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Apparenlty Oxiana (OZ-Minerals) is going to go gang busters tomorrow as a bounce from all this selling.
As far as I can see most of the selling is due to Barclay's Bank in Scotland. Barclay's is a major instituional investor in Oxiana. Recently Barclay's determined that coupling with the US market through the credit crunch was a bad idea and decided to divest itself of stock so that it only holds 20% gold / silver as a hedge against any rapid stock market crash. This meant a lot of selling of it's shares which it did at relatively low prices.
It doesn't help that the price of zinc is fairly low, but the newly merged company OZ-Minerals does not just sell zinc. It also has copper at a robust price and gold. One might say that owning OZ-Minerals is almost as good as a hedge as gold is what OZ-Minerals they produces.
Everyone agrees China and India have been growing strongly and despite recent worries this growth is likely to continue. Less than 1% of people in china and india own cars. Those large developing countries are going to require large amounts of cars as their populations become more wealthy. The price of oil is a major barrier to the fullfillment of that dream. The only likely outcome is the green car. The green car uses fuel cells. Fuel cells need zinc.
Zinc is also a major requirement, almost as relevant as iron ore is to making steel. As china and india grow the rise in iron ore price should eventually be reflected in zinc prices.
July is the tax month. Traditionally people sell to pay taxes and this impacts the market. If too many people sell then margin loans are called in and prices can spiral downwards. This could explain the sharp decline.
There has also been some bad luck affecting production with a fire at apache energy effecting gas supplies in western australia to OZ-minerals. Another fire affected copper production in south africa. These problems are temporary and have largely been corrected.
Investors may have the concern that the high price of oil and gas may impact on the cost side of OZ-Minerals. It all depends on how permanent the price rise is. Most of the rise in oil is due to speculation artifically inflating the price. It is true that oil is limited but there are also huge amounts of untapped reserves. Australia recently incresed it's oceanic boarders opening up many new potential oil fields. Some say a new field as big as the North West shelf could be found. Similarly the US has a known oil field in alaska which is larger than the oil field in the middle east! If McCain wins the US election he has promised to open up alaska to oil production. Increased prices increase supply and we may find next year to have too much oil!
It is also be argued that OZ-Minerals may not require large amounts of oil to produce Copper, Zinc and Gold. Most of energy requirement are gas and Western Australia has plenty of Gas supplies. When the plants are working of course.
In addition a firm called Xstrata may be considering buying OZ-Minerals. Historically newly merged companies take time to integrate and shore up under new leader ship and that can drive down the share price. If Xstrata, China or even RIO/BHP decide to buy then this could rapidly increase the share price.
A strategy that buying companies follow is to short a prospective companies stock. This artifically drives the shareprice down and makes it easier for the buying company to purchase. If you look at OZ-Minerals the amount of stock shorted is as high as 1.6%
Looking at the fundamentals of OZ-Minerals I can see excellent value. potentially the stock may double in the short term and go as high as $20 in the long term. Easy Money.
Also I heard a rumour. Apparently the company that built the channel tunnel between England and France may be building a subsea tunnel between New York and London.
The amount of stainless steel required would be equivalent to 1 year of the worlds production. A very large amount.
As you know zinc as well as Iron Ore is a major requirement for stainless steel production.
OZ-Metals is going to jump.
Ryan Upton
As far as I can see most of the selling is due to Barclay's Bank in Scotland. Barclay's is a major instituional investor in Oxiana. Recently Barclay's determined that coupling with the US market through the credit crunch was a bad idea and decided to divest itself of stock so that it only holds 20% gold / silver as a hedge against any rapid stock market crash. This meant a lot of selling of it's shares which it did at relatively low prices.
It doesn't help that the price of zinc is fairly low, but the newly merged company OZ-Minerals does not just sell zinc. It also has copper at a robust price and gold. One might say that owning OZ-Minerals is almost as good as a hedge as gold is what OZ-Minerals they produces.
