Just reading the Huntley's recommendation again and wonder if it might now be unduly pessimistic. A few days after that posting this opinion was expressed in the Australian
Feb 19
"Kagara Zinc (KZL) 39.5c
IN the grand mining tradition of hiving off fashionable commodity plays to unsuspecting investors, the copper and zinc miner hopes to parcel up its Queensland gold tenements and float them off as Mungana Goldmines.
Fair enough, too. There is zero interest in base metals but gold is attracting tentative interest given the record Australian dollar gold price.
According to Kagara, Mungana will consist of the Red Dome and Mungana porphyry deposits, containing an inferred resource of 1.6million ounces (plus copper and silver). Red Dome was mined profitably by Nuigini Mining between 1985 and 1996. Kagara argues that if Nuigini could turn a quid at the then going rate of $500 an ounce, the project should be a nice earner at the current $1500 an ounce.
We will see. In the meantime, Kagara's zinc and copper plants at Thalanga and Mt Garnet have been hit by flooding, but deliveries have not been "materially affected".
Kagara posted record December-quarter copper output at a margin of US68c a pound over cash costs, but zinc was extracted at a skinny buffer of US15c/lb.
While the operations are cashflow positive, provisional pricing adjustments plunged Kagara into the red. "No base metal miner in Australia is profitable at present and Kagara is no exception," it said.
Kagara is a hold. The company stands to unlock value from its gold assets but it really needs a sustained base metals recovery. "
I tend to agree. With out doubt it has been a difficult time for them and Q1 2009 may yet turn out to be the ugliest quarter, but with rising metals prices and Mungana Gold being prepped for sale the outlook is somewhat better.
Base metals prices are a clear enough story. December quarter was cash flow positive from operations with cash costs of 1.20 for copper and 0.41 for zinc. They should have moved a little lower as they have seen a full quarter with low exchange rate and low fuel costs. Meanwhile we have seen copper and zinc move above the December quarter average prices.
it will be interesting to see the progress on the costs as output increases. Copper is expected to increase from 26,000T to 35 to 40,000 T this year and zinc is due to increase from 40,000T to more than 100,000T by 2011.
The big hit they took in Q4 08 from provisional pricing adjustments should not be repeated - a much smaller impact if any in Q1 and may turn positive in Q2 if metals prices hold.
Debt is a problem that should be brought back in to line by a successful float of Mungana Gold. The sale is scheduled for June. They have announced resource upgrades and scoping study results in support of the sale. The scoping study numbers were a bit ambitious in terms of metals price assumptions but estimated production costs of A$300/oz should generate some decent interest.
KZL looks like it was being priced for failure but the corner may have been turned and if a survivor then there could some decent upside here.
Nice post JBNimble. Something stirred today, up 30%. Wonder if anything has leaked....? 100 characteeeeers.....
Crikey - 30% up. Was it something I said? LOL. Glad I moved on this hunch last week.
On the lookout for more Lazarus stocks...
0854 [Dow Jones] STOCK CALL: UBS downgrades Kagara Zinc (KZL.AU) to sell from neutral on risks associated with miner's debts. KZL needs to refinance two debt facilities totaling A$150m by end of October and UBS says it believes the miner has insufficient cash to repay either of the facilities. "Without certainty on the method of readjusting the balance sheet, we believe an investment in KZL is risky," UBS says. Target price cut to 30 cents from 43 cents; KZL last traded at 49.5 cents. (APW)
Well UBS sure can pick them...
KZL went on a nice little run from mid 30s to almost 80 in the Xmas/New Year rally on much weaker news. I'm hoping for similar mileage on this run.
Dunno what the exact nature of what is going on, but this is C&Ped from their Ann 5/6/09So whats happening here?
Share purchase plan in place soon,
Suspended only because of this but was supposed to be up today... why isnt it??
Anyone any ideas?
Might be bad news that removed for ASX200, some fund managers will dump it due to contravening their fund rules??
REQUEST FOR EXTENSION OF VOLUNTARY SUSPENSION
Further to our request of 2 June 2009, Kagara Ltd advises that it now anticipates being in a position
to make an announcement to the market with respect to its proposed significant capital raising on
Tuesday, 9 June 2009. However, to enable the book build which forms part of the institutional
component of the capital raising to be conducted, Kagara Ltd requests that its securities continue in
voluntary suspension until pre-open on Thursday, 11 June 2009.
The Company is not aware of any reason why the requested extension of voluntary suspension
should not be granted.
A 1 for 1 rights issue at 60c - nearly half the last traded price.
The rights aren't tradable and it is ex the rights entitlement when it recommences trade on Thursday. So no chance to sell out before the price drop if you didn't want to take them up.
I don't think thats looking after your shareholders. If you're not an Aus or NZ resident you might not even be legally allowed to take up the rights - thats if they even send you the personalised application forms. Not happy.
Also how and why did they come up with that figure of 60c. Seems way too chep considering the potential that the company has as indicated by the recent SP rise.A 1 for 1 rights issue at 60c - nearly half the last traded price.
The rights aren't tradable and it is ex the rights entitlement when it recommences trade on Thursday. So no chance to sell out before the price drop if you didn't want to take them up.
I don't think thats looking after your shareholders. If you're not an Aus or NZ resident you might not even be legally allowed to take up the rights - thats if they even send you the personalised application forms. Not happy.
Seems to be making a recovery over the last few days, especially today.
What are the latest views or opinions.
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