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    http://business.smh.com.au/broken-hill-to-unite-with-merger/20080222-1tuw.html

    Broken Hill to unite with merger
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    February 22, 2008 - 10:40AM

    ALL of the mining operations in Broken Hill could be controlled by one company for the first time in 130 years after Perilya and CBH Resources yesterday revealed they were in merger talks.

    The deal, which could be worth more than $750 million, would join Perilya's operating mines and plant in Broken Hill with CBH's mine under development.

    The managing director of CBH, Bob Besley, said the companies were still examining the best possible way of combining. But he indicated the likely outcome was for Perilya to make a scrip bid for CBH at a premium to the target's share price. ``Our shareholders would want to see some value out of it before they would do it,'' he said.

    It is understood Perilya has already run due diligence on CBH, but it might take a few weeks more for the companies to agree on the final price. CBH's largest shareholder, Toho Zinc, is believed to be supportive of the deal. Last year, it had pushed to oust the chairman of CBH, Jim Wall, over corporate governance issues.

    Other parties, including an international miner, have also been examining CBH's books in recent weeks.

    It is possible a Perilya offer for CBH could draw out another bidder. But it is understood combining the respective Broken Hill operations could provide $200 million of cost savings that would be impossible for another bidder to achieve.

    Perilya's general manager for sustainable development, Peter Eggleston, declined to comment on specifics of the deal. But he said there would have to be benefits for both parties.

    The Broken Hill properties owned by the two companies helped give birth to BHP Billiton, along with Rio Tinto's predecessor, CRA. But the region has never been owned by a single party.

    Perilya's plant has a significant amount of spare capacity and CBH is developing a new underground mine to be commissioned next year which could produce 30,000 tonnes of zinc and 25,000 tonnes of lead a year.

    An analyst said the deal would be sensible, particularly given each company has only one operation in production at present and both are ``mature, challenging and underground''.

    Along with its Broken Hill mine under development, CBH owns the operating Endeavour mine near Cobar. It also owns the Panorama project in Western Australia, which has yet to be developed.

    CBH shares closed 7c higher at 42c, while Perilya shares closed 9c lower at $1.085.
 
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