OZL - Oz Minerals

All of the above, in theory, but I suspect only a marginal effect in practice. There have been a few other zinc closures/reductions recently so cumulatively supply must be starting to contract somewhat.



Disc: Holding OZL and interested in more at these prices.

Ashsaege said:

With OZL reducing it's Zinc and increasing it's Copper would this have several positive effects?

Reducing the production of zinc, would mean less supply of zinc, which would hopefully improve prices (would it make a tiny impact at all?)? which would then make OZL's left over zinc operations more profitable.

And with Copper being very profitable in the current market, an increase in supply may have a negative effect on copper prices, but it would still be very profitable.

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Global zinc production is around 10.5 to 11 million T per year so 50,000 T is 0.5%. Not big by itself but with a fair number of closures and output reductions reported, the oversupply is correcting.

Copper - USGS figures report copper output grew from 15.1 mill T (2006) to 15.6 mill T(2007). Interesting to see where it goes next - BHP have reported that Escondida is heading in to lower grade ores and expect a 15% fall in output from the mine that represents 10% of world production. http://www.bloomberg.com/apps/news?pid=20601081&sid=a4ZbwPmmlCok&refer=australia
On the other hand we have PNA's PhuKham just on line with an initial 50,000 T/yr output, OZL's Prominent Hill starting up for 110,000 T/yr output, and there will be others... I expect the credit crisis is going to bite pretty hard in the construction industry and this will hurt copper demand. Offsetting that will be accelerated investment in alternative (electric) energy as response to price of oil/peak oil realities.

My pick is that the nett effect of supply and demand factors will be a softening in price for a couple of years but hopefully nothing like the rapid slide we saw in zinc. Longer term outlook feels good. In the short term this seems a sensible response from OZL.

nioka said:

Today's preopen trading; 1,135,776 for $3,868,387 an average price of $3.40 per share. This must be getting expensive for a lot of people by now. Good to see the price holding and getting away from the low. The indicative price suggests a further rise today.

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These preopen trades are puts being exercised overnight, has happened to me 3 times this month now. I had sold Oct 08 $2.50 puts that were ex'ed early.

Only happens to me with OZL, my LGL options go through to expiry. Low income this month so far, see what happens on Monday with Naked short ban, should finally see some upside.

Chris Locke from Oystertrade called this the end of the bear(SP500 hit 50% Fib and bounced.. HARD!) I like Chris Locke!

Todays preopen trades. 558,720 for $1,661,779. This is still costing traders a lot of money. With the SP rising I hope that it is costing those short selling the stock the same amount. Now that selling short has been shown to be the scourge that it is can I suggest that we should see the SP return to a price more related to the fundamental value. OZL needs long term investors not short term traders.

nioka said:

Todays preopen trades. 558,720 for $1,661,779. This is still costing traders a lot of money. With the SP rising I hope that it is costing those short selling the stock the same amount. Now that selling short has been shown to be the scourge that it is can I suggest that we should see the SP return to a price more related to the fundamental value. OZL needs long term investors not short term traders.

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Correct me if I am wrong nioka, but I thought I heard short selling has been banned from today or was that only in the USA?

These pre-open trades are likely to be put options being exercised.

However, as far as previous short trades are concerned we assume that they will have to be covered at some stage and the way the market is moving this is likely to be expensive.

noco said:

Correct me if I am wrong nioka, but I thought I heard short selling has been banned from today or was that only in the USA?

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Yep banned for 30 days then to be reviewed.

ASIC restrict short selling with immediate effect from 22 Sep 2008

The Australian Securities and Investment Commission has made the following decisions to apply from the opening of the market on Monday, 22 September 2008:

1. Naked short selling banned
2. Covered short selling banned (subject to limited authorised market-maker exemption)
3. ASIC will reassess and advise the market in 30 days, whether or not it will at that time, or at a later date, reopen covered short sales for non-financial stocks.

ASX will implement the changes by removing all stocks from the permitted list of naked short sales.

Impact on CommSec customers:
In order to support the new regulations and return confidence to the financial markets, CommSec has made the following changes effective immediately
- Day Short Selling - No new orders will be accepted.
- Term Short Selling – No new orders will be accepted. Clients with open positions can still close out existing positions.
- ASX CFDs – No new “sell to open” orders will be accepted. Clients with open positions can still close out existing positions.
- OTC CFDs - No new “sell to open” orders will be accepted. Clients with open positions can still close out existing positions.

As ASIC and the ASX release more information regarding the changes to Short Selling we will post additional updates on the website to keep CommSec customers informed.

