ZFX - Zinifex Limited

[ozrob]

If i got a half decent offer you can be sure I'd sell.

I think just about everyone out there holding ZFC would happily sell if any sort take over offer was to materialize.
I would have thought with the share price so low anyone who was interested in taking them over would start buying up a initial stake.

 

[hacheln_mice]

To state the absolute obvious ~
Well, sure it would be nice to buy at $8, but what about your existing holding? They'd have declined so majorly at that point. It's easy to say you have a long-term view, but should you need emergency funds at one point or another in the not-to-distant future, or if the markets continue to deteriorate, would be awful to sell shares at a 50+% loss.

It seems like you are finally starting to make some sense here. Kudos.

I'm not saying that ZFX/or zinc will head to zero here, or can't shoot off to new highs, but one needs to be aware of the potential that there is a value trap.

The value trap is described here in the context of the US homebuilders and hopefully it'll shed some light on what I mean.

HOUSING…All we are left with is another case study in fear greed and leverage. I started writing the case study back in February of 2007 (Wall Street set this case study in motion when housing stocks first broke out to new highs in 2002):

Homebuilders - The NEW Value Trap

Five years from now when the homebuilding stocks are 20-30 percent lower and marking time, small investors will all own shares in what the institutions have distributed to them since mid 2006. The companies are not crap and they won’t be in 5 years, but the stocks will be value traps. Victims of a badly ended trend where the stocks were overowned and overhyped. It is no one person’s fault, it is just the way Wall Street works. They are just not real growth stocks. Nothing was different this time and no particular CEO or management team will be totally immune. The industry will continue to go out of favor with Mutual Funds. That does not mean you should sell your home or get bearish on the world. Hundreds of new trends have been emerging since the homebuilders peaked last spring. Do not overthink it and get sucked into buying value. That’s for Warren Buffett and a select few, great value managers. Housing stocks, not housing as a business in general are done. Housing is cyclical, always has been, always will be. You CAN overbuild, just like you can make too much capacity for semiconductors (or zinc). With homebuilders, leverage sped things up. I disregarded my own analysis and in the Fall I bought the housing sector for a short-term bounce trade. That was my worst idea of the year. I quickly took my losses and have watching the mess once again from the sidelines.

I never tried to call a top in housing, but definitely warned that it would get worse after they had already fallen 50 percent back in February. I followed up repeatedly . I guess that’s why the permabears ‘disgust’ me so. As if calling a top makes you a special gifted market person o). I guess I was wrong about housing stocks being a value trap way back when . They never made it to value, just straight to bankruptcy. Owning them now is not for anyone other than forensic accountants who have a crystal ball into The Fed and lenders tolerance or for penny stock speculators.

I think Howard sums it up best when he concludes that:

Wall Street is cooking up the supply (for China & Solar). Timing when it overtakes demand is a fool’s game, but it will happen. China is on the verge of another break, while Solar seems to be just getting legs. Both will end the same way, but you don’t need to predict when, just avoid being the YUTZ’s holding the shares once it is clear the trend has run it’s course.

 

[Nyden]

Who wants to bet on when we'll see $10? Only 18c off now!
I'm glad I haven't been topping off at least

 

[roland]

Who wants to bet on when we'll see $10? Only 18c off now!
I'm glad I haven't been topping off at least

I think you mean $11 - unless my Comsec is very delayed. Aegis, just changed from Hold to Buy for Zinifex

Investment Opinion
ZFX is one of the world’s largest zinc and lead producers, with a portfolio of mines supplying approximately 6% of the global demand for zinc and 4% for lead. The company is unhedged, which leaves it exposed to the volatility of commodity prices and exchange rates. We have a neutral long-term view on the stock.

The Century and Rosebery mining operations are performing strongly, particularly on the back of historically high zinc and lead prices, with zinc LME inventories at year-year lows. At its current share price, we have a positive 12-month view on ZFX.

