OXR Versus ZFX

[nizar]

Both these companies develop copper, gold and zinc.. and remain unhedged.

Which one is better to invest in now, and why..?

Any ideas?

 

[Smurf1976]

ZFX is focused on zinc and lead and is a significant producer of these. Copper, gold, and silver are by-products of their operations and not their primary focus. Also there are other products such as sulphuric acid and much of their lead and especially zinc is sold in alloyed form for specific end uses. And they're looking at recovery of some minor metallic elements present in their ore too. But financially it's primarily a zinc and lead company.

I know less about OXR but I think gold is much more of a focus for them than for ZFX? So OXR is more influenced by the gold price (?) whereas ZFX is linked more to zinc and lead.

 

[michael_selway]

ZFX is focused on zinc and lead and is a significant producer of these. Copper, gold, and silver are by-products of their operations and not their primary focus. Also there are other products such as sulphuric acid and much of their lead and especially zinc is sold in alloyed form for specific end uses. And they're looking at recovery of some minor metallic elements present in their ore too. But financially it's primarily a zinc and lead company.

I know less about OXR but I think gold is much more of a focus for them than for ZFX? So OXR is more influenced by the gold price (?) whereas ZFX is linked more to zinc and lead.

Yep thats true

Zinifex Limited (ZFX) is one of the largest integrated zinc and lead producers in the world. The companys operations include the mining and processing of zinc and lead ores and the smelting of zinc and lead concentrates. ZFX also produces significant amounts of silver and lesser amounts of copper and gold.

Oxiana Limited (OXR) is an Australian based copper and gold miner and exploration company. The companys operations are located in Laos, Australia, Cyprus and the Philippines. The company is focus is on the operation and development of the Sepon copper and gold project in South East Laos, the operation of the Golden Grove copper/zinc mine in Western Australia and development of the Prominent Hill copper/gold deposit in South Australia.

http://www.zinifex.com
http://www.oxiana.com.au

On their front page they have daily prices of their metals, looks like in order of significance.

ZFX Headline FY05 NPAT quadrupled compared to FY04 to $234.7m. The previous year only included three months production and profits. The headline result was boosted by an income tax benefit of $55.6m. Stripping out the tax benefit, adjusted NPAT roughly tripled to $179.1m. Sales revenue was increased fourfold to $1.92bn due to a full years production. Sales were 15.6% ahead of the prospectus forecast due to improved zinc prices, a continuation of strong lead prices and higher metal premia in most markets; partially offset by lower volumes primarily due to Century lead concentrate production due to lower than forecast lead ore grades, the Century SAG mill stoppage in March and lower than target zinc metal sales at Hobart, Clarksville and Port Pirie.

OXRs headline 1H05 NPAT of $17.3m was nearly triple the pcp result of $6.4m. After removing the volatile unrealised FX gains, adjusted NPAT doubled to $12.9m. Headline EPS improved from 0.6c to 1.4c. Growth was driven by a 52% increase in gold production to 111.3koz due to the Sepon expansion. Gold cash costs were held in check. EBITDA rose 116% to $42.6m. Margins were steady at 48.7%. EBIT tripled to $26.2m but pre-tax profit only doubled to $12.9m due to additional finance costs.

 

[bvbfan]

OXR are now primarily a copper producer

The financials which should be out in Feb will reveal how good!
But based on targets from company for last 12months
copper production is 30,000 t = $132,300,000 @ $2/lb
gold prouduction is 200,000oz = $108,000,000 @ 540/oz
zinc production i'm not sure but not worth as much as these two
Just checked and boy surprized me
zinc around 125,000 t = $234,281,250 @ 0.85/lb

this year should see full copper production of 60,000t so will be about $260,000,000 from copper production (or about 40%)

These are just the revenues from sale of production, no accounting for production costs have been made

I haven't run numbers on OXR in a while but that zinc number if correct production figures used blows my mind, and I've been long since 10c

 

[smuggler]

ZFX is the re-born PAs without debt etc. It has a long wayu to go as century mine is new and a mega producer of zinc. The silver and gold by -products are low grade and probably only good for industrial purposes. ZFX is a giant compared to OXR and whereas OXR is a takeover target, ZFX is in a position to start taking over minor miners.

Either way you are on a winner.

 

[Smurf1976]

ZFX is the re-born PAs without debt etc. It has a long wayu to go as century mine is new and a mega producer of zinc. The silver and gold by -products are low grade and probably only good for industrial purposes. ZFX is a giant compared to OXR and whereas OXR is a takeover target, ZFX is in a position to start taking over minor miners.

