CBH managing director Bob Besley told MiningNews.net the company would need to spend less than $2 million to tack a gravity circuit onto its Endeavour processing plant in New South Wales in order to recover gold in the Hera ore.
“We will need to put in a gravity circuit to pick up 50-60% of the gold as free gold, the rest of it finishes up in the concentrates,” Besley said.
“It’s a very low capital cost for us to put it into production so it’s actually worth quite a lot more to us than it is to someone trying to do a stand-alone project and that was the driver behind the deal with Triako.”
CBH intends to truck the ore some 150km by road to Endeavour, a scenario that was supported as the most economic in Hera’s pre-feasibility last year.
The pre-feasibility concluded toll treating was the best option for the Hera ore. As a result, Triako has had a number of interested companies in the region using a data room it set up for potential suitors in October last year.
Triako managing director Dr Angus Collins told MiningNews.net he was unable to disclose who the other interested companies were.
The Hera resource is currently 1.94 million tonnes grading 6.7 grams per tonne gold, 2.8% zinc, 2.5% lead, 0.2% copper and 14gpt silver, though Besley said he believed there was plenty of potential for growth. CBH expects to put an exploration decline in at Hera in order to better assess the upside with future drilling.
Outside of Hera, Besley said there was also vast potential in Triako’s ground holding in the southern Cobar Basin of NSW.
“There are large geophysical anomalies that are hardly tested along strike and several others in other parts of the (Cobar) Basin so Triako have got a very strong exploration position,” Besley said.
CBH has offered Triako shareholders 3.5 CBH shares for each Triako share.
In addition, Triako shareholders have been offered a 1c per share dividend and an in specie distribution of one Ausmelt share for every 3.6 Triako shares held.
Triako holds a sizeable stake in ASX-listed smelting technology company Ausmelt. Besley said the Ausmelt holding does not fit in with CBH and, as such, was being offered to Triako shareholders.
Based on yesterday’s closing price of 50.5c for CBH and 80c for Ausmelt, the total offer values Triako at $2.00 per share.
CBH already owns 7.25% of Triako’s issued capital and has made pre-bid agreements with companies associated with Triako directors Geoff Lord, Tom Klinger and Kevin McCann.
The pre-bid agreements, partially subject to Foreign Investment Review Board approval, will see CBH’s holding in Triako increase to 19.99%.
Triako’s directors have endorsed the offer in the absence of a superior bid.
CBH’s bid also includes a $625,000 break fee clause, which Triako is liable to pay CBH should another offer emerge or Triako’s directors change their recommendation for any reason other than a “material adverse change in CBH’s prospects”
Meanwhile, CBH has tied up a life-of-mine off-take deal from Endeavour with Japan’s Toho Zinc.
Toho has agreed to purchase all of Endeavour’s zinc concentrate from January 2009 at prevailing Asian benchmark terms. Currently Zinifex takes 50,000t of zinc concentrate from Endeavour with the balance available to Toho. Zinifex’s deal expires at the end of 2008.
Toho has provided CBH with $30 million, with $15 million in the form of a “soft” five-year loan at an interest rate of 2% and the remaining $15 million as a five-year unsecured convertible note, also at 2% interest.
The deal is subject to shareholder approval and finalising of documentation, expected in the next six weeks.
Shares in Triako were up 35c (25.6%) at $1.72 and CBH shares were off 2.5c (almost 5%) at 48c during midday trade.