Risks
Zinifex is a high-risk investment exposed to the volatility of the zinc and lead markets. Historically, these commodities have suffered longer periods of weak prices and poor returns.

Strategic Direction
ZFX has now ceased to be a vertically integrated business and is now a pure mining company. Its most significant challenge is to maintain the company's resource base. It plans to do this by pursuing both organic and acquisition growth routes. ZFX has launched an all-cash offer for Allegiance Mining. ZFX has offered a two-tiered pricing structure, an initial bid of $0.90 per share, increasing to $1.00 per share if ZFX acquires more than 30% or if the Allegiance board recommends the offer.

Earnings Outlook
ZFX expects that if metal prices remain at current levels, increased revenue should more than offset any expected cost escalation and deliver another excellent result in 1H08. Following the successfully floated Nyrstar in October 2007, we expect EPS to decrease 44% from FY07A to 185cps in FY08F and decline a further 11% in FY09F to 165cps.

 

[Nyden]

I think you mean $11 - unless my Comsec is very delayed. Aegis, just changed from Hold to Buy for Zinifex

Investment Opinion
ZFX is one of the world’s largest zinc and lead producers, with a portfolio of mines supplying approximately 6% of the global demand for zinc and 4% for lead. The company is unhedged, which leaves it exposed to the volatility of commodity prices and exchange rates. We have a neutral long-term view on the stock.

The Century and Rosebery mining operations are performing strongly, particularly on the back of historically high zinc and lead prices, with zinc LME inventories at year-year lows. At its current share price, we have a positive 12-month view on ZFX.

Risks
Zinifex is a high-risk investment exposed to the volatility of the zinc and lead markets. Historically, these commodities have suffered longer periods of weak prices and poor returns.

Strategic Direction
ZFX has now ceased to be a vertically integrated business and is now a pure mining company. Its most significant challenge is to maintain the company's resource base. It plans to do this by pursuing both organic and acquisition growth routes. ZFX has launched an all-cash offer for Allegiance Mining. ZFX has offered a two-tiered pricing structure, an initial bid of $0.90 per share, increasing to $1.00 per share if ZFX acquires more than 30% or if the Allegiance board recommends the offer.

Earnings Outlook
ZFX expects that if metal prices remain at current levels, increased revenue should more than offset any expected cost escalation and deliver another excellent result in 1H08. Following the successfully floated Nyrstar in October 2007, we expect EPS to decrease 44% from FY07A to 185cps in FY08F and decline a further 11% in FY09F to 165cps.

Heh, I obviously don't mean 10.00, but rather 10.99 - the $10 range. Seeing that 10 would be rather painful.

I stand by my previous remark - I will be topping up..when things start to look more rosy :

I'm not exactly sure why are markets are down today at all, resource stocks especially - the commodity gains managed to hold? They've risen rather drastically last few days, yet the corresponding stocks have not followed suit in the slightest. One thing's for sure, it isn't a fundamental market at the moment.

This AGM situation is messy as well. They're off exploring now, 10% of their shares are held by a Chinese group - I don't know how they're going to secure that. That 10% will block the takeover if they refuse to sell.

It's becoming incredibly difficult to stay positive on this stock! It just keeps continuing its trend of being hit the hardest, & recovering the softest. 1 step forward, 2 steps back does not make for a good price :

This fundie is a fish out of water at the moment

 

[prawn_86]

This fundie is a fish out of water at the moment

Not really on topic, but i have to agree with you Nyden.

Most of my stocks are defying 'logic' at the moment.

