If you vote yes than you expect:
1. Zinc prices to trade at or around current levels in the longer term &
2. Copper prices to be lower than current spot prices in the medium to longer term.
If you have any belief in the BRIC economies and there rapid industrialisation, especially that of China & India, wouldn’t you think that given one of the worst global recessions since the great depression of the 1930’s that metal prices have only recently just bottomed out? A large reason for metal price recovery in copper and zinc has been China stock piling as they realise they can grab a bargain at current prices, that won’t be around in a few years time and they know it.
For zinc I have devoted a whole thread to its potential over the coming years, with many major zinc mines due to close or reduce production as they exhaust all resources and close. Add to this the current global financial crises and its impact on zinc prices which has led to an industry wide closure or downsizing of zinc mines across the globe and deferred a number of plans for zinc mine developments. Many of these closures and deferments will require zinc prices to push and hold around the $US0.90-1.00 for a good length of time before any decision is made to reopen or restart development and exploration programs. This in turn implies when economic conditions turn and demand for metals starts to rise again there will be a significant shortfall of zinc. Hence the reason for Minmetals to pick up the assets of one of the worlds largest zinc producers. What better way to get hold of zinc supply.
I think the poor performance since the merger of the two companies to create OZ Minerals is attributable to one thing only “poor management”. The mining industry is very cyclical and goes through periods of downturn and hence the reason for good management to have plans in place to act swiftly when circumstances change. Questions like this have to be asked. Why was OZ management so slow to react to the downturn in zinc prices? From my following of the zinc industry OZ was one of the last to react to falling metal prices. Instead of significantly curtailing or re-sizing operations along with reducing CAPEX (particularly at Century) to stop the bleeding of cash flow, it continued producing significant quantities of zinc at a hefty loss. Only months after every other zinc company made significant changes did OZ finally decide to curtail production and when it did it was almost insignificant. Development expenditure on Prominent Hill was not the main reason for cash outflow, it was Century!!!
The Chinese are very intelligent people and very conservative investors, when they see an opportunity as cheap as this one they pounce. Look around people, China Inc is investing everywhere in zinc from the bigger end of town OZ Minerals and Perilya to the smaller end of Kagara and Terramin. Each of these companies has significant zinc assets. And why is China getting into these companies, because they see what the future holds from both a financial point of view and in terms of securing supply well into the future.
I don’t hold any OZ shares and never have, but have followed it very closely over the years with great interest and intent of investing. From my point of view I couldn’t care less whether you vote for or against the Minmetals bid, but I think it’s good to take a step back and have a look at the long term picture as I think many of you are not even looking to the future. The OZ board and management have let you all down greatly since the merger (it’s a disgrace really) so why would you trust their recommendation now? They too only have their sights set on the short term! People forget how profitable Century, Rosebery and Golden Grove can be, and I think in the years to come they will be just as profitable at the height of the boom times.
Good luck on making your decision.
1. Zinc prices to trade at or around current levels in the longer term &
2. Copper prices to be lower than current spot prices in the medium to longer term.
If you have any belief in the BRIC economies and there rapid industrialisation, especially that of China & India, wouldn’t you think that given one of the worst global recessions since the great depression of the 1930’s that metal prices have only recently just bottomed out? A large reason for metal price recovery in copper and zinc has been China stock piling as they realise they can grab a bargain at current prices, that won’t be around in a few years time and they know it.
For zinc I have devoted a whole thread to its potential over the coming years, with many major zinc mines due to close or reduce production as they exhaust all resources and close. Add to this the current global financial crises and its impact on zinc prices which has led to an industry wide closure or downsizing of zinc mines across the globe and deferred a number of plans for zinc mine developments. Many of these closures and deferments will require zinc prices to push and hold around the $US0.90-1.00 for a good length of time before any decision is made to reopen or restart development and exploration programs. This in turn implies when economic conditions turn and demand for metals starts to rise again there will be a significant shortfall of zinc. Hence the reason for Minmetals to pick up the assets of one of the worlds largest zinc producers. What better way to get hold of zinc supply.
I think the poor performance since the merger of the two companies to create OZ Minerals is attributable to one thing only “poor management”. The mining industry is very cyclical and goes through periods of downturn and hence the reason for good management to have plans in place to act swiftly when circumstances change. Questions like this have to be asked. Why was OZ management so slow to react to the downturn in zinc prices? From my following of the zinc industry OZ was one of the last to react to falling metal prices. Instead of significantly curtailing or re-sizing operations along with reducing CAPEX (particularly at Century) to stop the bleeding of cash flow, it continued producing significant quantities of zinc at a hefty loss. Only months after every other zinc company made significant changes did OZ finally decide to curtail production and when it did it was almost insignificant. Development expenditure on Prominent Hill was not the main reason for cash outflow, it was Century!!!
The Chinese are very intelligent people and very conservative investors, when they see an opportunity as cheap as this one they pounce. Look around people, China Inc is investing everywhere in zinc from the bigger end of town OZ Minerals and Perilya to the smaller end of Kagara and Terramin. Each of these companies has significant zinc assets. And why is China getting into these companies, because they see what the future holds from both a financial point of view and in terms of securing supply well into the future.
I don’t hold any OZ shares and never have, but have followed it very closely over the years with great interest and intent of investing. From my point of view I couldn’t care less whether you vote for or against the Minmetals bid, but I think it’s good to take a step back and have a look at the long term picture as I think many of you are not even looking to the future. The OZ board and management have let you all down greatly since the merger (it’s a disgrace really) so why would you trust their recommendation now? They too only have their sights set on the short term! People forget how profitable Century, Rosebery and Golden Grove can be, and I think in the years to come they will be just as profitable at the height of the boom times.
Good luck on making your decision.
