Toho Zinc Loans CBH Resources A$ 40M for Ore Expansion

Toho Zinc announced on Wednesday the firm finances CBH Resources of Australia, Toho Zinc’s affiliate company, with A$ 40 million (approximately 3 billion yen). CBH Resources plans to utilize the fund for output expansion of Endeavor mine in Cobar, New South Wales, Australia and new development of Rasp mine in Broken Hill, New South Wales.

Toho Zinc loans CBH Resources A$ 40 million with annual 5% interest and 3-year repayment term. The securities for the finance are Rasp mine, which is under development now, and shiploader facilities in New Castle area, those which will be released after full repayment.

There is an option that CBH Resources repays A$ 10 million and transfers 50% equity in Rasp mine to Toho Zinc as a substitution of the rest repayment. In this case, Rasp mine development will become controlled by a fifty-fifty joint venture company between CBH Resources and Toho Zinc. Another option is that CBH Resources offers 72.7% equity in Rasp mine to Toho Zinc as a substitution for full repayment.

CBH Resources also implements new share issue to existent shareholders living in Australia and New Zealand. A shareholder is permitted to purchase CBH Resources’ new share at 10 cents, set 26% lower than CBH Resources’ averaged share price in the latest month, to maximum total A$ 15 million. After the subscriptions are fixed, Toho Zinc and other major investors will become able to subscribe for new shares at the same price.

In the case that Toho Zinc exercises a subscribing right, Toho Zinc’s equity in CBH Resources won’t change from current 28.6%. If Toho Zinc doesn’t subscribe for the new shares, Toho Zinc remains the top shareholder in CBH Resources with above 22% equity.

Toho Zinc has purchased Endeavor mine’s all ores to consume at Annaka smelter, Gunma, Japan. Annaka smelter produces electrolytic zinc. Endeavor mine’s ore accounts for one fourth in Annaka smelters’ total material consumption.

CBH Resources has reduced crude ore production at Endeavor mine to 420,000 tonnes per year along the market decline since autumn 2008. The concentrate output becomes 55,000-60,000 tonnes, which contains zinc at 50%. However, the firm currently plans to raise crude ore output to 850,000 tonnes per year and concentrate output to 100,000 tonnes per year when zinc market price is recovering.