ZFX - Zinifex Limited

[chicken]

Re: ZINIFEX..ZFX

On the buyback the broker can sit on the sideline and buy when he wishes...There has been heavy buying recently in this stock...also the broker gets his instruction from Zinifex and the buying was only 100k so as I said heavy buying from someone..who? dont know..... go to www.tradingroom.com.au go to zfx and all their announcements are there....

 

[Investor]

Re: ZINIFEX..ZFX

Investor.

.... lets look at potential investors (Longer term having a similar veiw to you---re under or fair valued possible take over bid.).

Without the added security of having a profit buffer how would a buyer (Now)
(who traded fundamentally) approach the questions I posed Chicken?
While you've answered my question re possible selling points----how long do you hold---if the share stagnates?/worse continues to fall (Making it more appealing to potential buyers).

Perhaps its one of structuring a plan as it unfolds?
This could be dangerous if the plan doesnt follow as one expects.

Profit certaintly affords one time to think and opens many positive options.
Failure---well options are limited---often in action which compounds any problems.

For potential investors, although the fundamentals of ZFX appear sound, there is a significant aspect to be wary of, as I have previously alluded to.

ZFX made the announcement of the $70 million on market buyback in Feb 05 for execution in April 05.

In accordance to finance theory, it is good capital management for a company that views its shares to be undervalued by the market, to conduct an on market buyback. Warren Buffett mentioned this in one of his writings and I agree with this. Future EPS will rise, other things being equal, because there are less shares, after the buyback.

Between Feb. 05 and now, some occurrence has caused ZFX to be reluctant to proceed with the buyback in any meaningful way. Compare the current buyback executions of BSL and ZFX and it is like chalk and cheese.

ZFX has spent a mere $13.6 million of the $70 million. With the passing of each trading day, ZFX has been sending a covert message to the market that it expects the SP to fall.

At any point in time, ZFX has a better idea of its likely SP movements than anyone else (except perhaps for "chicken" who knows the price will go up . Sorry chicken, but you really set yourself up because you cannot help it due to your enthusiasm for this stock - Rule Number One - never get emotionally attached to any stock - you are swimming with professional money sharks - if they can take money away from you, they will).

I have yet to work out what has happened to cause ZFX to go slow to such an extent. My conjecture:

1. ZFX is aware of a big shareholder who is seeking off market share placement for an exit. If that shareholder cannot find placement at the offer price, an on market exit is the only way out. This drives the SP down, due to liquidity issues, depending on the size of the exit. Probability: Moderate chance.

2. ZFX is aware of a contingent liability/liabilities that has/have occurred that will reduce EPS. Under ASX rules, it should be informing the market if the sum is significant enough. Hence, unlikely.

3. ZFX is now aware (not in Feb 05) that global zinc supplies by other suppliers are due for a huge rise. Probability: High.

If ZFX is expecting SP falls, it is likely that SP will fall.

If anyone is interested in a buying opportunity based on fundamentals, the occurrence of scenario no. 1 above, would present a reasonable case because the selling is due to shareholder liquidity issues, not ZFX's fundamentals.

However, if scenario 3 emerges, SP of ZFX is likely to stagnate, at best, fall somewhat; more likely.

There is some buying support for ZFX today, in line with overall mining sector shares. If ZFX does not buy any today, it is probably best for everyone to avoid buying at this stage.

In today's newspaper:

"Morgan Stanley has begun coverage on ZFX with an "overweight" recommendation and forecast target price of $3.45 in 12 months."

The implied yield is 18.96% p.a. based on current price of $2.90.

If realised, or 50% close to, it would cover my opportunity costs.

Regarding opportunity costs, my borrowing costs is 6.6% p.a. fixed for 5 years (I get a better rate due to size of a/c). After deducting tax, my funding costs is around 3.3% p.a. I can cover that quite easily, with the expected EPS yield from ZFX.

I will hold until such time when I see one of the following:

1. It becomes clear to me that the mining cycle has turned for the medium term (1 to 2 years); not just a pause. Currently unclear, but I am expecting continuance of the uptrend, barring occurrence of big adjustments to global fiscal imbalances, in which case, all bets are off and all markets will nosedive.

2. ZFX's EPS will fall, for whatever reasons that I become aware of, not just short term (a year), but over the medium term.

Neither scenario has occurred yet. Should it occur, I exit.

Warning: This post is not investment advice.

 

[tech/a]

Re: ZINIFEX..ZFX

Investor

Thanks for the insight.

Must admit that its certaintly a vastly different way to approach trading than
my way.
I can see from your writings the WHY you trade this way.
Its your method and your comfortable with it---fair enough.


Me Im purely numbers over X period if I do X+Y=Z Im pretty sure my return will be at least Z,Many times I have no idea nor do I want or need to know what a company does or how its going.

 

[Rockon2]

Re: ZINIFEX..ZFX

Hello all

ZFX looking ok,, we shall see!

