PEM - Perilya Limited

[mishu]

"Perilya weighs into Herald bid
13 Dec 2007 | The Australian Financial Review | Michael Vaughan

Base metals miner Perilya will hold talks with Herald Resources following a $455 million bid for the explorer from Indonesia's largest mining company, PT Bumi Resources. "

http://afr.com/home/viewer.aspx?ATL://20071213000020076505&title=Perilya+weighs+into+Herald+bid

"...Between January 8 and 14, the Dow Jones AIG commodity index will adjust the weighting of many commodities including zinc, nickel, copper and aluminium traded on the London Metal Exchange (LME).
The adjustment is likely to involve the purchase of about 250,000 tonnes of zinc and 10,000 tonnes of nickel. Both metals are used to make steel.
To put those numbers into perspective, stocks in LME warehouses now stand at around 77,000 tonnes for zinc and at 46,000 tonnes for nickel.
"If you look at buying relative to market size, the rebalancing is probably going to have its most significant impact on zinc," said Michael Jansen, analyst at JPMorgan.
"It will also be very friendly to nickel...""

http://www.guardian.co.uk/feedarticle?id=7149765

 

[UMike]

Do you think a short mine life is an issue with PEM?

I'll concede that I don't know a great deal about PEM (well not as much as I do CBH) but I am not overly concern about some estimation of the mine life.

Broken Hill Southern Operation conservatively credit five years mine life based on reserves.

As well as.....

Perilya (PEM) announced a Board decision to proceed with a six month feasibility study on the development of the 3.7Mt North Mine Deeps project at Broken Hill. Perilya's CEO, Len Jubber, said that the potential extension of the existing North Mine would add substantial value to the Broken Hill mine, extending the mine life and reducing dependence on the Southern Operations.

 

[mishu]

Regarding mine life they are also a go for copper since that discovery. And they have just sold their stake in Herald for a nice 16 million dollar profit, as I calculate it. Should be good for their bottom line this quarter.

http://stocknessmonster.com/news-item?S=PEM&E=ASX&N=390740

Perilya Limited (ASX: PEM) has today sold its 8.86% shareholding in Herald Resources Limited for a total consideration of approximately $39.3 million and ceases to be a substantial shareholder.
...Background to Perilya
Perilya Limited is an ASX 200 Australian base metals mining and exploration company. Perilya is investing substantially in the development of its three major projects located in the Broken Hill, Mt Isa and Flinders regions as well as exploration in the surrounding tenements.
The company is expanding its operations at the iconic Broken Hill mine through the development of an exploration decline at
Potosi, re-developing the North mine via a development decline, conducting an open pit feasibility study into the Flying
Doctor deposit and conducting exploration within a ten kilometre radius of the concentrator.
During 2007 Perilya successfully mined and stockpiled approximately 77,000 tonnes of contained zinc from the Beltana deposit at the high grade zinc silicate Flinders project in South Australia. It is currently conducting a feasibility study into a similar project at the adjacent Reliance deposit. The high grade nature of the ore obviates the need for metallurgical
processing enabling direct shipment to smelters over the next couple of years.

The Company is also targeting a 200,000 – 300,000 tonnes copper resource through extension drilling at its 112,000 tonne
Mount Oxide copper project in the Mt Isa region in Queensland.
Perilya has a strong balance sheet with low debt levels and is actively seeking growth opportunities

 

[Freeballinginawetsuit]

Regarding mine life they are also a go for copper since that discovery. And they have just sold their stake in Herald for a nice 16 million dollar profit, as I calculate it. Should be good for their bottom line this quarter.

http://stocknessmonster.com/news-item?S=PEM&E=ASX&N=390740

Yep the HER saga is a bit of a dissapointment for all concerned, PEM have done the right thing to exit there holdings for a tidy profit ( HER is a bit of a done deal in my opinion, all concerned may as well accept and move on).

Market isn't liking it ATM though.................perhaps most aren't happy at the 100% plus profit and wanted PEM to hold out for env approvals till the neva neva!.

IMO PEM are oversold and undervalued and have loaded up today

 

[treefrog]

technically (day chart) there is strong S/R line at $2.50 but then its down to S/R at $2.00
froggy's worth is thatthe $2.50 level should hold and bounce for a while but a lot of overseas buying a coupla years back and suspect they would be bailing with falling zinc (halved since oct 06) and looks like completing a classic head and shoulders pattern taking it back to $1200 - if PEM goes with it share price will drop to $1.60 before mid next year

 

[Freeballinginawetsuit]

froggy's worth is falling zinc (halved since oct 06) and looks like completing a classic head and shoulders pattern taking it back to $1200 - if PEM goes with it share price will drop to $1.60 before mid next year

Pretty much got the opposite cycle view on Zn price than you!.

