Australian (ASX) Stock Market Forum

EXS - Exco Resources

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Red hot commentary from Shaws today:

We have a BUY on EXS, and a A$0.50 target price.

We are beginning to believe that the White Dam gold project is even better than the
conservative picture the company is painting.

Michael Anderson is in Kalgoorlie, and it appears the story is gaining some
traction amongst the punters, judging by the buying interest today.

With a project design capacity of 50kozpa, the mine is reportedly running
at over 60kozpa, and we believe this could jump again to 80kozpa, and we
continually revise up our expectations. Why?

* Company being conservative, A$560/oz reported cash cost should
fall, and with only 2 out of 3 leach pads up and running, a 30% jump
on current production looks possible;
* At this rate existing reserves will run out within 2 years, that is why they are
mobilising drill rigs to expand the 170koz reserve and 330koz resource base-
either way, why not produce more gold now?;
* Cashflow to EXS will grow to A$2-3m/month by early next year (A$10m/quarter at spot?);
* Our valuation of A$52m for EXS's share is based on our conservative
US$900-950/oz gold price and a total mined reserve of 220koz. Both the reserve,
and the gold price could grow and we have an A$80m spot valuation on
EXS's 75% share.

Not too many companies are mining gold for A$560/oz or less recently, only
Lihir at Mt Rawdon, Newcrest at Cracow and Ramelius come to mind. Even Avoca
didn't cut it at Higginsville, recording A$671/oz cash cost last quarter.

A common mis-conception amongst non-industry types is you can't make money on 1g/t dirt. Wrong. Some of Australia's most profitable mines are at this grade (think Boddington, Lake Cowal, Mt Rawdon etc). Newmont's McPhillamy's will be in this highly profitable, sub A$500/oz camp in my view (ALK has 49%).

The real value driver of EXS, Cloncurry,continues to be progressed behind the scenes.
We believe the logic for someone to make a move on EXS is increasingly compelling,
particularly with copper at US$3.30/lb.

Even though formal enviro approval isn't due till December, we believe every month Xstrata
waits to do a deal on Ernest Henry offtake, it costs them A$4m. What I mean by this, is
if they wait until December/January to deal on EXS, then it could be too late: The Chinese
and others may have dealt on the project already (see CDU announcement). We believe
the logic of a stand-alone development is compelling, and can be easily funded,
hence the pressure really is on Xstrata to act in the near term.

When? hard to say, either way EXS is not sitting around waiting to be asked to the ball.
It is already fending off other suitors. What happens between now and Christmas
will be interesting, however its hard to see EXS shareholders coming off second best.

Major shareholder Ivanhoe Australia, with their A$1b market cap and 20.2% stake in EXS,
could also be weighing up their options. A scrip bid would be a nice way to throw a spanner in Xstrata's plans, and deliver them yet another production centre to complement Merlin and Mount Dore.

We see plenty of value in EXS, even taking a 50% risk discount to Cloncurry. As mentioned
previously, the stock is trading on 1yrs cashflow once Cloncurry is up and running (assuming
offtake deal) and a PE of 1.4x. Only two things can really happen here, either Xstrata has no interest
in a deal, and prefer to spend A$400m building a shaft at Ernest Henry and exploring for their own ore
or they see a free A$50mpa kick (including gross smelter benefits) from Exco's ore as a reasonable proposition.
If our thesis is correct, then there will be two winners: EXS shareholders +A$200m, Xstrata +A$500m.
 
There is no doubt in my mind that the "interested parties" in negotiations at present are the Chinese.

There is also no doubt in my mind that Xstrata have waited too long to negotiate from a point of strength. We now have the situation as referred to by various analysts, that EXS are fending off offers, so the Board of EXS now have the upper hand.

Xstrata will now be forced to make a genuine offer at a suitably acceptable price. Even if the offer is higher than any offer coming from the Chinese, Ivanhoe could still trump it with a scrip offer.

Furthermore we know that the Chinese will pay top $ for Aussie resources. So Xstrata are going to have to pay up.

We must also be very grateful to the ASX. Michael Anderson must have been very happy to receive the query. That way he was forced by regulation to confirm that they are in discussions.

Two questions remain.
1. How much will the top bidder have to pay?
2. How long will it take to conclude?

I am tipping top dollar and very soon.
 
