ZFX - Zinifex Limited

[Investor]

Re: ZINIFEX..ZFX

Check www.kitcometals.com if we stay around these shareprice sooner than later as MACQURIE said we would become a takeover target...no debt...good mine life of up to 15 years...good cashflow..shortage of ZINC...good orders....and money in the bank...makes one wonder but I would not at all supprised...we will know soon

I am new to this forum and had a look at this thread because I hold ZFX. Bought 30,000 shares in 2004 at average price of $1.60 as I thought the shares were undervalued at that time.

Chicken has previously stated that he welcomes any factual comments on ZFX. As such, I will oblige.

Chicken has stated, too many times, ZFX has "no debt". Read the financials FYE 30/6/04. As at 30/6/04, ZFX had $169.1 million in bank debt.

Chicken has stated "good mine life of up to 15 years". ZFX has two mines. Century Mine in Queensland and Rosebery Mine in Tasmania. From what I have read, the former has an expected mine life of 11 years while the latter has an expected mine life of 5 years (but I could be wrong).

The "money in the bank" that Chicken refers to will largely be spent on the $70 million on-market share buy back (bear in mind this was in lieu of paying dividends) and exploration expenditure to try to find new ore reserves.

ZFX has stated to the ASX (public announcement) that the maximum price it will buy shares in the buy back is $3.2718.

I will continue to hold ZFX, unless I expect a sizeable fall in the share price at some point, as I am a long term investor and not a trader. However, I am aware that investment in mining shares carry a much higher level of risk of capital loss than say, Woolworths or AGL; and I would not do what Chicken has done to continuously post ZFX.

Any global economic recession (they do occur once a while) will bring ZFX's share price lower, as will happen to most mining shares and many other shares.

 

[Warren Buffet II]

Re: ZINIFEX..ZFX

ZFX has stated to the ASX (public announcement) that the maximum price it will buy shares in the buy back is $3.2718.

Good post investor, that is the kind of thread we want here, interesting informationa and real facts, that is great.

I just want to point to the public announcement from ZFX about the buyback share price, I am not sure and I am not an expert on this but that price changes everyday (at least everyday they buy new shares), why? I do not know but it goes up and down, they refer to some document rule 7.33 ??

Anyone knows why that price changes?

the highest price allowed today is $3.2193

Now, about the debt, this is what the financial statement says "At 31 December 2004 the company held cash reserves of $164.4 million. With outstanding borrowings of
$158.5 million at the same date, the company was effectively debt free."


Regards,

WBII

 

[Investor]

Re: ZINIFEX..ZFX

I just want to point to the public announcement from ZFX about the buyback share price, I am not sure and I am not an expert on this but that price changes everyday (at least everyday they buy new shares), why? I do not know but it goes up and down, they refer to some document rule 7.33 ??

Anyone knows why that price changes?

the highest price allowed today is $3.2193

Now, about the debt, this is what the financial statement says "At 31 December 2004 the company held cash reserves of $164.4 million. With outstanding borrowings of
$158.5 million at the same date, the company was effectively debt free."


Regards,

WBII

WBII,

I think rule 7.33 has to do with the Corporations Law that regulates on market share buy backs, to implement some control over share price movements that could occur when a buy back exercise is in play.

In ZFX's case, it stops ZFX from spending $70 milllion all at once, which could lead to an unwarranted price rise.

The timing of the buy back (announced in Feb. 05 for an April 05 execution) was probably good as the market was undergoing a correction. Good for existing ZFX holders as the company can buy at lower prices caused by the market correction.

 

[Warren Buffet II]

Re: ZINIFEX..ZFX

I agree, it has been a great time for the buy-back.

Found rule 7.33

"A company may only buy back shares under an on-market buy-back at the price which is not more than 5% above the average of the market price for securities in that class. The average is calculated over the last 5 days on whihc sales in the shares were recorded before the day on which the purchase under the buy-back was made"

http://www.asx.com.au/ListingRules/chapters/Chapter07.pdf

WBII

 

[chicken]

Re: ZINIFEX..ZFX

Warren, hope you did not go short on those 125000 shares...dow had its highes increase 206 points...so with Lead up Zinc down a fraction of a % we should see a niece rise in this stock and many of the others...and Zinifex will have to buy soon more quantaties as they MUST spend the $70millon in 12 months as the $70k they buy a day is not enough...annyone knows who the broker is who has to buy...for Zinifex....and your replies are tremendous...I have every confidence in this stock as world supplies are dropping CHINA will be the driving force for this stock...and of course not to forget they are now actively exploring....in AUSTRALIA....for more minerals

 

[chicken]

Re: ZINIFEX..ZFX

Just this ,Zinifex will present their first quater on the 28th APRIL...Zinc stocks declined another1554 tonnes overnight...