PEM would be in some serious probs if the SP reached $1.60, considering there cash reserves and stockpiles.......... something like a cave in might do it though .

 

[treefrog]

hope u r right freeball - just calling what IS there atm and possibilities

the thread was concern/reason for PEM's current slide

have a good xmas

 

[tronic72]

Am looking at buying back into PEM. The recent high volume combined with a turn around in the Zinc price should make all the difference.

Here's part of what Huntley's said in their recent buy recommendation:

"We initiate PEM coverage with a Buy recommendation. Key attraction is likely production growth at Broken Hill and other advanced projects. Our valuation is $3.55ps. Long term assumptions are US70c/lb lead, US90c/lb zinc and US$10/oz silver. We use an A$/US$ foreign exchange of 0.80 and a 10% discount rate. PEM’s share price has languished since the tragic death of an employee in January."

Anyone else got PEM on their watch list?

 

[DowJones]

I have PEM on my watchlist. I have bought the stock twice. The recent one was about 2 months ago when I bought it at 3.90 and sold at 4.30. I thought it was going on a strong run...

The price of zinc needs to rebound, but on the other hand, what mining stock is trading at PE of 5.52???

Its EPS, however is decreasing due to their mine life - but they are cashed up and will acquire.

IMO, at $2.6 can it get cheaper? Wait for a more favourable RSI I think.

 

[tronic72]

The current RSI is only 30.1. I was under the impression that anything around the 30 mark meant the stock was over sold.

Correct me if I'm wrong.

 

[bvbfan]

RSI can stay below 30 for a long period, doesn't make it a great buy now.

If you had used RSI, then on the run up the RSI went above 70 at about 2.90 but it stayed overbought to $5

 

[treefrog]

Am looking at buying back into PEM. The recent high volume combined with a turn around in the Zinc price should make all the difference.

Here's part of what Huntley's said in their recent buy recommendation:

"We initiate PEM coverage with a Buy recommendation. Key attraction is likely production growth at Broken Hill and other advanced projects. Our valuation is $3.55ps. Long term assumptions are US70c/lb lead, US90c/lb zinc and US$10/oz silver. We use an A$/US$ foreign exchange of 0.80 and a 10% discount rate. PEM’s share price has languished since the tragic death of an employee in January."

Anyone else got PEM on their watch list?

tronic - that Huntly report does not instill confidence as PEM forward sold all their silver for the next several years at less than $5/oz a couple of years ago - a significant blunder as the spot price of silver quickly rose to three times that shortly after the sale and is thereabouts today

the other thing that is not good news for PEM share price is that analysts are continuing to downgrade earnings forecasts

and living on top of their main cashcow here in broken hill one hears a lot of rumours about the local mine - one is that the amount of ore remaining in the north mine is much less than old records indicate and that comes from the former underground foreman for that mine who says they actually mined the pillars much narrower than agreed with the DoM - so who knows - refer to ASX ann "Decision to Proceed with North Mine Deeps Feasibility Study" dec 20

 

[oldblue]

Hi treefrog
Given the prospects for silver it would be interesting to know who PEM sold its 5 years' production to.

Any ideas? Did they ever disclose this?

 

[treefrog]

Hi treefrog
Given the prospects for silver it would be interesting to know who PEM sold its 5 years' production to.

Any ideas? Did they ever disclose this?

yes they did - this is part of their 9/9/05 asx ann......"PEM has sold 17.2million oz of payable silver to Coeur for an upfront payment US $36m - a further $6m will be paid in annual increments over the next 8 years plus $2 /oz as each oz is produced plus a refining charge of 31c/oz...."


This (in part) is was what I penned for the local rag around that time (14th jan 06)......... (the hillbilly trader = treefrog)