From Getagraph.com:

SHORT TERM COMMENTARY:
Exco Resources Limited [Wednesday 11 Aug. 2010]:

Exco Resources Limited is up by 17.65% yesterday from AUD 0.34 to AUD 0.40 In the last 10 days the price of Exco Resources Limited has been rising in a total of 5 out of 10 days, and is up by 42.86% over the past 2 weeks. Volume also increased last day along with the price which is positive technical sign, and in total there was traded 16,44 million more shares than the day before. In total there were bought and sold 19,83 million shares for approx. AUD 7,93 million.

3 MONTH TREND
Exco Resources Limited has broken the wide and strong rising short term trend up and even stronger raising rate are indicated. On reaction back there will be support on the roof on the current trend broken, which is AUD 0.34, a level that may pose a second chance to hit a runner. According to fan-theory AUD 0.42 will be next possible trend top level and thereby pose a resistance level which may not be broken on first attempt.


Support/Resistance |s
Support 1: AUD 0.35 Resistance 1: AUD N/A
Support 2: AUD 0.34 Resistance 2: AUD N/A
Support 3: AUD 0.33 Resistance 3: AUD N/A
 
Clock ticking as Cloncurry copper heats up BARRY FITZGERALD
August 11, 2010 - 9:11AM
.Things are stirring up Cloncurry way in north Queensland. From the update file on the region's copper riches comes the news that Exco has raised $4.9 million from the placement of 5 per cent of its shares with the Singapore-based, and Chinese-connected, Sin-Tang Development.

More to the point is that the deal has started the clock ticking on a bigger deal in which Sin-Tang could buy an interest in Exco's Cloncurry copper project (CCP), as well as provide debt financing for its development.

The broader deal cuts across the on-again, off-again, on-again talks that Exco has had with Xstrata in the last five years for ore from a development of the CCP. Xstrata's Ernest Henry treatment plant sits 8 kilometers or so away and is operating at less than half capacity.

Does the Sin-Tang deal lock Xstrata out? It doesn't. But Big Mick Davis at Xstrata or more likely his Queensland minions will have to move quickly. And they will want to be talking to 20.2 per cent (pre-placement) Exco shareholder, Ivanhoe Australia.

IVA is happy with its investment in Exco. After-all, its el supremo, Robert Friedland, reckons we are heading off into uncharted territory in terms of copper demand and prices. But IVA has got enough going on elsewhere in the region to make the decision on letting Exco go an easy one, at the right price of course.

The betting is that Xstrata will move quickly to secure the CCP, either by taking over Exco or by bidding at the asset level. The latter would leave Exco cashed up and with its White Dam gold interest, plus lots of exploration ground.

The betting reflects the obvious. Xstrata will find it difficult to let go the chance of securing 348,000 tonnes of copper just 8 kilometres from a plant which desperately needs additional ore to keep operating costs at a reasonable level, let alone keep up copper concentrate supplies to its Mt Isa smelter/Townsville.

It's all a neat situation for Exco shareholders to be in. If Xstrata does not step up and do the obvious, Sin-Tang will fill the void. And if Xstrata does do the obvious, Sin-Tang will walk away with the second prize of a profit on its 30 cents a share subscription price. Could be a handy turn too.

Exco closed at 33.5 cents a share on yesterday, valuing the company at $110 million.
 
"The betting is that Xstrata will move quickly to secure the CCP, either by taking over Exco or by bidding at the asset level. The latter would leave Exco cashed up and with its White Dam gold interest, plus lots of exploration ground."

If IVA are prepared to sell out at the right price, so would Lion so it would definitely be on the cards that a takeover is in the offing.
 
At lunchtime I posted the following on another site:

"wont be able to hold them down now, buyer lets 400-500k build up on the offer then goes bang and cleans them out:

this is insto or corporate, private client brokers dont tend to buy like this."

What transpired later was amazing to watch. With a huge special sale taking place late in the day, it is likely that the buyer was also buying most of the other stock offered today.
 
52 Wk Range: 0.175 to 0.395

Good buying volume building up for last few trading days.

* Buyers 2,300,779

* Sellers 464,269

Macquarie Consensus recommendation: Strong Buy

Looking exciting days ahead.
 
SHORT TERM COMMENTARY:
Exco Resources Limited [Thursday 12 Aug. 2010]:
(Autocomments)

Exco Resources Limited fell by -2.50% last day from AUD 0.40 to AUD 0.39. . In the last 10 days the price of Exco Resources Limited has been rising in a total of 5 out of 10 days, and is up by 39.29% over the past 2 weeks. Volume fell last day along with the stock which actually is a good sign as volume should follow the stock. Last day the trading volume fell by -14,96 million shares and in total there was bought and sold 4,87 million shares for approx. AUD 1,90 million.

