Cash-strapped zinc and lead producer CBH Resources Ltd has secured the medium-term future of its Endeavor mine near Cobar after striking a spin-off deal involving the sale of its Hera gold and base-metal tenements near Nymagee to Chinese-backed YTC Resources.
Under the terms of the yet-to-be-approved $12 million sale YTC, which is 22.75 per cent owned by the Yunnan Tin Group of China, will fast-track development of the potentially rich Hera deposit with ore to be trucked 150 km to Endeavor for processing. CBH will utilise the sale proceeds plus a 5 per cent royalty on future gold production to focus on its core base-metal projects including further development at Endeavor.
Last year’s global economic crisis and slump in mineral prices forced CBH to drastically downsize its work force from 600 to 120 and reduce production at Endeavor by 50 per cent.
The company also placed its Rasp silver, lead and zinc project in Broken Hill on care and maintenance.
At the time, CBH added its name to the growing list of Australian mining companies considering the introduction of a major Chinese shareholder.
The Financial Review reported CBH as being in talks with as many as three Chinese groups with the company also exploring a couple of other options in parallel.
CBH managing director and CEO Stephen Dennis last week announced details of the acquisition by YTC Resources of the company’s under developed gold and base-metal Hera deposit and Nymagee mineral tenements south east of Cobar.
“YTC’s intention is to rapidly develop a gold and base-metal project at Hera with ore from Hera to be trucked to CBH’s Endeavor Mine for processing,” Mr Dennis said.
“The Hera tenements are located 150 kilometres to the south of Endeavor by road.
“YTC also proposes to fund the purchase and construction of a gravity separation circuit at Endeavor designed for the recovery of coarse gold and silver.
“Ore from Hera would be processed at Endeavor under a tolling arrangement to be negotiated with CBH.”
Mr Dennis said CBH would utilise the proceeds from the sale of Hera to focus on its core projects including mine development at Endeavor.
He also expressed confidence in the YTC project team’s plan to fast track the development of Hera with the support and expertise of its major shareholder, Yunnan Tin Group of China.
“Under the sale agreement with YTC, CBH is to be paid a non-refundable deposit of $1 million with the balance of the purchase price to be paid within 90 days subject to the receipt of various approvals including Australia’s Foreign Review and YTC shareholder approval, if applicable,” Mr Dennis said.
“CBH is to be paid $11 million for the Hera tenements which it wholly owns and an additional $1 million for its 80 per cent of the Nymagee Joint Venture tenements.
“CBH will also be paid a
royalty of 5 per cent of the value of the first 250,000 ounces of gold ore sales produced from Hera.”
YTC chief executive Rimas Kairaitis described the Hera and Nymagee tenements purchase as providing new opportunities for the company’s growth plan and a target for future larger scale mineral acquisitions in Australia.
He said YTC had been talking to CBH for the past six months about the potentially rich Hera deposit near Nymagee.
“We see it as a good fit for our NSW based company and a project that can be brought into production quickly,” he said.
“We have a very aggressive company growth strategy and will continue to look for additional acquisitions.”
According to a business report in the Australian newspaper Yunnan Tin Group which is the largest global producer of tin, listed as YTC Resources on the Australian stock exchange in May 2007.
Yunnan general manager Wenxiang Gao also became chairman of YTC after the two companies formed their strategic Australian partnership.
“The Foreign Investment Review Board will have to rule on the acquisition but because it is an exploration project, which is likely to result in significant investment in the area, no significant hurdle is expected,” the newspaper reported.
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