zinifex offer 1.00 for allegiance mining

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17 December 2007
Zinifex Offer for Allegiance Mining
Highlights:
• All cash Offer for Allegiance
• Two tiered pricing – A$0.90 per Allegiance share, increasing to
A$1.00 per Allegiance share if Zinifex acquires more than 30% or if
the Allegiance Board recommends the Offer
• Zinifex’s Offer represents a significant premium over Allegiance’s
last closing price and 1 month VWAP
Zinifex Limited (ASX: ZFX.AU) (“Zinifex�) is pleased to announce an off-market
all cash takeover offer (the “Offer�) for all of the issued ordinary shares of
Allegiance Mining NL (ASX: AGM.AU) (“Allegiance�) by its subsidiary Zinifex
Australia Limited.
Allegiance is the owner of the 8,500 tonnes per annum Avebury nickel project on
the Tasmanian west coast, which is due to be commissioned in the first quarter
of 2008.
Under the two tiered offer structure, Allegiance shareholders will be offered
$0.90 cash per share. This will be increased to $1.00 cash per share for all
Allegiance shareholders who accept Zinifex’s Offer, if Zinifex obtains a relevant
interest of more than 30% of Allegiance shares, or if the Allegiance Board of
Directors recommends the Offer.
The Offer clearly represents an attractive premium for Allegiance shareholders:
Cash Offer Price $0.90 $1.00
Premium to Closing Price 27% 41%
Premium to 1 Month VWAP 29% 44%
Note: Closing price of $0.71 as at 14 December 2007, 1 Month VWAP of $0.695
VWAP = volume weighted average price
Zinifex’s Chief Executive Officer (elect) Andrew Michelmore said “Zinifex’s offer
is compelling for all stakeholders. Allegiance shareholders will receive an
attractive premium for their shares.�
“For Zinifex shareholders, we like nickel as an attractive long term growth
business and Allegiance’s Avebury project is an excellent entry point for Zinifex.
With nickel production due to commence in early 2008, this mine would add
immediate growth to Zinifex’s existing profit centres, the Century and Rosebery
mines.�
“Avebury is just the start of our strategy to vigorously grow in Zinifex’s chosen
base metals of copper, nickel and zinc. We like investing in high margin, long
life, expandable mines, and Avebury delivers all of these attributes. Avebury
promises to be an exciting new nickel region that, with appropriate investment,
we expect will support rapid production expansion and mine life extension.�
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“For Allegiance employees we see a bright future. The team at Avebury has done a
terrific job with this project and enjoyed great success exploring the area. We would
welcome them to Zinifex, and together with our Rosebery operations, use our
combined strength to further build our Tasmanian position.� Mr Michelmore
concluded.
The Offer will be financed from Zinifex’s current cash balance.
The Offer has minimal conditions, details of which are set out in the attachment to
this announcement. It is Zinifex’s current intention to waive the conditions contained
in the attachment and declare the Offer unconditional upon receiving Foreign
Investment Review Board approval. Any decision to declare the Offer unconditional
would be subject to any announcement made by Allegiance after the date of this
announcement which affects, or is likely to affect, the fulfilment of the bid conditions.
Once the Offer is declared unconditional, Allegiance shareholders will generally be
sent payment for their shares within 5 business days of accepting.
Zinifex will be holding a media briefing conference call at 10.30am AEST today
followed by an analyst briefing conference call at 11.30am AEST today. The analyst
briefing conference call will be audio streamed. Please use the following link to listen
to the audio stream (an archived version will be available following the event):
http://wcc.webeventservices.com/view/wl/r.htm?e=99611&s=1&k=70E37B2878418F
CA9F7BC5CA9DB8E7C5&cb=genesys
Participating in the calls will be:
• Andrew Michelmore - Chief Executive Officer elect, Zinifex Limited; and
• Tony Barnes - Acting Chief Executive Officer, Zinifex Limited
Citi is acting as financial adviser, and Freehills is acting as legal adviser, to Zinifex.
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For more information contact:
Martin McFarlane
Group Manager – Investor & Community Relations
Zinifex Limited
Direct telephone: +61 (3) 9288 0479
Mobile: +61 (0) 417 543 638
Email: [email protected]
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Allegiance Mining NL
Allegiance is an ASX listed mining company that owns the Avebury nickel sulphide
mine development project located on the west coast of Tasmania, 8kms west of
Zeehan, and 30kms from Zinifex’s Rosebery mine.
The project is expected to treat approximately 900,000 tonnes of ore annually
producing 8,500 tonnes of nickel in concentrates. Avebury is at an advanced stage of
construction, with first production expected by the end of the first quarter 2008. The
mine is operational and 16,800 tonnes of ore have already been stockpiled.
Allegiance also has a 10% interest in the Nymagee Mine Joint Venture, with joint
venture operator Triako Resources Limited (a wholly-owned subsidiary of CBH
Resources Limited) and Ausmindex NL holding the remaining 80% and 10% interests
respectively. Nymagee Copper Mine is located within the township of Nymagee,
approximately 80 km south-east of Cobar, New South Wales.
Table 1: Avebury Resources
Category Million Tonnes Ni% Nickel
(tonnes)
Measured Resources 0.5 1.08% 5,724
Indicated Resources 6.9 1.06% 73,246
Inferred Resources 8.8 0.90% 79,470
Total 16.3 0.97% 157,819
Figure 1: Project, Mine and Infrastructure Locations, Tasmania
Allegiance has an agreement with China’s largest nickel company, Jinchuan for the
sale of all nickel concentrates produced at Avebury.
Allegiance has 774.9 million ordinary shares and 32.2 unlisted options at exercise
prices ranging from 17 to 98.6 cents per share.
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Attachment – Offer conditions
• The Australian Treasurer having no objection to the takeover bid in terms of the
Commonwealth’s foreign investment policy;
• No material adverse change – between the date of this announcement and the
end of the offer period (each inclusive) no event occurs or is announced which,
individually or when aggregated with all such events, has or is likely to have a
material adverse effect on the business, assets, liabilities, financial or operating
position, profitability or prospects of the Allegiance group (after taking into
account any matters which offset the impact of the event or events giving rise
to the adverse effect), including an event which results, or is likely to result, in a
material disruption to the implementation of the Avebury Nickel Project as
described in the report for the September 2007 Quarter issued by Allegiance
(such as, for example, anything that results in a delay in: (i) the mill and
process plant commissioning; or (ii) nickel production commencing, each as
contemplated by that report),
but other than:
(1) a change in general economic or political conditions or the securities
markets in general;
(2) a change in the market price for nickel, which impacts on Allegiance and
other nickel companies in a similar manner;
(3) a change in generally accepted accounting principles or the interpretation
of them; or
(4) anything that is fully and fairly disclosed in an ASX filing by Allegiance
prior to the date of this announcement.
• No changes in capital structure – between the date of this announcement and
the date 3 business days after the end of the offer period (each inclusive), none
of the following occurrences happen:
(1) Allegiance converting all or any of the shares into a larger or smaller
number of shares under section 254H of the Corporations Act;
(2) Allegiance or a subsidiary of Allegiance resolving to reduce its share
capital in any way;
(3) Allegiance or a subsidiary of Allegiance entering into a buyback
agreement or resolving to approve the terms of a buyback agreement
under subsections 257C(1) or 257D(1) of the Corporations Act;
(4) Allegiance or a subsidiary of Allegiance making an issue of shares (other
than shares issued as a result of the exercise of Options into shares) or
granting an option over the shares or agreeing to make such an issue or
grant such an option; or
(5) Allegiance or a subsidiary of Allegiance issuing, or agreeing to issue,
convertible notes.