 

[markrmau]

Re: ZINIFEX..ZFX

but zinc 3 month futures down 1.2% (though this could be letting off steam from this weeks run)

 

[chicken]

Re: ZINIFEX..ZFX

The futures...well we are talking STOCK in HAND...manipulation by futures....see it rise today the monkey has turned..DOW is up by 206 pionts its highest rise in 2 years..LEAD is up...so your 1.2% fall means silch...the Dow does the talking...should increase by at least 10c today

 

[markrmau]

Re: ZINIFEX..ZFX

Manipulation of the 3 months zinc contract on the LME? Rubbish.

Chicken, by investing in zfx, you have a proxy investment in the zinc futures market. If I were you, I would try to learn as much about the futures market as I could, and find out what terms such as backwardation mean.

I am not saying zfx won't go up today, or that it won't reach $4 (though I highly doubt it). What I am saying is that the futures market suggests the spot price of zinc has further to fall (which is contrary to your implied comments about LME stocks decreasing).

 

[chicken]

Re: ZINIFEX..ZFX

check...www.kitcometals.com if you wish to see the state of the metal market worldwide...I am not in any future market but in shares of ZFX...Zinc stocks are falling worldwide..so prices will rise..not any other way...this year there is a shotage of 395000 tonnes...next year even more..all is sold what ZFX produces...and you are saying ZINC will fall...the demand exceeds supply..so price will go up thats the way I see it...CHINA is the driving force....LEAD is UP....anyway check it out

 

[Investor]

Re: ZINIFEX..ZFX

Hello Chicken,

Your enthusiasm for this share has convinced me to buy in so lets see what happens.

Cheers

Suzanne

This was the post that prompted me to type my first post in this forum a few days ago, on this thread.

I do not want to see anyone in this forum being exposed to potential financial loss, out of chicken's persistent ramping of ZFX.

I stress that I hold ZFX and still believe it to be worth holding.

However, uninformed investors need to adequately comprehend that an investment in ZFX does carry a higher than average risk level.

I tried to send chicken a subtle message to stop ramping, but it seems to me that perhaps my message was too subtle.

I will now spell it out.

ZFX is the phoenix that rose from the ashes of Pasminco, under a scheme engineered by the Insolvency Practitioner that required the approval of the consortium of bankers that had already lost a lot of money to Pasminco. If the banks did not agree on the debt to equity swap, ZFX would not exist. Pasminco was very highly geared, zinc prices were low (due to oversupply and inadequate demand) and Pasminco's due diligence team did not uncover a big loss on a 'marked to market' position with an off balance sheet derivative instrument on a takeover acquisition.

ZFX's assets are all previous assets of Pasminco. The shareholders of Pasminco lost all value from their shares, as usually happens when a company bites the dust (I did not hold any Pasminco). The banks also lost a chunk of their money to Pasminco.

From memory, ZFX's century mine was sold by Rio Tinto to Pasminco, when Rio Tinto decided that zinc and lead were not what Rio wanted to pursue. This rules Rio out as a possible suitor for a takeover of ZFX.

In the current issue of BRW, on page 58, "ZFX is an almost pure zinc company with its fortunes tied to the demand for (and the price of) zinc. This, in turn, is tied to the demand for steel because of zinc's use in galvanising, which protects steel from rusting."

The outlook for the steel industry is unclear. Please see my comments in the thread for Bluescope Steel (BSL).

From the same kitcocasey website cited by chicken, comes the following article on zinc, which was published yesterday:

"Of course, there are X-factors that could result in unexpected price falls. As is the case for many commodities, industrial growth in the US and, particularly, China is key in driving demand for galvanized steel and therefore zinc. In the case of China, one development that may negatively impact the global zinc price is renewed central trading of the metal in Shanghai. According to a Platt’s Metals Week article late last year, four of China’s major zinc producers are considering resuming trade of zinc on the Shanghai Metal Exchange. The four companies were also reportedly considering pooled buying to achieve better prices, which could spur domestic production. However, Chinese mine production of zinc has reportedly been limited by depleting reserves, while smelter output has been limited by power shortages at facilities (such as the Zhuzhou smelter, which was forced to shut down in January), factors tending to push China in the direction of importing more.

Despite such positive developments for the zinc market, there is caution amongst both analysts and producers going forward, given the volatile price history of the metal. Last December, a Macquarie research report noted that, despite an optimistic price outlook, zinc is a “perennial dasher of hopes” and that “years of underperformance leave us cautious of getting too bullish at current levels.” At a meeting of the American Zinc Association in early March, Greig Gailey, CEO of Australian zinc producer Zinifex, owner of the Century mine in Queensland, the world’s second largest zinc producer, warned that zinc’s current bull market could be “destroyed by overinvestment in new capacity” on the part of miners and refiners. For his part, Gailey said that he sees high zinc prices sticking for three to five years.