Either way you are on a winner.

Regarding gold and silver produced by ZFX, at Rosebery Mine (Tas) I've seen a silver / gold alloyed ingot product that they pour on site. Looks like a pale gold colour. I'm not sure what happens to it next but I assume that someone buys it and refines it into pure gold and silver?

As for production, Hobart Smelter now has the highest production capacity it has ever had. Lots of tweaking the plant to remove bottlenecks in recent years and now the production target is (I think) 261,000 tonnes of zinc per annum.

They have also converted the paragoethite dryers to run on natural gas (previously diesel-fired) and likewise converted part of their casting operations from LPG to cheaper natural gas (most of the casting heat is from electricity via induction furnaces). This should save a few $ million a year depending on what the oil price does.

Another thing they have been doing is making some modifications at Hobart to enable it to run completely on company produced concentrates. The feedstock is about 30% from Rosebery but they were dependent on Broken Hill (not owned by ZFX) for much of the rest due to different composition of the Century concentrate. Shifting to 30% Rosebery / 70% Century makes them independent of external concentrate suppliers and also will reduce the production of paragoethite (PG). This will bring PG production below the maximum level which can be reprocessed at Port Pirie thus ending the growth of the stockpile there and allowing the stockpile to be removed over 15 or so years thus ending a potential environmental liability.

To my understanding there is a higher sulphur content in the Century ore so Hobart Smelter's production of sulphuric acid ought to increase too. Not certain by how much though.

 

[nizar]

ZFX while the price has gone up 196% in 2005 is still relatively cheap, sitting on a p/e=11 while oxiana p/e=32..

But with miners in these days, nobody seems 2 care so much about valuations anymore... people are still paying 120 times earnings for LHG!

Another main diff. btw these companies is that ZFX pays a dividend...

Yeh thats tru zfx has a way to go with century, apparently its the 2nd largest zinc mine in the world based on production....

 

[michael_selway]

ZFX while the price has gone up 196% in 2005 is still relatively cheap, sitting on a p/e=11 while oxiana p/e=32..

But with miners in these days, nobody seems 2 care so much about valuations anymore... people are still paying 120 times earnings for LHG!

Another main diff. btw these companies is that ZFX pays a dividend...

Yeh thats tru zfx has a way to go with century, apparently its the 2nd largest zinc mine in the world based on production....

Well for LHG/OXR the reason why their PE's are so high etm is because their forecast EPS is very good! OXR is 32 atm, but if u used 2006 forecast EPS as per below, at current sp, PE = 11.1

EPS(c) PE Growth OXR
Year Ending 30-12-05 5.9 32.8 772.2%
Year Ending 30-12-06 17.5 11.1 196.6%

Btw Zinc hit $US2000+/tonne today!

---------------------------------------

Precious Metals Value Change % Change
Silver US$/oz 9.1 0.16 1.7897
Platinum US $/oz 1035.1 12.1 1.1828
Gold US$/oz 556.5 10 1.8298

---------------------------------------

Base Metals Value Change % Change
Copper US$/t 4685.5 34.5 0.7418
Aluminium US$/t 2366 18 0.7666
Nickel US$/t 14725 320 2.2215
Lead US$/t 1229.5 40.5 3.4062
Zinc US$/t 2044.5 42.5 2.1229
Tin US$/t 6835 140 2.0911

 

[goetzuwe]

I have a third answer about mining companies.

From the money which I invest in this field

50 % are Zinifex
25 % are Oxiana
25 % are Sino Gold

I am 9 mouth invest and earn the most money with Zinifex
but the future of Oxiana and Sino Gold looks good too.

 

[Halba]

They are all blue chips, depends on the individual? ZFX for me, FF yields too good to pass up.

 

[bvbfan]

I don't know the growth pipeline for ZFX but I don't think they are spending close to $1blillion in developing future mines in the next 2-3years
It that is the case then the reason for big dividends is justified

Of course if I am wrong let me know.

Oxiana has $700million to spend on Prominent Hill and then quite a bit on Martabe to bring that online.

 

[Halba]

I don't know the growth pipeline for ZFX

Dugald River. Scheduled to produce over 250,000tpa of zinc and a lot of lead and some copper. Another mine in QLD half the size of century (will benefit from infrastructure in the area).