Damn panic sellers/smart money/everyone else that doesnt share my view

 

[porkpie324]

Looking at the daily chart of ZFX apart from the obvious downtrend the share price rallied on well above average volume on 15/11/07, 30/11/07 & 21/12/07 these rallies were short lived and the share price fell away on low to average volume. So could we be expecting a change in direction, technically it should be although there's no divergance yet on MACD or Stochastic indicators.
At this point I'm out of ZFX, I feel that the market would be more in favour of ZFX taking a company already producing with good long reserves with no dept and not zillions of shares on issue like IGO, MCR, SMY.Porkpie

 

[treefrog]

when the volcano is spewing red hot molten lava its not a good idea to run up the mountain and try to stop the flow - better to turn and run down the mountain with it

its quite a while since I've used my downtrending fib projection tool but punching in the ABC points for ZFX of 2160; 1475; 1885 it give the first resistance target of 1460 (bingo) the second of 1200 (recent bingo) and the final target 777

don't shoot the messenger

 

[porkpie324]

Which 'froggy' is why i'm out of ZFX now and have been since late 2006, I simply hate giving up hard earned profits back to the market. But I'm always looking at sound miners shares in distress. Sooner or later ZFX will turn around and November & December share price action caught my eye.porkpie

 

[3MT]

To be ahead of the statistical 90% ish who lose money trading on the stock market one has to avoid the herd mentality. Right now the herd says get out of zinifex.

There is obviously no certainty in life but I am waiting for a technical correction(market) before jumping back on this miner (albeit not with my life savings). Its getting near that 5BN capitalisation, about twice its cash balance.

AGM is a good strategic buy, but not the only one.

 

[adobee]

With zinifex getting cheaper and cheaper you would think it has to be more appealing to those companies considering a take over attempt. I hope that zinifexs take over gets knocked back quickly and then someone makes a move on zinifex.. I would be ready to accept an offer as I am sure many others are..

 

[Nyden]

With zinifex getting cheaper and cheaper you would think it has to be more appealing to those companies considering a take over attempt. I hope that zinifexs take over gets knocked back quickly and then someone makes a move on zinifex.. I would be ready to accept an offer as I am sure many others are..

The many uncertainties that keep market-buyers away from Zinifex, may unfortunately keep acquirers away as well.

Fortunately, all of my stocks pay dividends - with the price of base metals continuing it's climb as of late, I'm not too concerned with all of this pricing. It truly is a market gone mad, where base metals can increase 1-4% overnight, yet none of the corresponding stocks follow. Great buying op though, increased earnings, decreased price.

People also seem to be already counting their chickens here before they've had time to hatch! AGM hasn't been bought yet. We can't call it a good move by Zinifex, until the move has at least made some progress, & I've yet to see an announcement of substantial holdings.

Personally, I am very doubtful with regards to the takeover, simply because a blocking share of 10% of AGM is held by the Chinese, if they don't sell - even if Zinifex gets 90% (I believe the takeover requirement is 96 or 98?), they cannot take it over.

We don't know whether zinifex will keep pursuing AGM, & we still don't know what other targets they have / what will become of the remaining money they have.

 

[nioka]

The many uncertainties that keep market-buyers away from Zinifex, may unfortunately keep acquirers away as well.

Fortunately, all of my stocks pay dividends - with the price of base metals continuing it's climb as of late, I'm not too concerned with all of this pricing. It truly is a market gone mad, where base metals can increase 1-4% overnight, yet none of the corresponding stocks follow. Great buying op though, increased earnings, decreased price.

People also seem to be already counting their chickens here before they've had time to hatch! AGM hasn't been bought yet. We can't call it a good move by Zinifex, until the move has at least made some progress, & I've yet to see an announcement of substantial holdings.

Personally, I am very doubtful with regards to the takeover, simply because a blocking share of 10% of AGM is held by the Chinese, if they don't sell - even if Zinifex gets 90% (I believe the takeover requirement is 96 or 98?), they cannot take it over.

We don't know whether zinifex will keep pursuing AGM, & we still don't know what other targets they have / what will become of the remaining money they have.

