Mining extra capital: Perilya (PEM) 51.5c,

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    Mining extra capital: Perilya (PEM) 51.5c, CBH Resources (CBH) 10c CRITERION: Tim Boreham From: The Australian November 17, 2009 12:27PM Increase Text SizeDecrease Text SizePrintEmail Share

    Add to DiggAdd to del.icio.usAdd to FacebookAdd to KwoffAdd to MyspaceAdd to NewsvineWhat are these?WHAT does a lead and zinc miner do when global prices for these metals have risen 134 per cent and 90 per cent, respectively, since the start of the year? It raises more dough, of course.

    Broken Hill stalwart Perilya this morning said it would pass the hat for $55 million via an underwritten, one-for-three rights issue.

    But at least the 33 per cent expansion of the share base is being done at a modest 16 per cent premium to the share price (the 42c offer price is a 16 per cent less than the five-day average ahead of last night's close).

    In February, Chinese miner Zhongjin Lingnan paid 23c a share ($45.5m) for a 50.1 per cent Perilya stake.

    But back then you didn't quibble about price when the alternative was financial oblivion.

    Zhongjin will average up its entry price by participating in the raising and thus maintaining its controlling stake.

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    Perilya is vague about how the funds will be used, but there's a number of development opportunities in its existing portfolio. These include the satellite bodies close to Perilya's main Broken Hill ops (including Potosi and Flying Doctor), the Flinders Project near Leigh Creek in South Australia and Mt Oxide (a 220,000 tonne copper project near Mt Isa).

    Perilya has a far more presentable case to investors these days, having done the usual slashing to get its cash costs down to US38c a pound in the September quarter. This compares with the current zinc price of $US1.02 lb.

    A year ago Perilya was citing cash costs of $US1.36 against a net averaged received price of US87c lb, the result being: misery.

    Perilya's revival compares with the fortunes of Broken Hill bed-fellow CBH Resources, whose share price continues to lag the overall market.

    Perilya and CBH took turns at trying to take each other over, the objective being to reap cost benefits from a continuous seven-kilometre lode (CBH's deposit lies between Perilya's Broken Hill operations).

    Perilya CEO Paul Arndt also refers to ``additional projects which complement existing production from Broken Hill and Flinders''.

    Perhaps it's time to for Perilya to use its scrip firepower to put CBH out of its misery, although CBH's 28 per cent Japanese owner Toho Zinc probably is thinking along those famous 30-year time lines and has other ideas.

    How about a joint venture then?

    Criterion had Perilya as a spec buy at 38.5c and CBH as a hold at 9.3c in early September.

    There's perhaps more upside now in CBH than Perilya so we'll call CBH a speculative buy and Perilya a hold.

    borehamt@theaustralian.com.au

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