3 MONTH TREND
Exco Resources Limited has broken the wide and strong rising short term trend up and even stronger raising rate are indicated. On reaction back there will be support on the roof on the current trend broken, which is AUD 0.35, a level that may pose a second chance to hit a runner. According to fan-theory AUD 0.43 will be next possible trend top level and thereby pose a resistance level which may not be broken on first attempt.



Support/Resistance |s
Support 1: AUD 0.35 Resistance 1: AUD 0.40
Support 2: AUD 0.34 Resistance 2: AUD N/A
Support 3: AUD 0.33 Resistance 3: AUD N/A
 
Sitting back watching the action over last few days has been great theatre.

It started with interest being generated whilst the managing director was at Diggers and Dealers. Then the ASX decided to query the company as to the reason for the initial price range. The response became a catalyst to push things along, just to flush out and fire up those who have been sitting on the fence for a long time.

A masterstroke of good corporate upmanship.

To put this in perspective:

05/08-2.6 mill shares traded
06/08-2.8 mill shares traded
10/08-3.3 mill shares traded
11/08-19.8 mill shares traded (includes 13 mill off market)

Today 4.8 million shares traded.

Stakes are being/have been built and by more than one player. And the share price is rising strongly reflecting the interest coming from all quarters.

First we have our new Singaporean investor who subscribed to the placement that, when announced sent others in a flurry to see just how many shares could be acquired on market.

We also have two unknown positions at present:
the first being whether Xstrata has shown their hand, and if not, in what form they are going to enter the fray. Are they buying on market, are they only interested in making an asset play (and if so, what assets - is it only E1 or the total Qld portfolio), are they interested in making a bid for the company as a whole, or are they going to let others steal it all from them?

The second is who acquired the Lion shares. Was it Xstrata, the Singaporeans or a new entrant to the field? And what is that entity's intention? Are they building a position to be able to block a bid or argue for a better price from a position of strength.

We also have our major shareholder Ivanhoe raising a heap of cash and also being in a position that they could also offer scrip for EXS if they so chose to do so. Given the sale of the 13M shares by Lion and the recent placement that has taken place, what is IVA's long term intentions?

Barry FitzGerald's article about things heating up in Cloncurry is right on the mark, and we are about to see it unfold before our eyes.

No doubt Xstrata would not have been happy to see the announcement of our new Singaporean investor being interested in assisting with a stand alone mine development, and I am sure that Michael Anderson will have fielded a phone call from Xstrata to enquire if it is not too late to arrange a deal so that their mine still has sufficient ore to process.

It all looks very promising to see all this interest appear at once, and presumably shareholders will be the winners in coming weeks.
 
Washington H Soul Pattinson buys 21.4m Exco Resources shares
(Australian Stock Exchange) 08:13 AM


August 13, 2010 Friday

Washington H Soul Pattinson & Company Ltd bought 21,424,200 Exco Resources Ltd shares from August 6, 2010 to August 12, becoming a substantial shareholder with 21,424,200 shares (6.52%).

STOCK DASHBOARD: August 13, 2010

Exco Resources

Closing Price: 40.0c

Price change from previous trading day: 3.9%

Relative Strength (6 months percentile rank): 96.8

Market capitalisation: $131.4 million

Price/Earnings: -37.1 times

Turnover volume: 3,580,744.0

Volume Index (1 is average): 7.4

Turnover value: $1.4 million

Turnover period: 2 years 7 months

Value of $1,000 invested 1 year ago: $1,667

Source: www.BuySellTips.com

Terms & Conditions Privacy
Copyright © 2010 LexisNexis, a division of Reed Elsevier Inc. All rights reserved.
 
An interesting article from our friend Barry Fitzgerald at the Melbourne Age 16/08/2010.

We all know now the identity of the fourth player, so Game on!!

"COULD a four-way tussle be unfolding for control of Exco Resources (ASX: EXS) - or at least its Cloncurry copper project (CCP)?

As previously mentioned in Garimpeiro, the pot first got stirred when Exco raised $4.9 million from the placement of 5 per cent of its shares with the Singapore-based, and Chinese-connected, Sin-Tang Development.