 

[chicken]

Re: ZINIFEX..ZFX

Good one...Maquarie has just placed an outperform on Zinifex...they are very enthusiastic for this stock...just the latest today...I had bought more that day I posted a buy on ZFX...bought at $2.65...20k....so well in profit...

 

[chicken]

Re: ZINIFEX..ZFX

I also meant to post that one of Zinifex director has been Apointed to the St Barbara mines or SBM board...as Director....could be intresting to watch the developments......its all wheels within wheels....just thought I post that....

 

[Rockon2]

Re: ZINIFEX..ZFX

Yes gday chicken.. good news ta..

Im new to this site, was a recco by Mofra, I know him from another chat site.

He mentioned a great post or link in here by WayneL.? on ETO's...

Better keep looking :bigun2:

 

[chicken]

Re: ZINIFEX..ZFX

Hello all

ZFX looking ok,, we shall see!

Tech/a....I see from this chart that ZINIFEX is forming a traiangle...meaning that once it reaches the point we may see the stock rise considrebly....as I said before Maquarie just advised the market on friday it put OUTPERFORM on ZINIFEX....also note the large turnover in this stock finishing on the high....ZINC is starting to shine..so higher price should follow....also see what I said about one of the directors joining SBM...CHINA is definitly the driving force...AND the large buying at present makes one wonder what is going on.....Investor anny idea...please post....also you said you once had something todo with food...what do you think of BPC.......

 

[GreatPig]

Re: ZINIFEX..ZFX

ZFX did indeed recently break out of a symmetric triangle, in the downward direction. It has now returned to the apex, as is quite common after triangle breakouts. It is also common at that point for prices to return to the direction of the breakout - downward in this case. However, false breakouts are not uncommon either, so continued upward movement is also quite possible.

At this point I'd personally be playing the wait-and-see game.

GP

 

[It's Snake Pliskin]

Re: ZINIFEX..ZFX

MARKET TALK: ZFX Can Still Hit A$4 in 12 Months - Merrill 29/05/05 09:37:00+

0937 [Dow Jones] STOCK CALL: Despite extreme earnings volatility, Zinifex
(ZFX.AU) offers excellent leverage to zinc market, says Merrill Lynch. Maintains
Neutral recommendation, adding: "We believe that in a deficit zinc market, the
risk reward continues to favor owning ZFX up to A$4/share," vs A$2.93 last.
Momentum, history suggest A$4 achievable next 12 months, driven by strengthening
zinc market, additional capital (buyback) initiatives. (JAD)

Contact us in Sydney. 61 2 8235 2950;
djnews.sydney@dowjones.com

(END) Dow Jones Newswires
29-05-05 2337GMT(AP-DJ-05-29-05 2337GMT)

(C) Dow Jones & Company, Inc. All rights reserved.

It seems some people are still positive on this stock.

 

[chicken]

Re: ZINIFEX..ZFX

NOW...why would they not be positive...do your research...and find out your reason for those recomendation...Company debt free and making money also 2nd largest producer of ZINC...read why and what I POSTED...and others as well see what the INVESTOR posted.....I allways have said $4...WHOOO i am maybe right after all.....bought another 20k at $2.65...the day I said BUY.....

 

[tech/a]

Re: ZINIFEX..ZFX

Chicken your trading hope not price action.

80% of predictions by "experts" fail that I see.
You buying another $20000 worth doesnt make it more bullish either.
Why mention that??

 

[Investor]

Re: ZINIFEX..ZFX

A snapshot of a post which I posted on another thread:

Whitney Tilson is a highly successful US money manager, and a student of human behaviour. His recent presentation, entitled Applying Behavioural Finance to Value Investing, draws upon several columns he has written for the likes of the Wall Street Journal, in which he identifies and examines those traits of human nature that turn a seemingly rational investor into a luck-be-a-lady irrational gambler.

Be warned, we are all about to enter a hall of mirrors and may not like what we see.

Tilson believes that investment success requires far more than intelligence, good analytical abilities and proprietary sources of information. Equally important is the ability to overcome the natural human tendencies to be extremely irrational when it comes to money. As Warren Buffet puts it, "Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble investing."

Consider an experiment by the Nobel Prize-winning economist, Vernon Smith, in which a group of participants would trade a dividend-paying stock, the value of which was clearly laid out for them.

Invariably, a bubble would form, with the stock later crashing down to its fundamental value. One might expect that the participants, having suffered terrible losses, would have learned not to speculate. Yet when they gathered for a second session, still the stock would exceed its assigned value, though the bubble would form faster and burst sooner.

The conclusion drawn is that the lesson learnt by investors the first time was not: "don’t speculate", but rather: "sell more quickly once the bubble starts to burst". Of course this doesn’t work either, as few people accurately time the top and everyone tends to head for the exit at the same time.

