CBH Resources (CBH.ASX) and Perilya Mines (PEM.ASX)

CBH Resources is a growing producer of base metals with a number of advanced projects throughout Australia, as well as some $178mil in cash to fund capital expenditure which will expand their earnings power. There is no question that those plans look less appealing than they did 12mths ago since metal prices fell. But with such great projects, still high prices, 24% hedging in place and huge cash reserves, CBH have alot of capacity to expand mine life through more exploration. Their asset holdings are strategically very strong. With a market capitalisation of $353 million, and $179mil in cash, their mine holding are undervalued.

I think it is very likely that discussions between Perilya Mines (PEM.ASX) and CBH will result in a merger of the two companies. There are a number of reasons to think this transaction will proceed:
1. Both companies share alot of synergies
2. The executives of both companies have a long history
3. The CBH & Perilya operations at Broken Hill are closely intertwined, and the East-West spread of operations even makes sense since Perilya in Perth based and CBH is in Sydney.
4. A merged entity would command a significantly greater market premium that the separate entities.
See my discussion forum for these two companies - Perilya and CBH Resources.
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Andrew Sheldon www.sheldonthinks.com