Ontzinc bids on remains of Pasminco (December 08, 2003)

Administrators of the Australian zinc and lead producer Pasminco have rejected a bid by Venture-listed developer Ontzinc (OTZ-V) to take over the insolvent company’s assets for A$1.7 billion.

Ontzinc had bid A$1.3 billion cash ($1.2 billion in Canadian funds) and offered to assume A$300 million in environmental liabilities and A$80 million in existing leases. It also proposed to issue share warrants to Pasminco’s creditors. Pasminco’s administrators, accounting firms KPMG and Clayton Utz, rejected the bid.

Ontzinc, led by well-known mining executive Clifford Frame, had engaged Lazard Frres to arrange financings and act as financial advisor on the bid. Currently, the company has 165 million shares outstanding and a market capitalization of around $38 million, or roughly 3% of the offer for Pasminco.

At the end of the second quarter of 2003, the last period for which Ontzinc has filed financial statements, the company had $965,161 in current assets and $683,064 in current liabilities, for working capital of $282,097.

Pasminco went into voluntary administration under a Deed of Company Arrangement in September 2001, after its currency hedge program, which had bet on a rising Australian dollar, sunk the company deep into the red. It lost A$226 million on revenue of A$1.8 billion in the year ended June 30; in the previous financial year, it lost A$411 million on revenue of A$2 billion.

It had A$2.1 billion in assets and A$3.6 billion in liabilities at its last financial year-end, for net liabilities of A$1.5 billion.

The company produced 743,653 tonnes zinc and 137,442 tonnes lead in concentrate in fiscal 2003, mainly from its Rosebery and Century mines, in Tasmania and Queensland. Its four smelters (two in Australia and one each in the U.S. and the Netherlands) produced 697,112 tonnes zinc and 329,054 tonnes lead metal in the same year.