Australia zinc miners Perilya, CBH in merger talks

By James Regan

SYDNEY (Reuters) - Australian zinc miners Perilya Ltd (PEM.AX: Quote, Profile, Research, Stock Buzz) and CBH Resources Ltd (CBH.AX: Quote, Profile, Research, Stock Buzz) said on Thursday they had had discussions about a potential merger, but cautioned no agreement was imminent.

CBH stock jumped as much as 22 percent on the news, while Perilya slipped 5.5 percent after climbing sharply earlier in the week. Perilya has a market capitalization of around A$360 million ($334 million). CBH is valued at A$345 million.

The talks come as Perilya and CBH take steps to diversify away from ageing zinc mines by adding other commodities to their activities, and amid forecasts for declining zinc prices.

"It would not surprise me to see them merge," said Tom Sartor of ABN AMRO in Brisbane. "It diversifies both companies' risks from single, relatively typical mines to a broader portfolio," Sartor said.

Perilya is looking to develop a new copper mine in eastern Australia while CBH Australia wants to dig a copper and zinc mine in Western Australia.

CBH said only that it was holding confidential talks with Perilya centering on getting the most out of each companies' zinc mines in the Broken Hill region in the eastern state of New South Wales.

"No formal agreement has been reached nor is such an agreement inevitable," Perilya said in a statement.

Finding merger and acquisition opportunities was proving a challenge for Perilya because of competition from other suitors, Perilya's chief executive Len Jubber said back in October.