The same conference heard similar warnings from a CRU analyst, who warned, “The low prices seen in 2000 closed many mines or put them on a care-and-maintenance basis. These can be taken back on stream.” CRU, in fact, sees zinc reaching a 240,000 tonne surplus by 2008, at which point it will take “ten years for profit to recover.” One such mothballed project that could have a major impact on zinc prices is the Lennard Shelf mine complex in western Australia. The operation, formerly owned by Western Metals, produced 176,000 tonnes of zinc in the year ended June 30, 2003, just before it was shut down. In other words, Lennard’s output alone would make up the lion’s share of the zinc market’s current deficit. Lennard Shelf has since been bought by Teck Cominco, which reports that the complex’s potential annual capacity is as high as 3.1 million tonnes.

However, some producers may be getting out of the zinc market, even as prices rise. Late in March, Anglo-American subsidiary Kumba Resources announced that they are considering moving away from zinc because of the metal’s unstable fundamentals. Kumba’s executive director Richard Wadley told Business Day that despite the “great buoyancy in the zinc market” of late, “historically it has been very volatile.” The company currently owns an 89.5 percent stake in the Rosh Pinah mine in southern Namibia, which produces 120,000 tons of zinc annually."

I continue to hold ZFX but my entry price provides a huge margin of safety. I expect further price rises going forward, but I could be wrong and the $4 that chicken sees could be overly ambitious, unless there is a takeover.

I have also read that with mining shares, one has to know when to sell. Easier said than done, of course.

 

[chicken]

Re: ZINIFEX..ZFX

I am impressed with your post..question....you talk about western METALS who produced 176000 tonnes of ZINC concentrate..right..now you say they could produce 3.1 million tonnes a year..now..think what you require to produce this amount...firstly to get this capacity..you need an investment of $1 to $2 billion $$$$...to get the engineering of the project...which we have in Zinifex...the logistic of it is massive maybe $2billion is not enough so you think it will happen over night and ZINC will be cheap as chips...no this is a massive undertaking IF it will happen or when it will happen read my first posts on the company..how zinifex who are the 2nd largest producer of this metal...plus you forgot...they are large SILVER,LEAD...copper and gold producers as well...and Pasminco went BUST with $3.5 billion Dollars..as you say shareholders lost their equity..I have lost in a few companies..well it happends...bad luck,....so where is the capital coming from to build THIS infrastructure...MAKES YOU WONDER WHEN YOU THINK WHAT IT WOULD COST TO BUILD A COMPANY SUCH AS zfx...WHAT WOULD IT COST TO CREATE BUILD ANOTHER zinifex...eg SMELTERS...$2billion or $3 billion...we have 500 million shares at present value..$3...which is $1.5 billion..and you say I am dreaming re $4...the company is DEBT FREE..does that not account for the value we have plus I like to see if western Australia will produce this hugh quantaty of ZINC...what they believe they will produce so far NOTRHING is produced in this mine 176000 tonnes was produced...and these are just figures which they dream about...ZINIFEX are producing THE GOODS.. NOW when it is needed..what happends in 5 years time..well thats anybodies guess....We all can say we can produce but that now is the matter which is important..re takeover that at present share price is a high possibility...because what is Zinifex worth...plus the 5 Smelters...who are producing.....$3 is a joke because you would not be in the position at todays prices to replicate what Zinifex has got and that is not ramping but plain facts as I see them..you build a house and everybrick COSTS MONEY..and the same with a company...it all have massive costs which ZINIFEX has got freehold...and is a great little producer..on the 28th April the 1st quater will reveal how we are going...now $70million $$ ZFX is spending to buy their own shares back...which means 20 million to 25millon shares will be of the market...I worked it out that 20 shareholders hold 425 million shares 75 million we have freefloating minus buyback...and you have 50 million shares...not much for the whole of Australia...stock is tightly held...so its going to get intresting...where this company is going from here...but they are making $$$ and producing the goods...

 

[Fleeta]

Re: ZINIFEX..ZFX

Chicken, I like your post. But how about using paragraphs. It makes it alot easier to read.

 

[RichKid]

Re: ZINIFEX..ZFX

Chicken, I like your post. But how about using paragraphs. It makes it alot easier to read.

That's probably why it isn't in paras, so you can't easily pick all the stuff that's been repeated. Not picking on chicken for the sake of it here, I just don't think he's changed his 'spots'...wonder how many people who dont post are influenced by his 'enthusiasm', let's hope they don't suffer any losses or panic everyday that ZFX stays below $4.

 

[Investor]

Re: ZINIFEX..ZFX

I am impressed with your post..question....you talk about western METALS who produced 176000 tonnes of ZINC concentrate..right..now you say they could produce 3.1 million tonnes a year..