Everyone agrees China and India have been growing strongly and despite recent worries this growth is likely to continue. Less than 1% of people in china and india own cars. Those large developing countries are going to require large amounts of cars as their populations become more wealthy. The price of oil is a major barrier to the fullfillment of that dream. The only likely outcome is the green car. The green car uses fuel cells. Fuel cells need zinc.
Zinc is also a major requirement, almost as relevant as iron ore is to making steel. As china and india grow the rise in iron ore price should eventually be reflected in zinc prices.
July is the tax month. Traditionally people sell to pay taxes and this impacts the market. If too many people sell then margin loans are called in and prices can spiral downwards. This could explain the sharp decline.
There has also been some bad luck affecting production with a fire at apache energy effecting gas supplies in western australia to OZ-minerals. Another fire affected copper production in south africa. These problems are temporary and have largely been corrected.
Investors may have the concern that the high price of oil and gas may impact on the cost side of OZ-Minerals. It all depends on how permanent the price rise is. Most of the rise in oil is due to speculation artifically inflating the price. It is true that oil is limited but there are also huge amounts of untapped reserves. Australia recently incresed it's oceanic boarders opening up many new potential oil fields. Some say a new field as big as the North West shelf could be found. Similarly the US has a known oil field in alaska which is larger than the oil field in the middle east! If McCain wins the US election he has promised to open up alaska to oil production. Increased prices increase supply and we may find next year to have too much oil!
It is also be argued that OZ-Minerals may not require large amounts of oil to produce Copper, Zinc and Gold. Most of energy requirement are gas and Western Australia has plenty of Gas supplies. When the plants are working of course.
In addition a firm called Xstrata may be considering buying OZ-Minerals. Historically newly merged companies take time to integrate and shore up under new leader ship and that can drive down the share price. If Xstrata, China or even RIO/BHP decide to buy then this could rapidly increase the share price.
A strategy that buying companies follow is to short a prospective companies stock. This artifically drives the shareprice down and makes it easier for the buying company to purchase. If you look at OZ-Minerals the amount of stock shorted is as high as 1.6%
Looking at the fundamentals of OZ-Minerals I can see excellent value. potentially the stock may double in the short term and go as high as $20 in the long term. Easy Money.
Also I heard a rumour. Apparently the company that built the channel tunnel between England and France may be building a subsea tunnel between New York and London.
The amount of stainless steel required would be equivalent to 1 year of the worlds production. A very large amount.
As you know zinc as well as Iron Ore is a major requirement for stainless steel production.
OZ-Metals is going to jump.
Ryan Upton
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Thanks for the post Ryan..interesting read...does anyone know the fwd PE 2009 /2010 for Oz Minerals...the combined entity?
It sounds like you're really onto something with that rumor. There are approx 5561km between London and New York. Apparently there are massive lines of people in new york just waiting for such a tunnel to open. Instead of flying across in 6 hours, they can drive across in just 55 hours (assuming they're driving at 100km p/h non-stop). Just imagine, you could do the return trip in only 4.6 days! And the views along the way should be amazing!
I heard a rumour a company is going to build zinc plated surfboards :bowser:It sounds like you're really onto something with that rumor. There are approx 5561km between London and New York. Apparently there are massive lines of people in new york just waiting for such a tunnel to open. Instead of flying across in 6 hours, they can drive across in just 55 hours (assuming they're driving at 100km p/h non-stop). Just imagine, you could do the return trip in only 4.6 days! And the views along the way should be amazing!
Another bit of good news for OXR and a bit more cash in their coffers...
Oxiana finds partner for Indo expansion
03/07/2008 - Nicholas Clydsdale
lol, I guess I did sound a bit crazy. I shouldn't have presented it in such a silly way.
I'm not saying they are going to build a sub-sea tunnel tomorrow. But they are building a tunnel and it's going to require huge amounts of metal. Actually it's high speed trains. No cars.
Wheather OZ-metals can capitalise on this is another story. That's not the only project in the works, all I'm trying to illustrate is that demand is strong for that business and likely to continue.
The key question is how close is the coupling between the US credit crunch and such projects.
The short sellers may be around but I predict a bounce. Money has been swapping between the banks and miners lately and yesterday was the turn on the banks. Today there may well be a reversal.
