South32 agrees to buy remaining Arizona shares

JOHANNESBURG – Diversified and metals company South32 yesterday announced that it had agreed to acquire the remaining 83percent of outstanding shares of Arizona Mining through a plan of arrangement for a fully funded all-cash offer of $1.3billion (R17.43bn).

The dual-listed group, which was spun out of BHP in 2015, said its board had approved a fully funded cash offer for Arizona Mining of C$6.20 (R62.96) a share, representing a 50percent offer premium, based on the 20-day volume weighted average price.

South32 chief executive Graham Kerr said the cash offer would allow the group to optimise the design and development of one of the most exciting base metal projects in the industry.

“Our deep understanding of this high-grade resource and surrounding tenement package, and extensive experience at Cannington, makes us the natural owner of this project and ensures that we are well positioned to bring it to development, delivering significant value to our shareholders,” Kerr said.

Arizona Mining is a Canadian-listed company focused on the Hermosa Project, a zinc, lead and silver project located in Arizona’s Santa Cruz County. The company offers potential for a low-cost, long-life operation with a clear development pathway.

South32 already owns a 17percent stake in Arizona Mining. It has operations in Australia, Southern Africa and South America and is listed on the London Stock Exchange, Australian Securities Exchange and the JSE.

Kerr said South32 was not changing its approach or strategy by acquiring Arizona Mining. “We are committed to the remains of the $1bn capital management programme. And we continue to remain committed to our strategy of putting our shareholders’ money to work when we can create value,” Kerr said. The group said the deal was subject to approval from at least 66.67percent of votes cast by Arizona Mining shareholders at a meeting expected to take place in September. South32 can vote its 17percent shareholding in favour of the deal.

Richard Warke, Arizona Mining’s founder and executive chairman, said South32’s all-cash offer represented a premium reflective of the nature of the Hermosa Project and allowed shareholders to realise immediate value. “Importantly, South32 knows the asset well and understands the significance of the strong relationships that we have built in Arizona with all of our stakeholders,” Warke said.

South32 will provide Arizona Mining with a working capital facility of up to C$70m. The transaction is expected to close at the end of the September quarter.

South32 said its balance sheet would remain strong following completion of the Arizona Mining and Eagle Downs transactions, as it had $2.8bn in cash at the end of March.

South32 rose 1.77percent on the JSE yesterday to close at R38.45.

– BUSINESS REPORT