Broken Hill Operation - Resizing and Closure of Hedge Book
21 August 2008
Perilya (ASX code: PEM) advises it has completed an extensive review of its Broken Hill zinc, lead and silver operation and implemented a plan to resize the operation in light of current low metal prices. As a result of this review, production at the Broken Hill Operation will be focused on a lower tonnage profile around mining remnant pillars and stopes with low development requirements in the Southern Operation. The North Mine and Potosi exploration decline will be placed on care and maintenance. These operational changes are aimed at ensuring the Broken Hill Operation maintains a production level that is financially viable and allows the operation to weather the current low metal prices. The Broken Hill Operation will be well positioned to re-establish increased production and profitability in the future when metal prices increase.A summary of the production and operational changes include: - A reduction in milled tonnage from 1.8 to 0.95 million tonne per annum ('mtpa'), with annual production of approximately 55,000 tonnes of contained zinc and 50,000 tonnes of contained lead.
- Future ore production will focus on the utilisation of stopes that are currently available, or require minimal development, and the brining forward high grade pillars that were originally planned to be mined in the latter years of the Life of Mine Plan.
- Exposure to spot prices, with hedging restricted to QP hedging and the use of option contracts.
- Reduction in manning levels by approximately 440, at a total cost of $20 million.
- Lower capital and development expenditure for FY09 forecast at $25 million reducing to $15 million in FY10.
- Lower exploration expenditure within the Broken Hill region.
- Further cost reductions at the corporate head office..
- Subject to an improvement in metal prices and based on known mining inventories, the Southern Operations can run for at least a further 7 years. In addition, there are significant additional mineral inventories also available at Potosi, North Mine, Flying Doctor, Pinnacles and other regional deposits.
In conjunction with the resizing, Perilya has closed-out its hedge book realising $60.3 million in cash. The hedge book was closed to realise its inherent financial value and to strengthen the company's balance sheet during this period of low metal prices.Patrick O'Connor, Perilya's Executive Chairman, said, "The resizing at the Broken Hill Operation is prudent, conserves cash and positions the operation for the future. The company is confident that the Broken Hill Operation can be sustained to maintain a level of continuity of production and one that is financially viable at current metal prices for at least the next 2 to 3 years without significant compromise to the longer-term life of mine.""Should metal prices increase in the future, we will be in a strong position to ramp-up production at the Broken Hill Operation and to utilise the full potential of the Broken Hill concentrator with ore sources from the Southern Operations, Potosi, the North Mine and Flying Doctor," he said."Regrettably, the lower production rate necessitates a reduction in our workforce from 760 to 320 employees. The affected employees will be provided with their full entitlements and supported in the transition. The decision to reduce our workforce has not been taken lightly and we are mindful of the impact upon individuals, their families and the community. We firmly believe that this is the best option to ensure continuity of operations and to preserve the mine for the long-term benefit of the community and the shareholders." he added."Perilya is in a sound financial position with cash reserves and low debt to weather the current period of low metal prices," he added.Further details on the resizing at the Broken Hill Operation, the closure of the hedge book and future strategic intent is set in detail in the Company ASX and Media Announcement. For further information:Investors: Patrick O'Connor Media: Warrick Hazeldine / Annette Ellis
Executive Chairman Purple Communications
Phone: +61 8 6210 2000 Phone: +61 8 9485 1254 / 0417 944 616
Shareholders: Darryl Edwards
Company Secretary
Phone: +61 8 6210 2000
Background to Perilya
Perilya Limited is a leading Australian base metal mining and exploration company. It is an S&P/ASX 200 listed company. Perilya owns and operates the iconic Broken Hill zinc, lead and silver mine in New South Wales, Australia and the Beltana high grade zinc mine in South Australia. The company is strengthening its project pipeline with an exploration decline at the Potosi deposit in Broken Hill, exploration at the Mount Oxide copper deposit in Queensland and the Flinders Project in South Australia. Perilya has a strong balance sheet with low debt levels and is actively seeking growth opportunities through acquisition.
For more details, visit www.perilya.com.au
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Perilya Limited
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PRODUCER |
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CODE : PEM.AX |
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ISIN : AU000000PEM8 |
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Perilya Ltd. is a zinc and lead producing company based in Australia. Perilya Ltd. produces zinc, lead, silver in Australia, develops cobalt, copper and silver in Australia, and holds various exploration projects in Australia. Its main assets in production are BROKEN HILL - POTOSI and BROKEN HILL in Australia, its main asset in development is MOUNT OXIDE in Australia and its main exploration properties are ROCKHAMPTON, BROKEN HILL EXTENDED, BROKEN HILL SOUTHERN EXTENSIONS, FLYING DOCTOR, NORTHERN LODES, PINNACLES (BROKEN HILL EXTENDED), FLINDERS and BROKEN HILL DISTRICT in Australia and TAMPANG in Malaysia. Perilya Ltd. is listed in Australia and in Germany. Its market capitalisation is AU$ 184.1 millions as of today (US$ 162.7 millions, € 119.3 millions). Its stock quote reached its highest recent level on January 05, 2007 at AU$ 5.80, and its lowest recent point on November 28, 2008 at AU$ 0.09. Perilya Ltd. has 526 075 563 shares outstanding. |