I got that one wrong about the stainless steel. No zinc in stainles steel. OZ-Minerals does sell nickel. Zinc is mainly used in galvanizing to protect against rust. But the fact remains, large projects in the works, demand is strong, fundamentals are good.
I guess I presented myself in quite a silly way. Still if you can't attack the logic you attack the person. I still can't see where the flawed reasoning is. Warren Buffet suggests value investing is the most profitable, where the investor buys the fundamentals and then waits for the market to correct. As far as I can see it OZ-Minerals has good fundamentals and shall continue to do so. Eventually the market will recognise this. The negative Hype can't last with such a high Earnings per Share and the price will rise.
Ryan Upton
I'm not saying they are going to build a sub-sea tunnel tomorrow. But they are building a tunnel and it's going to require huge amounts of metal. Actually it's high speed trains. No cars.
Wheather OZ-metals can capitalise on this is another story. That's not the only project in the works, all I'm trying to illustrate is that demand is strong for that business and likely to continue.
The key question is how close is the coupling between the US credit crunch and such projects.
The short sellers may be around but I predict a bounce. Money has been swapping between the banks and miners lately and yesterday was the turn on the banks. Today there may well be a reversal.
I got that one wrong about the stainless steel. No zinc in stainles steel. OZ-Minerals does sell nickel. Zinc is mainly used in galvanizing to protect against rust. But the fact remains, large projects in the works, demand is strong, fundamentals are good.
I guess I presented myself in quite a silly way. Still if you can't attack the logic you attack the person. I still can't see where the flawed reasoning is. Warren Buffet suggests value investing is the most profitable, where the investor buys the fundamentals and then waits for the market to correct. As far as I can see it OZ-Minerals has good fundamentals and shall continue to do so. Eventually the market will recognise this. The negative Hype can't last with such a high Earnings per Share and the price will rise.
Ryan Upton
Ryan, whilst your enthusiasm is great to see.... 20 dollar price targets, tunnels from new york to london, etc are all rather far fetched... (tho I won't be complaining, as I am a long long term holder in the oX and still hold a large amount, its certainly never come into my thinking...)...
and as for what is a fair price.... the market decides the price of a share... in good econmic times, it might meet its true value... but in hard economic times, with the absence of cheap credit and high interest rates... PE ratio's can be serverely beaten down.
I am happy to continue to hold the OX... good pipeline of works, solid revenue stream, plenty of cash...
and as for what is a fair price.... the market decides the price of a share... in good econmic times, it might meet its true value... but in hard economic times, with the absence of cheap credit and high interest rates... PE ratio's can be serverely beaten down.
I am happy to continue to hold the OX... good pipeline of works, solid revenue stream, plenty of cash...
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Ryan, Thanks for your two posts I enjoyed reading them. If you base your investments plan on your last sentence in the second post (Mr Buffets advice) long term you won’t have to much to worry about.
Don’t place to much credence on blue sky dream boat rumours. I am 55 and I have been reading about that tunnel since I was in my twenties.
I am in Melbourne and have this bridge for sale.....
Don’t place to much credence on blue sky dream boat rumours. I am 55 and I have been reading about that tunnel since I was in my twenties.
I am in Melbourne and have this bridge for sale.....
There is a theory that high metal production requires lots of energy. High oil prices impact on the cost of this production and therefore drive commodities companies prices down.
Oil is very high at the moment but we have plenty of cheap gas in Australia which is where most of the energy production comes from. High Global oil prices may not directly effect plant production.
Similarly, I believe high oil prices are temporary high. The fundamentals do not support high oil prices. There is plenty of oil coming out of the middle east and plenty of new oil fields coming online or available. The main reason they are so high is because of speculators who have artificially driven the oil price up.
The main reason the speculators are piling into oil is because they are betting that Bush is going to invade Iran. Iran needs to sell us oil far more than we need to buy it. It’s in Iran’s interests to keep that oil production stable. George Bush is a mad war dog but he only has 7/6 or so months left in office. For him to attack Iran would be sheer lunacy and I believe very unlikely. Eventually people will realise that the US is not going to attack Iran and the oil price will fall.
