Australian base metals mining and exploration company
Perilya owns and operates the iconic Broken Hill zinc, lead and silver mine in New South Wales, Australia and the Beltana high grade zinc mine in South Australia
Perilya is in the top twenty of global producers for zinc and the top ten for lead production. Broken Hill is the world’s thirteenth largest zinc mine and the sixth largest lead mine
The company is strengthening its project pipeline with an exploration decline at the Potosi deposit in Broken Hill, exploration at the Mount Oxide copper deposit in Queensland and the Flinders Project in South Australia
Presently, Perilya is investing in the development of its three major projects located in the Broken Hill, Mt Isa and Flinders regions as well as exploration in the surrounding tenements
Perilya has a strong balance sheet with low debt levels and has actively sought growth opportunities through acquisition
For more details, visit www.perilya.com.au
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Appendix B: Indicative Term Sheet
Issuer Perilya Limited (ACN 009 193 695)
ConditionsTerm
Underlying Shares Ordinary Shares of the Issuer (the “Ordinary Shares”)
Ranking Senior unsecured
Coupon 7.25%
Principal $1,000 per bond
Maturity Date 3 May 2012
Conversion Price The conversion price will be 67 cents (and as adjusted in accordance with clause 6 of the terms of the CBH Notes contained in the Convertible Note Prospectus) multiplied by 3 as per the terms of the offer.
Issuer Call Option The Issuer may redeem all, but not some only, of the Bonds at their principal amount, together with accrued interest
(i) 3 years after Deemed Issue Date, if the Parity Value in respect of a Bond on each of at least 20 consecutive trading days ending not earlier than 5 days prior to the giving of notice of redemption is at least AUD$1,300; or
(ii) at any time if Conversion Rights shall have been exercised and/or purchases and/or redemptions effected in respect of 85 per cent. or more in principal amount of the Bonds originally issued; or
(iii) if a Change of Control occurs, within the period of 45 days after the end of the period of 30 days following the later of:a. such Change of Control; andb. the date on which notice of such Change of Control is given to Bondholders by the Issuer.
Tax Redemption Payments in respect of Bonds will be made without any withholding or deduction for or on account ofAustralian taxes, unless required by law. If withholding or deduction is required for or on account ofany such Australian taxes:
(i) the Issuer will be obliged to pay additional amounts subject to customary exemptions; and(ii) the Issuer will have the right to redeem the Bonds at their principal amount plus accrued interest subject to the right of
Bondholders to elect not to have Bonds redeemed and thereafter to receive all payments on the Bonds subject to withholding or deduction on account of relevant Australian taxation.
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Appendix B: Indicative Term Sheet (Cont’d)
Change of Control In the event of a Change of Control of the Issuer, Bondholders will have the right to:(i) put the Bonds to the Issuer at their principal amount together with accrued interest; or(ii) for 30 days following the Change of Control convert the Bonds at a Conversion Price calculated in accordance with the
following formula:COCCP = OCP/(1 + (CP x c/t)) where COCCP means the Change of Control Conversion PriceOCP means the Conversion Price in effect on the relevant Conversion Date (disregarding the application of this provision)CP means the conversion premium of approximately 32.5% (expressed as a fraction)c means the number of days from and including the date of the Change of Control to but excluding the Maturity Datet means the number of days from and including the Closing Date to but excluding the Maturity Date
A "Change of Control" occurs if:(i) an offer is made to shareholders to acquire the whole or any part of the share capital of the Issuer; or(ii) any person proposes a scheme of arrangement with regard to such acquisition, and more than 50% of the voting rights of
the issued share capital of the Issuer have or will become vested in the offeror, or any like or similar event occurs
In the event of a Change of Control of the Issuer, the Issuer will have the right to redeem the Bonds within 75 days after the later of the Change of Control and the date on which notice of the Change of Control is given to Bondholders by the Issuer.
ConditionsTerm
Dividend Protection
Investor protection in the form of Conversion Price adjustment in respect of all dividends and distributions
Events of Default Yes, in line with standard provisions, including:(i) if the Issuer defaults on its payment or other obligations under the Bonds; and(ii) liquidation of the Issuer or any Principal Subsidiary, except where all or part of the undertaking and assets of a Principal
Subsidiary are transferred to the Issuer or another Subsidiary of the Issuer.
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Appendix B: Indicative Term Sheet (Cont’d)
Cross Default There will be a cross default provision in respect of the Issuer and its Subsidiaries, subject to an AUD$10 million threshold or its equivalent in other currencies. Project Finance Indebtedness is excluded from the cross default provision. See clause 10(c) of Note terms."Project Finance Indebtedness" means future indebtedness incurred to finance the ownership, acquisition, construction, creation, development, maintenance and/or operation of an asset (whether or not an asset of the Issuer or any of its Subsidiaries), or any associated rehabilitation works, in respect of which the person or persons to whom any such indebtedness is or may be owed by the relevant borrower (whether or not the Issuer or any of its Subsidiaries) has or have no recourse whatsoever to the Issuer or any of its Subsidiaries for the repayment thereof other than certain limited types of recourse including, but not limited to any guarantee and/or indemnity by the Issuer or its Subsidiaries of such indebtedness or completion of construction or development of an asset.
ConditionsTerm
Negative Pledge The Issuer will not create or permit to subsist any Security Interest over its present or future assets to secure any indebtedness or guarantee or indemnity for borrowed money (other than for an amount of up to AUD$50 million in respect of off balance sheet financing of mobile mining equipment) in an aggregate amount in excess of (a) AUD$110 million and (b) the principal amount of all Bonds which have been converted or redeemed at any time and (c) the amount of equity share capital raised by the Issuer after the Implementation Date, unless the Trustee has been satisfied that:
(i) amounts payable under the Bonds are secured equally and rateably with relevant indebtedness; or(ii) such other security interest or guarantee or indemnity or other arrangement is provided in respect of amounts payable
under the Bonds either (i) as the Trustee deems not materially less beneficial to the Bondholders, or (ii) as shall be approved by an Extraordinary Resolution of the Bondholders.
If the market capitalisation of the Issuer exceeds AUD$750 million for a period of 12 months, the Negative Pledge clause ceases to apply.
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Appendix B: Indicative Term Sheet (Cont’d)ConditionsTerm
Anti Dilution Conversion Price adjustments upon, inter alia, share consolidations, share splits, spin-off events, rights issues, and reorganisations.Excluded from the Anti-dilution are Bonds the Company may issue through a subsequent issue within 90 days from the date of Issue, but only to the extent required to reach AUD$200 million in total proceeds including this Issue
Documentation To be substantially on the same terms as the Trust Deed and Terms governing the CBH Notes with amendments necessary to give effect to these terms and the Schemes
Trustee Expected to be - Trust Company Fiduciary Services Limited ACN 000 000 993 or trustee of equivalent standing chosen by the Issuer
Listing The Issuer will apply to list the Bonds on the Australian Stock Exchange Limited.
Governing Law Australia (NSW) Law