"But then the market has begun to wake up that 65% of Perilya’s product is zinc and that the zinc price growth that started in late 2004 was not a short term spike with the price having doubled from $1000/tonne to near $2000 today.
And hasn’t the Perilya price responded – up to the time of writing (Saturday) it has lifted 33% in just 10days.
A really rough check on this would be to say that the market valued Perilya shares somewhere around $1 over the last few years when it was drifting in and out of profit each year so all things being equal, the product selling prices have now doubled so we should be good for a significant free cash and earnings boost from here on – dare we hope for double on those and the share price as well?
Checking the longer term chart Perilya has twice before tried to break through the $1.45 level and failed (jan 94, jan 04) and looks set to have another attempt at this level. When trading, Hillbilly has observed that quite a few shares move above a price level on their third attempt. Conservative traders will wait for a clear break above that resistance, but for others the recent doubling in zinc price will be more than enough to jump on board with the expectation that dividends now should not now be too far away.
With our additional homework done, many would probably agree with the analyst who made the strong buy recommendation.
And does Hillbilly have any concerns about the hometown miner? One certainly. Just how market savvy are the Perilya board members when they sell all the family silver in September last year at the bargain basement price (to the purchaser mind) of little more than $5/oz when the market price was then $7.50 and rising solidly on the shirt-tails of the gold trend.
Silver is now $9/oz and rising rapidly with some year end forecasters suggesting $15/oz.
Let’s put this another way – Perilya produces silver, almost 2million oz a year at negligible cost because it is a by-product of the main lead and zinc operation. It sells this silver at half market price to buy a gold mine at full price. The forecast price increase for silver is to at least double but the price of gold to increase by only 40%.
All going well, the gold mine will produce 65,000oz pa, marketable at say $600/oz for a net say $200/oz giving $13m profit pa less the costs to buy the mine. Whereas the 2m oz of silver marketable at say $11/oz giving a net profit of $20m pa. Or $7m pa better off staying with the well proven silver production.
The CEO’s spin to shareholders is that it is a good deal, so I contacted the company a few times last week to understand how so as hillbillies are generally regarded as fairly thick, but I couldn’t get anyone to tell me.
And without a glossy market education on these matters, Hillbilly’s view is that the potentially foregone $50m on 17.2m oz silver would have been very welcome as dividends to the long suffering shareholders.
And let me state with certainty that board members won’t let this solid gold clanger affect their options, salaries and bonus entitlements. They will simply ask us to look how much better the share price is now than in June last year or some other diversion.
But that’s the market

Until next time
The hillbilly trader

 

[oldblue]

Thanks for that, treefrog.

I've been tracking PEM for a few months now but didn't research back far enough to find the goods! Very interesting, hillbilly was right on the money!

Seems to make CXC an even brighter prospect?

 

[treefrog]

keeps attacking the 2.50 S/R line looking for a hole

frog has changed his solid 2.50 S/R line to one with gaps in to signify the price is looking to go lower - as the gaps and holes are equal length now, it has a 50/50 chance to move lower next time it bumps up and down again.

 

[mishu]

"- PERILYA LIMITED

UBS rates as Upgrade to Buy from Neutral - The broker has lowered its target price to $3.05 from $3.35 after downgrading FY08 net profit by 48% and FY09 by 18%. This comes after factoring in the company?s weaker production guidance and lower short-term zinc prices into its valuation. UBS has, however, upgraded the rating to Buy from Neutral as it believes that much of the risk with Broken Hill?s operating performance has been priced into the share price. ... "

This is a recent upgrade to buy from UBS.

Source FN Arena Broker Call Headlines - 11 Jan 2008
Sunday Jan 13 10:30 AEDT

 

[DowJones]

I remember buying this stock at 3.92 and selling it at 4.25 not too long ago, how times have changed, for the worse...

The PE is remarkable but baked into that is the decreasing EPS due to the mine life. PEM Ive read is cashed up for acquisitions though.. Also, a rally in Zinc prices will help it greatly.

Another with low PE for smilarly reasons is ZFX...

Both look attractive and could bounce, or await a takeover at these low levels

 

[tronic72]

I remember buying this stock at 3.92 and selling it at 4.25 not too long ago, how times have changed, for the worse...

The PE is remarkable but baked into that is the decreasing EPS due to the mine life. PEM Ive read is cashed up for acquisitions though.. Also, a rally in Zinc prices will help it greatly.

Another with low PE for smilarly reasons is ZFX...

Both look attractive and could bounce, or await a takeover at these low levels

I agree 100%

Yet another decent stock who's price is totally oversold. at $2 this share is good value but the way the market is I won't go near it. It's not like the company isn't worth anything.

Nearly 200 Million in cash and assets, good income, at a bargain basement price. It's not like the company is failing or even in bad shape.

Maybe PEM and ZFX should merge to become a Zuper Cr@p Miner

 

[DowJones]

Both PEM and ZFX fell further today.

I was watching CNBC and some analysts noted that there is starting to be a lower demand on commodities and there is a stockpile on the LME. With zinc prices getting smashed recently, hopefully it wont drop too much further.

PEM seems like a good buy, but I rather fly to quality and hold big caps right now.