Sin-Tang also got an agreement under which it could negotiate to acquire an interest in the CCP, as well as provide debt financing for its development.

The Sin-Tang deal cut across talks that Exco has had with Xstrata in the last five years about ore from a development of the CCP going to Xstrata's Ernest Henry treatment plant. So we now have Sin-Tang and Xstrata on high alert from here on in. The same can be said for Exco's biggest shareholder with its 20 per cent holding and its own big time copper ambitions in the region, Ivanhoe Australia.

The fourth player in all this has yet to declare their hand.

But based on volumes in Exco shares last week, we could be seeing a substantial shareholder notice early this week. We're told we will all find interesting the name behind last week's buying."


Barry must have written the article on Friday prior to the announcement of SOL coming onto the register.

However, I think that there is either the potential of a 5th player, or SinTang or Xstrata have also started to make a move, as the unaccounted volumes for the last week surely dould not be traders.

I recall that IVA are sitting on 20.2% prior to any dilution coming into efffect from the placement of shares to SinTang.

But IVA would be permitted to increase their holding by 3% each 6 months. So IVA may have been a buyer in the last few days.

Like a number of others, I wouldn't rule out IVA making a scrip bid to start proceedings.

Especially as Robert Friedland is so bullish on copper.

However if IVA purely wanted to see EXS sold at the highest price, a scrip bid launched now would ensure a much higher price for their shares should another bid come along from the likes XStrata. No doubt others would come out of the woodwork.

Just like any successful property auction, having a number of keen bidders ensures a good final price.

It might be that Xstrata and anyone else contemplating making a bid might have a window of opportunity to do so without competition from IVA until mid Sept.

IVA's fund raising is due to close then.

If they were to act before then, I think that they would be required to submit a supplementary or replacement prospectus for the fund raising.
 
what does a 35% price movement mean?

If EXS share price increases from 44.5c to 60c (possibly with an early bid from just one of the likely bidders lining up)

AND

if CDU share price falls the same percentage to $1.50

THEN the market cap of EXS will be greater than that of CDU.

31Mt at 0.8%Cu and 0.1 g/t Au is actually less valuable than the pit inventories for the Cloncurry Project!

Surprised CDU haven't been slammed harder. But more falls should be expected in my opinion.

No way they should be worth what they still are.

Whereas our share register goes from strength to strength with the quality and reputation of the latest entrants.

And the quality of the management make the clear distinction between the companies.

It gives little pleasure to say we told everyone so!
 
Substantial Target Increase leads to buying?

On Friday afternoon we witnessed a strong upward movement in the price for EXS shares. Why?

There are a few plausible reasons that come to mind:

1. Michael Anderson, the Managing Director was delivering a presentation to a wholesale investment forum;

2. Shaw Stockbroking released a report late last week substantially updating its target price for EXS;

3. The continuing fall of popularity of a Cloncurry stablemate, CDU.

Shaw Stockbroking has substantially updated its target price for EXS from 50c to 80c at the end of last week, and coupled with some other factors, it can be expected that this review from Shaws is going to lead to significant amounts of buying in the next couple of weeks in my opinion.

Geoff Muers, the analyst for Shaws has for sometime believed that a deal with Xstrata for an ore agreement has looked imminent but his latest report suggests that he now expects Ivanhoe and Xstrata to slug it out by way of a hostile bidding war, and I tend to agree with that chain of thought. For a long time Xstrata have had the opportunity to strike a deal but they have elected to play a game of wait and see what will transpire. Unfortunately for Xstrata, the waiting game has now expired and other parties including Sin-Tang, have entered the game to try to secure a deal.

Soul Pattinson has jumped onboard, seizing a position in the top 20 shareholder list and looks as though it has been buying more shares in recent days.

Ivanhoe have seized the opportunity to increase its position to just under 23% of the register.
Geoffs valuation is based on the belief that a hostile bid may emerge in the short term from either player, looking to take full control of the asset via either a cash or scrip bid.

Elsewhere in the Cloncurry region it has been en eventful week for copper hopefuls with Cudeco's disapointing resource announcement. At the time of Geoff Meurs writing his report he pointed out that the share price of CDU had fallen by nearly 50% in the last month, whilst the share price of EXS had increased 70%. Since writing that report the figures have become even more dramatic with CDU continuing to fall, and EXS continuing to rise. The figures as of Fridays close are a 86% rise for EXS and a fall of 52% for CDU.