For further information regarding the ASIC guidelines on short selling please refer to the ASIC website (asic.gov.au)

Preopen trades are starting to fall and the SP seems to be rising, might be the start of a good time for investors. 34,737 for $167,280 today, an average price of $4.82, now that is a price I would like to obtain for mine.

nioka said:

Preopen trades are starting to fall and the SP seems to be rising, might be the start of a good time for investors. 34,737 for $167,280 today, an average price of $4.82, now that is a price I would like to obtain for mine.

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Hm, the thing is price of zinc and copepr in the future, hard to predict atm

Earnings and Dividends Forecast (cents per share)
2007 2008 2009 2010
EPS 18.8 10.2 24.0 26.3
DPS 8.0 10.0 10.0 10.0

Date: 19/9/2008
Author: Matt Chambers
Source: The Australian --- Page: 23
Australian-listed resources group OZ Minerals has switched its focus to itscopper assets, as the global price of zinc declines. As a result, output of thelatter metal will be scaled back by 50,000 tonnes of concentrate in 2009 at theGolden Grove mine in Western Australia, while copper production is to be raisedby 14,000 tonnes. This translates to a reduction by $US85m and boost of $US95mrespectively. The zinc price has fallen by about $US1.25 to $US0.75 between late2006 and September 2008

Date: 19/9/2008
Author: Jo Clarke
Source: The Australian Financial Review --- Page: 57
OZ Minerals is focusing on copper at its Golden Grove mine in September 2008following a 60% decline in the price of zinc in two years. Zinc is in oversupplydue to the high cost of shutting down smelters. Despite the short-term shift, OZMinerals is planning projects to meet forecasts of improved demand for zinc in2012

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Preopen trades today are 65,737 for $263,880 an average of $4. This is an increase on yesterdays numbers but still below recent numbers traded preopen.

nioka said:

Preopen trades today are 65,737 for $263,880 an average of $4. This is an increase on yesterdays numbers but still below recent numbers traded preopen.

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Still a few put options to be exercised at attractive prices?

Would think these should be expiring fairly soon. The " big price " ones, that is!

announcement out now - prominent hill increases its resource base

not sure if that will have a massive on the share price

Details of ANN
24/09/2008 Prominent Hill Increase in Resource Base

http://www.asx.com.au/asx/statistics/showAnnouncementPDF.do?idsID=00883081

Following on from its 3 July 2008 announcement regarding the potential for the discovery of an additional deposit at Prominent Hill, OZ Minerals announces an increase in its global resource base for the project.

In terms of contained copper and gold, the global copper inventory has increased by 35% to 2.5 million tonnes, gold by 100% to 7.4 million ounces and silver by 43% to 22.6 million ounces.

The Prominent Hill deposit remains open in most directions, and intensive drilling continues to extend known mineralisation and discover new zones, such as the western copper deposit, approximately 1 kilometre to the west of the open pit. Recent results from this area, which are not included in the resource estimates shown below, include:
• 51.0 metres at 3.45% copper and 0.33 grams per tonne of gold
• 64.9 metres of 2.45% copper and 0.67 grams per tonne of gold.

As highlighted in the following tables, the updated resource estimates based on extensive additional drilling completed in the last year represent a substantial increase over the previously published resource estimates. Resource confidence has also increased with a significant rise in the higher confidence indicated resource category.

The attached Prominent Hill Resource - Long Projection shows the 2008 Resource outlines for Measured, Indicated and Inferred Resources and diagrammatically illustrates the changes that have occurred since release of the previous (2007) Resource Statement.

A full breakdown of the resources and the detailed resource statement and explanatory notes are available on the OZ Minerals website at www.ozminerals.com

This was in today's AIR email.


Oz Minerals says it can can finance its future development projects without having to access financial markets and it has apologised for the poor performance on the company's shares since the merged company started trading on July 1.
"We have a strong balance sheet, no net borrowings and the ability to generate healthy cash flows," Oz Minerals chairman, Barry Cusack and CEO Andrew Michelmore said in the letter to shareholders.
"At a time when the world's financial system is in so much turmoil, this is an enviable position to be in."
"We have a very strong pipeline of growth projects stretching out over the next decade, and we have the financial capability to finance the pipeline without being beholden to the financial markets.
"The outlook for demand for all the commodities we produce remains strong and, although there will be some volatility from one period to the next, we are very confident of ongoing growth in demand for many basic commodities," shareholders were told.
The company is in the process of completing the $1 billion-plus first sage of the Prominent Hill multi-metal mine in South Australia. It is due to come on stream in the next few weeks.
There are expansion plans for it and for the Golden Grove mine in Western Australia, as well as new gold and copper mining projects offshore, principally in Laos.
Referring to the share price, which "has fallen substantially in recent months", Messrs Cusack and Michelmore said that investors must keep in mind the company's achievements and opportunities.


