Struggling NSW miner, CBH Resources is to chop $100 million in costs from its budgets and halve its total staff numbers ahead of the planned merger with Perilya.
In a statement to the ASX, CBH said undertaking major corporate and operational restructuring is aimed at positioning the company for a more sustainable future and to insulate the Company against the recent decline in metals prices.
The news saw the shares in both CBH and Perilya rise.
CBH shares rose a cent to 26c on the news, Perilya shares rose 4c to end at 82c.
The company’s major products are silver, lead and zinc from the old Elura mine at Cobar (now called Endeavour) and at the Rasp mine in Broken Hill. Lead and zinc prices have fallen sharply in recent months.
The company is also focused on the Panorama prospect in the Pilbara region of WA for copper and zinc.
CBH said that at the Endeavor Mine, the total workforce (inclusive of contractors) has been cut from 602 to 382 personnel, a reduction of 220 people or 37% of the total workforce.
"This action will restore employment at Endeavor to approximately the same level which existed prior to the recent capital works program.
"Additional personnel reductions of 27 have taken place in the Company outside of Endeavor, including at head office in Sydney where only a small corporate team now remains."
The company said the workforce restructure, when fully implemented, "is expected to result in annual capital and operating cost reductions of approximately $ 100 million".
CBH said the moves include the completion of a major capital investment program at Endeavor and Rasp mines in NSW, and the restructuring program is unrelated to the proposed merger with Perilya Limited.
"We expect to update shareholders shortly on progress with the merger arrangements."
CBH Managing Director Stephen Dennis said while the workforce restructuring was regrettable, these measures were necessary to establish a foundation for the company’s future during the existing difficult lead and zinc market.
CBH told the ASX that the extensive capital works program undertaken at Endeavor over the past 12 months is nearing completion.
"Over $90 million has been spent on projects during 2007/8 which are designed to increase mine output, improve mine grade and lower operating costs.
"Commencing in the current quarter, Endeavor is well positioned to achieve sustainable increases in mine production, average ore grades, and mill throughput. This is expected to deliver increased metal in concentrate in 2008/09.
"Total capital expenditure for Endeavor will be significantly lower in 2008/9, and is currently estimated at $14 million," CBH said.
"The workforce reductions being implemented at Endeavor are not expected to impact adversely on production levels in the mine. Production at Endeavour is expected to increase in the next 12 months from approximately 1.05 million tonnes in 2007/8 to 1.3 million tonnes next year, also at higher ore grades."
At the Company’s Rasp Operations in Broken Hill, the development decline being constructed to provide access to the Western Mineralisation from the Kintore Pit will cease development at its current depth of approximately 350 vertical meters below the surface.
The performance of contractor, Macmahon Holdings Limited "which has undertaken this work on behalf of CBH has been excellent, and Macmahon will proceed immediately to demobilise operations at Rasp".
"At its current level the Rasp Decline will provide access to three individual working levels within the Western Mineralisation orebody and access to the east into high grade lead lode remnants. The work completed allows the development of 70% of the first two years of planned production from the Western Mineralisation.
"Work to secure the necessary government approvals to commence mining operations at Rasp will continue.
"With the demobilisation of the majority of contractors across the site, the Endeavor workforce will assume responsibility for many of the activities that were previously undertaken by contractors. This includes activities in the mine such as backfilling, shotcreting, production drilling, service work and charging. These changes are also expected to generate significant operating cost savings."
"CBH’s said its exploration program in 2008/9 will be reduced. The Company’s exploration budget next year will be $2.5 million, down from $14 million in the current year. CBH will no longer maintain a Sydney-based team of geologists, and responsibility for ongoing exploration programs has been assigned to each of the main operations.
"It is planned to maintain an exploration focus around the Endeavor and Broken Hill regions in NSW, and around the Panorama project in WA. The potential for further discoveries in these areas remains high."
"CBH will focus on delivering improved performance at its Endeavor Mine, and on developing its key projects at Broken Hill and Panorama. The overall cost base of the Company has been substantially reduced, and this has been assisted by the spin out of CBH’s early stage evaluation projects into Kimberley Metals during May.
"The rationalisation of growth projects and cost structure in CBH has been essential to securing a more sustainable future for the Company. We are now well positioned to deliver a step improvement in our operational performance, and we also retain strong growth potential through the development of key projects."