Traditionally people invest in commodities when the markets are boring. If there is nothing exciting going on then metals tend to rise. Lately we have had some excitement with the credit crises etc but I believe August should be a fairly boring month. Hopefully this will mean a rise in commodities and OZ-Metals should rise along with it.
Ryan
Oil is very high at the moment but we have plenty of cheap gas in Australia which is where most of the energy production comes from. High Global oil prices may not directly effect plant production.
Similarly, I believe high oil prices are temporary high. The fundamentals do not support high oil prices. There is plenty of oil coming out of the middle east and plenty of new oil fields coming online or available. The main reason they are so high is because of speculators who have artificially driven the oil price up.
The main reason the speculators are piling into oil is because they are betting that Bush is going to invade Iran. Iran needs to sell us oil far more than we need to buy it. It’s in Iran’s interests to keep that oil production stable. George Bush is a mad war dog but he only has 7/6 or so months left in office. For him to attack Iran would be sheer lunacy and I believe very unlikely. Eventually people will realise that the US is not going to attack Iran and the oil price will fall.
Traditionally people invest in commodities when the markets are boring. If there is nothing exciting going on then metals tend to rise. Lately we have had some excitement with the credit crises etc but I believe August should be a fairly boring month. Hopefully this will mean a rise in commodities and OZ-Metals should rise along with it.
Ryan
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It isn't a theory it is a fact but different processes require different amounts of energy.
Aluminum for example is very energy intensive.
All producers are facing far higher costs, one example was discussed in the paper today re Nickel miners and the soaring costs of Sulpher for Sulphuric acid.
We may have cheap gas in comparison to overseas but it has still risen in comparison to previous levels.
Many producers, including OXR have all or some of their production overseas.
While this topic is highly debatable and i believe we will have an easing of prices over time, you leave out the fact of growing demand, a key element to the fundamentals.
There are many reasons why people will invest in Oil and the possible Iran invasion would not be one of the major ones.
Have a look at some of the views in the Oil threads here and you will gain some good knowledge.
Have you not seen the commodity prices for the last few years as we went through a bull market?
I think you should have a look at the supply and demand situations along with a weak US$ rather than your "boring" scenario.
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Hello,
As I understand it OXR recovers large amounts of Sulphides as part of its normal copper and gold operations and is a seller of Sulphuric Acid. So there may be an element of good news buried in the last few posts. Please don’t be too hard on me if I am a off the planet here.
Regards
As I understand it OXR recovers large amounts of Sulphides as part of its normal copper and gold operations and is a seller of Sulphuric Acid. So there may be an element of good news buried in the last few posts. Please don’t be too hard on me if I am a off the planet here.
Regards
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I'm beginning to think that OXR management did this deal with Zinifex for only one reason.
To avoid a takeover for at least 2 years.
Well you buy a complete dog of a stock and get tied to a commodity that has no upside for 2-3years as per the own OXR forecasts.
No predator would consider a stock now 50-60% tied to a dog commodity just for some copper upside however good that was.
If the intention was to delay or stop a takeover then this was a genius move from the OXR team as it will stop any takeover from happening before 2010 at the earliest or unless Zinc somehow manages a Lazarus type recovery before then.
Seems they saw the best way to defend a takeover was to put it off for a few years and hope the shareholder believed the crap being fed.
Only thing I can think of that warranted this takeover if the team at OXR had the view that zinc would be soft the next few years.
If that's the case this is going sub $2 and won't be at $3 again until zinc breaks $1 ($2205/t) and copper is well over $4 ($8820) and gold well over $1000.
Seems they have wiped any takeover premium that was at all left in the stock at the same time.
Bang up job Owen & the team if this was your only motive for the takeover which sadly to me seems correct.
Looking a for capitulation day tomorrow and a test of the $1 handle.
To avoid a takeover for at least 2 years.
Well you buy a complete dog of a stock and get tied to a commodity that has no upside for 2-3years as per the own OXR forecasts.
