China govt approves 51% stake in Perilya

Steel making giant Shenzhen Zhongjin Lingnan Nonfemet (Zhongjin) has received
Chinese government approval to take a 50.1 per cent stake in cash-strapped lead and
zinc miner Perilya Ltd for $45.5 million in cash.
Remaining conditions are approval by Perilya shareholders and Australia's Foreign
Investment Review Board.
The Perth company said in a statement on Monday that FIRB approvals were "in progress".
A general meeting of Perilya shareholders is slated for early February.
Perilya shareholders are also mulling a hostile $28.9 million all-scrip bid by
fellow lead and zinc miner CBH Resources Ltd, which closes on March 13.
Perilya has received an initial payment from Zhongjin of $10 million, which the
target described as a deposit.
It said the share placement and a related agreement to sell its Mount Oxide copper
exploration assets in Queensland to Zhongjin in certain circumstances may breach
CBH's bid conditions.
This would potentially entitle CBH to withdraw its takeover bid, "whether or not the
share placement to Zhongjin is approved", Perilya said.
Zhongjin's deposit is refundable within 20 business days if the remaining conditions
for the placement of 197.6 million Perilya shares to Zhongjin at 23 cents each are
not met.
If this happens and Perilya cannot repay the deposit, it will sell the Mount Oxide
project to Zhongjin for $15 million in cash.
Sources close to CBH said the deposit and placement indicated that Perilya's
financial situation was dire.
At the end of September, Perilya had no corporate debt but only $22.3 million cash
on hand.
Perilya's board this month advised its shareholders to reject CBH's offer, saying a
tie-up was unattractive because CBH had too much debt.
CBH had debt of about $190 million including convertible bonds at September 30.
Both companies, which abandoned friendly merger talks in July, have been hit by a
slump in zinc and lead prices.
Shares in Perilya and CBH were steady at 16.5 cents and 3.5 cents, respectively.