"OZ Minerals’ share price has fallen substantially in recent months.
“While part of the fall can be explained by general share market conditions, lower metal prices and higher costs, our share price performance has been worse than would have been predicted by these external factors alone.
"We understand that some aspects of our financial results have concerned some investors, but we also believe that many investors have lost sight of OZ Minerals’ substantial achievements and its undoubted opportunities."
"We are very aware that OZ Minerals’ recent share price weakness has had a devastating effect on many of our shareholders. We remind shareholders that the indicated valuation of $3.80 -$4.40 per share determined by Grant Samuel & Associates in May 2008 is substantially higher than the current share price.
"We can assure shareholders that nothing detrimental has happened to those assets over the past 4 months and we implore you not to lose sight of this fact."
"Whilst the current global economic uncertainties have prompted some investors, including hedge funds, to exit their commodity and basic materials share investments, we have recently seen a number of major, long-term investing institutions take up positions in OZ Minerals," they said in the statement.
"Operationally, OZ Minerals is performing very well; production levels are in line with our plans, and the integration of the old Oxiana and Zinifex businesses is on track.
“As we have announced, we have already identified almost $30 million of annual cost savings through the integration process, and we are confident there is more to come.
"Your Board and Management are working diligently to integrate the policies, procedures and systems capturing the best of both entities. We are also assessing the combined programs for exploration and growth to align with our strategic objectives."
OZ Minerals shares gained 10.5 cents, or 6.5% to $1.705 in a market that was off 2% or more yesterday. Firmer metal prices helped as copper and zinc rose and the US dollar fell.

A complicated result with OZL reporting statutory accounts for Oxiana for six months ended June, Zinifex for the year ended June and proforma for the combined group for 1H08. The headline proforma loss was $432.4m. The result included non recurring after tax asset writedowns of $667m, post tax merger costs of $37.4m and a $201.1m deferred tax liability reversal. Asset writedowns reflect provisional merger accounting based on the share price at the time of the transaction. Management does not believe the outlook has changed or that the assets are impaired. Adjusted proforma NPAT was $70.9m. Oxiana adjusted 1H08 NPAT was $72.2m versus $185.6 in 1H07. Zinifex adjusted FY08 NPAT fell 73% to $226.7m. Zinifex recorded a net loss of $1.4m for six months to June.

Business Impact: The result was disappointing with proforma NPAT falling well short of our $157.6m forecast. Costs, depreciation and tax were all higher than expected. Cost pressures were worst in fuel, power, transport, labour and for inputs like acid. We reduce our group OZL FY08 NPAT forecast from $406.6m to $206.2m after the poor first half. We raise near term cost and depreciation estimates. It’s unlikely Prominent Hill will contribute in 2008. Our FY09 NPAT forecast falls from $1.0bn to $772.8m with higher costs. We also conservatively reduce expected Prominent Hill output to 95,000t of copper and 69,000oz of gold at a higher cost, compared to previous guidance of 110-120,000t and 79,000oz. Assumptions remain US$3.50/lb copper, US$1.05/lb zinc and A$/US$ FX of 0.95

Anyone chosing to go along with the dividend reinvestment plan will recieve shares based on a price of $1.433c. At todays price of $1.765 that is already a reasonable profit. With the widening gap between MCR and OZL I think it is time for me to tradeback again to MCR I traded too early with the first half but will trade the balance now and hope MCR can catch up so I can trade back again to OZL. At todays prices an OZL share will buy 1.3 MCR shares.

Another preopen trade of 204,229 for $649,485 today, an averagr of $3.48. Still looks like speculators getting their fingers burnt.

still performed well today
the short banning has helped me here - im used to going short on OZL but now the long trades are putting out (but not nearly as much!)

nioka said:

Another preopen trade of 204,229 for $649,485 today, an averagr of $3.48. Still looks like speculators getting their fingers burnt.

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Not sure if you are referring to the trades that occurred around 7.00am. As I unerstand it, they were EP trades i.e. Exercising Puts they had taken out when the stock prices were these values. Hence the higher they were when they took them out, the more money they make when they fall.
A large number of EP's at the start of the day usually signifies that traders who held them anticipate that the stock will not go any lower before they are due to exercise the options (think that's the term) as they expect the price to go up.
Similarly when pre-trades are EC (exercising call's) the holders usually expect the price will fall from that point.
While the OZL price may never have been $5.32 (the highest price in yesterday's pre-market put sale), Zinifex's prices around the $20 mark converts to over $6 so I am presuming they had put options on Zinifex and converted them to OZL at the take-over.
Hopefully I have this right and am happy to be corrected if wrong.
I am interested in knowing how long put and call options can last for as put and call warrant prices are very much tied to their length before expiry.

Well, OZL looked pretty good this morning with a run up to $1.935 - thought about selling a few. Then BLAM! down to $1.80, if it falls much lower I guess my sell order will be a buy order - bummer