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EVEN as Perilya’s future looks increasingly likely to be with China’s third-largest zinc producer, Zhongjin Lingnan, fellow zinc miner CBH Resources has again said its all-scrip takeover offer for Perilya is a better deal for the company and the Broken Hill region.

Perilya has said it will accept a share placement proposal from Zhongjin, which will give the house a 50.1% stake in Perilya in exchange for $45.5 million in cash.

In the face of the weak zinc price and the global financial crisis, Perilya’s board says the deal will strengthen the company and provide it with a much-needed cash injection.

The company revealed this week that at October 31 last year it had only $10.8 million in cash, and on December 24 the company was given a $10 million advance deposit by Zhongjin.

The placement requires the approval of Perilya shareholders and the Foreign Investment Review Board, and if it goes ahead will see Perilya issue 198 million fully paid ordinary shares to Zhongjin at 23c per share.

Perilya shareholders will vote on the placement on February 5 in an extraordinary general meeting.

Earlier in the week Perilya’s managing director Paul Arndt said the proposed placement of shares to Zhongjin was a “superior transaction” to CBH’s offer, and the company also enlisted Ernst & Young to provide an independent expert’s review of the deal.

Ernst & Young said the deal was “not fair but reasonable”, even though the placement is at a price higher than Perilya’s share price at the time the deal was announced.

The accountants also found that if Perilya did not accept the offer, it would be forced to source new funding early this year to continue operating – with no certainty it could do so in the current financial climate.

Nevertheless, Zhongjin’s offer is below the 33c bottom price Ernst & Young has on Perilya’s share price.

Despite the assessment from Ernst & Young, CBH continues to assert that its all-scrip offer is superior to the Chinese(cnmining) deal, today saying the takeover would deliver the most “sound and sustainable future” for Perilya shareholders and the Broken Hill region.

CBH has long insisted its offer will bring together the two companies’ Broken Hill operations and provide a stronger future for the operations.

CBH also questioned Perilya’s cash burn rate and said its own cash backing of $56 million at December 31 was evidence it was pursuing the right strategy at its Broken Hill operations.

However, the company did warn the Zhongjin offer potentially breached the conditions of its bid for Perilya and it would be considering its position over the next few weeks.

CBH is offering 4.2 of its shares for every one Perilya share, and Perilya’s stocks last trading at 17.5c, down 1c, while CBH was at 6.3c, up 0.4c.