If the amount of critisizm being registered on share market chatroom sites over the weekend against CDU is anything to gauge this coming weeks likely share price direction on, I think that we are about to witness a tsunami of selling there. The exit of shareholders from their register is likely to be linked to a certain extent to an increase in buying for EXS.

CDU's resource of 31Mt @ 0.67% Cu and 0.11g/t Au (plus cobalt credit?)compares to EXS with 61Mt @ 0.85% Cu, 0.25g/t Au. The market capitalization of EXS is still only 57% of CDU. As Geoff Meurs points out in his report, something is not right here, either EXS remains substantially undervalued, or CDU will find a lot more high grade ore. Geoff is of the view and so am I, that the former is more likely.

In the report Geoff goes on to state that Xstrata could pay up to A$1.28ps for EXS and still retain value as he is of the opinion that the Cloncurry project to be worth up to twice as much to Xstrata than EXS under a tolling arrangement (as Xstrata could charge more than A$30mpa above cost-rates) exluding any flow-on benefits from full mill utilisation at Ernest Henry.

He ends his report saying that This indicates there is still plenty of room left on the A$100m value implied by the current market price of EXS (taking off A$50m for White Dam). The only question now is, who will be first to act? There is plenty of room between A$0.44ps and A$1.28ps.
 
from Getagraph.com last night.

The upper target keeps getting higher!

SHORT TERM COMMENTARY:
Exco Resources Limited [Monday 30 Aug. 2010]:
(Autocomments)

No changes to price of Exco Resources Limited last trading day. In the last 10 days the price of Exco Resources Limited has been rising in a total of 5 out of 10 days, and is up by 9.3% over the past 2 weeks.

3 MONTH TREND
Exco Resources Limited lays the middle of a very wide and strong rising trend on short term and further rise within the trend is signalized. Given the current short term trend the stock is expected to rise 68.7% during the next 3 months and with 90% probability hold a price between AUD 0.59 and AUD 0.93 at the end of this period.


Support/Resistance |s
Support 1: AUD 0.43 Resistance 1: AUD 0.47
Support 2: AUD 0.40 Resistance 2: AUD 0.48
Support 3: AUD 0.40 Resistance 3: AUD 0.53
 
exs superior to cdu says strachan

Peter Strachan from Stock Analysis has just released a report that states "Unless there has been some serious and systematic error in sampling and assaying, the higher grade portion of (CDU's Rocklands) deposit turns out to be quite small and relatively low grade overall, compared to peers in the area, such as Exco Resources.
 
"3mth price likely between 65c & 98c "

from Getagraph.com:

SHORT TERM COMMENTARY:
Exco Resources Limited [Wednesday 1 Sep. 2010]:
(Autocomments)

Exco Resources Limited fell by -2.13% last day from AUD 0.47 to AUD 0.46. The price has been going up and down in this period, and there has been a 2.22% for the last 2 weeks. Volume fell last day along with the stock which actually is a good sign as volume should follow the stock. Last day the tradingvolume fell by -389 548 shares and in total there was bought and sold 610 798 shares for approx. AUD 280 967.

3 MONTH TREND
Exco Resources Limited lays the middle of a very wide and strong rising trend on short term and further rise within the trend is signalized. Given the current short term trend the stock is expected to rise 74.9% during the next 3 months and with 90% probability hold a price between AUD 0.65 and AUD 0.98 at the end of this period.


Support/Resistance |s
Support 1: AUD 0.43 Resistance 1: AUD 0.47
Support 2: AUD 0.40 Resistance 2: AUD 0.47
Support 3: AUD 0.40 Resistance 3: AUD 0.53
 
On HC last night there was a reference to Goldmans being sellers of EXS of late and Iress confirms this.

This is very interesting information.

Given that Goldmans had not been active in the stock before, that suggests to me that SOL are trying to cap the price in a major way.

that would also tie in with the facts released by EXS. SOL had continued to increase their holding up until the time of the last set of presentation notes, and were not far away from having to submit a new Substantial s/h notice.

this suggests to me that SOL are keen to buy more but want to do so at cheaper prices if they can.

Prior large buyer Goldman Sachs have been largest seller during the period 21/8/2010 to 27/8/2010.

Goldman Sachs Sold a net 812t. 1 buy and 116 sells.

Largest net buyer was Shaw with a net 2.419mil. This is understandable given that they recently substantially upgraded their target price from 50c to 80c.
 

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