The offer for AGM can not be taken seriously. No AGM holder could be expected to fill out the application form as offered. All the applicant is offered is 90c share ( the price that will be paid if there is less than 30% and no recommendation from AGM directors) Maybe they are hoping to get 20 to 30% at that price then start another offer. If the Chinese don't sell then my small holding may be a foctor after all as I will be the last to sell. The only reason to sell would be to sell and buy ZFX and still get a benefit from AGM's potential but I don't see ZFX as good value even at the present discounted prices (as this thread suggests). Because of the good dividends in the past the SP of ZFX is inflated beyond their long term potential. I believe their price has a further fall indicated.

 

[Nyden]

The offer for AGM can not be taken seriously. No AGM holder could be expected to fill out the application form as offered. All the applicant is offered is 90c share ( the price that will be paid if there is less than 30% and no recommendation from AGM directors) Maybe they are hoping to get 20 to 30% at that price then start another offer. If the Chinese don't sell then my small holding may be a foctor after all as I will be the last to sell. The only reason to sell would be to sell and buy ZFX and still get a benefit from AGM's potential but I don't see ZFX as good value even at the present discounted prices (as this thread suggests). Because of the good dividends in the past the SP of ZFX is inflated beyond their long term potential. I believe their price has a further fall indicated.

What I do agree with, is the fact that no one in their right mind would accept at 90c. The 2-tier offer was quite foolish of ZFX, it should have been unconditional at $1. Who the heck would sell for 15c under market price?

I hope Zinifex make an offer that makes both parties happy.

Oh good, some sanity is returning to the markets! Zinifex up nearly 4% (correction, 3% now)

 

[Ashsaege]

ZFX up 33cents today... now lets keep up that pace for the next 10 days!

Bit higher volume as well. Tho has the price of zinc gone down today?

 

[roland]

Well, Zinifex started well enough, then fell on it's ****. What a lovely stock to have too many of, ho hum

 

[banska bystrica]

They will probably make the AGM offer unconditional at $1.15-$1.20 and at that price they will get 90%+. Those wanting to hold will be forced to sell once ZFX have got 90%.
Remember, without this offer, AGM would have been smashed with the rest of the market. They were 65c before the rumours started circulating that a predator was on the prowl for AGM. Since then the market had lost 10% so I would suggest AGM would be trading at around 55-60c now.
ZFX WILL GET AGM, albeit at a higher price than $1 but not much higher.
In the absence of another bidder, you watch AGM holders bail at $1.15-$1.20.

 

[roland]

How can it happen so often that Zinifex has a big swing up and down, only to finish the day exactly where it started. It seems to happen so often that it's almost scary!

 

[3MT]

[Dow Jones] Zinifex (ZFX.AU) up 0.5% at A$11.61, hit A$11.80 despite 3.5% fall in LME zinc. Traders not seeing much volume and there are no takeover rumors today, so early strength may not be significant. But A$11.54 is major technical support, being 50% retracement of lifetime rally. Weekly close above that level would be bullish after this week's fall to 16-month low of A$11.10. Zinifex is cashed up and would be a good fit for any cash-poor mining company with good prospects. Key resistance A$11.80. (DWR)

 

[chops_a_must]

[Dow Jones] Zinifex (ZFX.AU) up 0.5% at A$11.61, hit A$11.80 despite 3.5% fall in LME zinc. Traders not seeing much volume and there are no takeover rumors today, so early strength may not be significant. But A$11.54 is major technical support, being 50% retracement of lifetime rally. Weekly close above that level would be bullish after this week's fall to 16-month low of A$11.10. Zinifex is cashed up and would be a good fit for any cash-poor mining company with good prospects. Key resistance A$11.80. (DWR)

It's lined up with the exact ABC correction me and Nick were talking about a few pages back.

That's twice it's shied away and reversed hard from this area now. I'm not an expert with what happens post these ABC corrections, but they can move hard out of them. I don't know what the long term implications are, but after hitting the C area, a new trend is meant to eventuate. I guess the overall market will dictate that to a large extent, and depending on how it pans out over the next few weeks, it might be a good area for me to do a bottom draw job on these.