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December 18, 2007 |
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ZINIFEX LTD: Allegiance Offer Cues Fitch to Affirm BB+ Rating Fitch Ratings has affirmed Zinifex Limited's 'BB+' Long-term foreign currency Issuer Default Rating (IDR), following the announcement of an all cash offer for Allegiance Mining NL (Allegiance). The Outlook is Stable. Allegiance is a nickel exploration and development company. Its major asset is the underground Avebury nickel mine located close to Zinifex's Rosebery mine in Tasmania. The Avebury mine is near-production with first ore scheduled for Q108. Initial production is forecast at a rate of 8,500 tonnes of nickel in concentrate with a mine life of at least nine years. Concentrate will be shipped off to Jinchuan Nickel Group of China via an offtake and partnership agreement. "Fitch regards the acquisition of companies such as Allegiance, which will grow and diversify the business, as beneficial to Zinifex's creditors compared with the alternative of returning cash to shareholders," commented Maurice O'Connell, Director in Fitch's corporate team based in Sydney. "The diversification from Zinifex's historic narrow zinc/lead focus into nickel, the near-production nature of the Avebury asset, its low cost base and potential for expansion are all positives," added Mr. O'Connell. Zinifex has offered AUD0.90/share, to be increased to AU$1.00/share if Zinifex acquires more than 30%, or if the Allegiance Board accepts the Offer. This prices Allegiance at about AU$800 million based on AU$1.00/share. Zinifex has shown very strong cash flow generation in the last two years as a consequence of buoyant zinc and lead prices. Net cash from operating activities totalled AU$1.58 billion in the financial year ending June 2007. Zinifex's cash flow was further enhanced by the divestment of its smelting operations in October 2007 when it combined its smelting operations with those of Belgium based Umicore SA to form Nyrstar NV and received over AU$1.7 billion from the Nyrstar IPO. Zinifex has over AU$2.0 billion cash available for acquisitions or to return to shareholders. As at June 30, 2007 Zinifex had gross debt of AU$136 million. Zinifex is one of the world's largest zinc and lead producers. About Zinifex Ltd. Zinifex Limited, one of the world's largest integrated zinc and lead companies -- http://www.zinifex.com/ -- is headquartered in Melbourne, Australia. The company owns and operates two mines and four smelters. The mines and two of the smelters are located in Australia and supply the growing industrial markets of the Asian-Pacific region, including China. The company also has a zinc smelter in the Netherlands and the United States. The company sells a range of zinc metal, lead metal, and associated alloys in 20 countries. More than 80% of the company's products are distributed outside Australia, particularly in Asia, which is experiencing significant growth in construction activity and vehicle production. Zinc is used for steel galvanizing and die-casting and lead for lead acid batteries used mainly in cars and other vehicles. |
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