No predator would consider a stock now 50-60% tied to a dog commodity just for some copper upside however good that was.
If the intention was to delay or stop a takeover then this was a genius move from the OXR team as it will stop any takeover from happening before 2010 at the earliest or unless Zinc somehow manages a Lazarus type recovery before then.
Seems they saw the best way to defend a takeover was to put it off for a few years and hope the shareholder believed the crap being fed.
Only thing I can think of that warranted this takeover if the team at OXR had the view that zinc would be soft the next few years.
If that's the case this is going sub $2 and won't be at $3 again until zinc breaks $1 ($2205/t) and copper is well over $4 ($8820) and gold well over $1000.
Seems they have wiped any takeover premium that was at all left in the stock at the same time.
Bang up job Owen & the team if this was your only motive for the takeover which sadly to me seems correct.
Looking a for capitulation day tomorrow and a test of the $1 handle.
I was thinking, would it be possible Ox put the whole Zinc operation into "care and maintenance" for 2 years until Zinc prices improved? Expansion plans for the zinc operations could also be shelved for a while. Or alternatively they could completely slash zinc production, to an absolute minimum, save costs.
I think it's adaptable, Oxiana at least doesn't *have* to rely on the former-Zinifex assets to survive - and that will be the strength in future years.
I think it's adaptable, Oxiana at least doesn't *have* to rely on the former-Zinifex assets to survive - and that will be the strength in future years.
explod
explod
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Obviously a lot of short term investors with small amounts of patience. IMHO I see Oz M (OXR) as one of the best long term investments on the ASX.
An excerpt from back a few posts. It surprises me that posters add the
before checking or remembering the content of the thread:-
And of course general market semtiment is taking everything with it. Soon there will be a move to quality stock and OXR should be one of the targets.
An excerpt from back a few posts. It surprises me that posters add the
before checking or remembering the content of the thread:-And of course general market semtiment is taking everything with it. Soon there will be a move to quality stock and OXR should be one of the targets.
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Perhaps there is some merit in the idea of halting expansion or stockpiling, given the following release from abare http://www.abareconomics.com/interactive/08ac_june/htm/zinc.htm
Given explod has pointed out that less than 1% of people in China & India own cars, LT prospects for zinc still look good.
explod
explod
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Appreciate the acknowledgement but the quote came from uptonryan's post above on 3rd July.
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and probably 98% cant afford a car they pobably live on $10 a week - LOL
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I'm with you BVB, in my view there were cheaper ways for OXR to get it's hand on 1 Bil cash - how about just doing a share placement.......
ZFX was always a one trick pony and with zinc markets in the sh$tter, can't see OXR going anywhere but down/sideways for the medium term future......
Plus, Hegarty isn't running the ship anymore - that man a had a huge following.....
Cheers
I must say its easy to get disheartened when you bought in at 2.50 thinking its a bargain like other analysts.
It makes no fundamental sense for it to be this low. 6.5B Cap, 1.5B cash, so prominent hill and all the mines of oxiana and zinifex are valued at 5B. That means the other mining stocks still have a lot further to fall on that valuation.
Of course the market doesn't care about fundamentals in the short term. Yes it could be the speculators pulling out because they no longer see it as a short term target for Xtrata and Co.
But AXA must also be agreeing with some of us as its taken a recent substantial shareholding.
Charting this stock won't make any sense as its a different company now with no charting history. So I don't buy that, "if it break $x expect the next support to be $y thing
It makes no fundamental sense for it to be this low. 6.5B Cap, 1.5B cash, so prominent hill and all the mines of oxiana and zinifex are valued at 5B. That means the other mining stocks still have a lot further to fall on that valuation.
Of course the market doesn't care about fundamentals in the short term. Yes it could be the speculators pulling out because they no longer see it as a short term target for Xtrata and Co.
But AXA must also be agreeing with some of us as its taken a recent substantial shareholding.
Charting this stock won't make any sense as its a different company now with no charting history. So I don't buy that, "if it break $x expect the next support to be $y thing
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