If you read my post properly, you will see that I was quoting from an article from that kitcocasey website that you keep referring to, in many of your posts. That article was written by someone called Dave Forest.

If you read my quote from that article properly, the 3.1 million tonnes is merely stated as potential annual capacity. Potential is very different from actual.

Perhaps you should read that article if you have not done so (if you have not done so, can I ask why, since you are such a fan of ZFX?). From that same article is the following:

"Despite these factors, the zinc price was sluggish in the beginning of 2004 compared to other base metals, rising to $0.50/lb in the first quarter and then actually declining to $0.43/lb through to September. Why? We believe it was due to something called the “hidden stock phenomenon”. During 2002 and 2003, Teck Cominco estimates that some 517,000 tonnes of zinc entered the market, and yet official stockpiles such as those of the LME only increased by 245,000 tonnes. It’s thought that the missing 272,000 tonnes were delivered to warehouses but not reported, simply being held by buyers."

ZFX is the second largest zinc producer. I believe Teck Cominco is the largest in the world.

 

[Investor]

Re: ZINIFEX..ZFX

sorry, zinc is not used for Stainless manufacturing my mistake but all the same its nearly up 5c..so who is buying the market tells me its a good stock....

Zinc is used for galvanising steel to prevent rusting. This is why Bluescope Steel has a product line called "zincalume". As such, the demand for zinc is linked to the outlook for the global steel industry. The global steel industry was in the doldrums a few years ago, due to serious oversupply and inadequate demand, which prompted BHP to sell its steel business (now called Bluescope Steel).

Demand for steel then soared, due to China's rapid industrialisation and also, to a lesser but still significant extent, India. The outlook for the global steel industry is currently unclear, partly due to huge rises in iron ore and energy prices. This is why BSL is trading at a very low P/E FY 04, FY 05 and consensus FY 06. Some analysts believe demand will be sustained. Others think a fall in demand will occur. To state the obvious, there are no certainties. Only time will tell.

 

[Investor]

Re: ZINIFEX..ZFX

...plus you forgot...they are large SILVER,LEAD...copper and gold producers as well...

chicken,

You have no concept of the level of research that I do with my investments (and I do not blame you because you do not know my background).

However, do exercise a bit more care before you allege what I "forgot".

You have asked readers to check the zinifex website on many of your posts.

If you check the ZFX website, you will see, under the caption for "Products", that ZFX's products are zinc, lead and silver.

No copper or gold are mentioned, because these metals are so low in quantity for ZFX that the metals (by products from the mainstream zinc and lead mining) have to be stored in the store room, until they reach saleable quantities.

As for silver, if you read ZFX's financial reporting, you would be aware that only small quantities are produced.

Questions for you:
1. Are you aware of the outlook for lead?
2. Are you aware of how much CAPEX ZFX would have to spend to comply with EPA legislation at the end of the mine life for the two mines or if they decide to close any smelters should new smelters in China render them unviable?

To the extent that we both hold ZFX and expect price rises, we are in agreement.

Where we differ (like night and day) is that you appear to see it as a certainty, whereas, I do not. I see it as a likelihood of further price rise, with risk of price falls, should a global downturn occur (whenever it decides to do so).

My posts in this thread are intended to keep readers more informed. Information is critical whether one is an investor or a trader. Readers can make up their own minds as to what your intentions are.

 

[RichKid]

Re: ZINIFEX..ZFX

Investor,

I would like to thank you for your excellent posts and critical analysis in this thread (and elsewhere). I for one have enjoyed them and being a reader of other resources websites (such as caseyresearch) enjoy the reference to quality material. This is despite the fact that my trading method is based primarily (but not exclusively) on charting, quality posts are appreciated by all types of investors and traders.

It is clear from what you say that the factors which affect the sp of a stock, while they need to be understood, are normally outside the direct influence of the average investor or trader. You mention the uncertain outlook for steel and industry dynamics. It's issues such as those that Chicken chooses to ignore or doesn't comprehend. His belief, imo, is that misreprenting and ramping a stock is going to influence the sp to his advantage. Mr Market is less malleable than that.

In the meantime Chicken is doing little to help anyone. Perhaps the best thing he has done is encourage you to post. Perhaps that will be his saving grace.

 

[Investor]

Re: ZINIFEX..ZFX

Investor,

I would like to thank you ......

G'day RichKid,

No problem. I will soon correct a few more 'errors' that chicken has posted.

Regards.

 

[chicken]

Re: ZINIFEX..ZFX

Impressive post from Investor..I just wanted to point out what the cost would be to reproduce Zinifexes Smelter and mines...$3 billion to $4 billion..in todays costs...that you had NOT answered...the share price at $3.06 is still a joke of what they got..or are you saying I am wrong...post your reply..after all they own everything and are effectively DEBT FREE.....