Says Smith, "They always report that they’re surprised by how quickly it turns and how hard it is to get out at anything like a favourable price". It is only when the session is run a third time that the stock trades near its fundamental value, if at all.

Tilson suggests that one of the biggest problems facing human investors is that they tend to be overconfident in their view of things. Not just "robustly", but "wildly" overconfident.

It is such irrational overconfidence that Tilson believes gets investors into trouble. Moreover, it turns out that the more difficult the task (such as predicting the price of a stock), the greater the degree of overconfidence. And professional investors – the so-called experts – are generally even more prone to overconfidence as they have theories and models which they tend to overweight.

Tilson explains overconfidence by suggesting that people generally remember failures very differently from successes. Successes were due to one’s own wisdom and ability, while failures were due to forces beyond one’s control. Thus people will tend to believe that with a little better luck or fine-tuning, the outcome will be much better next time.

Overtrading is a fine example of overconfidence, Tilson suggests. In a study of 78,000 individual investors at a large US discount broking house during 1991-96, average annual turnover was around 80%. The least active quintile, with an average annual turnover of 1%, scored a 17.5% annual return. The S&P return was 16.9% over the same period.

The most active 20% of investors, with annual turnover of greater than 100%, scored a 10% annual return.

The authors of this study thus concluded that "trading is hazardous to your wealth". And perhaps more thought-provokingly, another study by the same authors showed that investors who switch to on-line trading, hence cutting out the human broker in between, suffer significantly lower returns.

Tilson’s conclusion is that investors have an awful, unshakeable habit of piling into the hottest investment fad at precisely the wrong time. If there’s one thing as certain as death or taxes, says Tilson, it’s that investors will chase performance, almost always to their detriment.

Whereas chasing performance irrationally may be one example of detrimental human behaviour, the real problems start when one considers the other side of the equation – selling. Possibly the hardest thing an investor has to do is to make a decision to sell at a loss.

One’s inability to admit that one may have made the wrong decision is part of the problem. As Tilson suggested, we attribute success to ourselves, but failure to outside forces. Nevertheless, in selling situations, the real demon is the tendency to put one’s head in the sand in the irrationally desperate hope that when one pulls it out again, it will all have been just a bad dream, and the stock is back where it was.

Tilson makes the perfectly rational suggestion that an investor should always step away from their portfolio and consider, "would I buy that stock now?" If the answer is no, then why hold on?

Tilson suggests another extremely sensible exercise (he’s kind of annoying like that). Take your portfolio, and pretend you’ve turned it all into cash.

Now, from a totally fresh position, decide upon the portfolio you would really like to have now. Is it different? Yes? Then why the hell is it?

As Tilson so poignantly points out, keep in mind that a stock doesn’t know that you own it. Its feelings won’t be hurt if you sell it, nor does it feel any obligation to rise to the price at which you bought it so that you can exit with your investment – not to mention your dignity – intact.

Humans don’t only turn into irrational reprobates at the thought of selling at a loss either. An equally unjustifiable opposite is the blind hope that a stock may return to a price where you wished to buy it in the first place, having since moved up. If your rational mind can suggest that a stock is worth buying up to a certain price, then go ahead.

The same philosophy can be applied on the downside. Just because a stock you’ve bought falls in price, it doesn’t mean you must be wrong. Some short term influence may be at play, and the reality is that a dip is an opportunity to buy more at an even better price.

Tilson refers to this as "anchoring". That is the tendency to stubbornly stick to your original evaluation without taking time to step back and review any new information, or objectively analyse any specific force acting upon a stock price.

To recap, the lesson so far is: don’t get swept up into chasing a stock, but don’t be too stubborn to increase a buying price. Don’t be foolish enough to hang on to a stock when it’s fallen, but don’t sell if you still believe in it. And don’t be overconfident for no good reason. It’s all very simple, isn’t it?


My comments:

I like the part which states "Successes were due to one’s own wisdom and ability (i.e. brilliant price prediction) .......... while failures were due to forces beyond one’s control (i.e. market manipulation by brokers, etc.)

It's not my fault - the dog ate my homework

 

[It's Snake Pliskin]

Re: ZINIFEX..ZFX

NOW...why would they not be positive...do your research...and find out your reason for those recomendation...Company debt free and making money also 2nd largest producer of ZINC...read why and what I POSTED...and others as well see what the INVESTOR posted.....I allways have said $4...WHOOO i am maybe right after all.....bought another 20k at $2.65...the day I said BUY.....

Chicken,

You are so good!

You might be prophesising in hope. How do you know you are right? Have you heard of information volatility? If not do some research on it. I will be happy if it does reach $4.00, but I won't be sad if it doesn't. We'll just have to see.

I posted that today just to inform anyone who may have been interested. It wasn't the catalyst for ramping.

Regards

 

[Investor]

Re: ZINIFEX..ZFX

..... Book keeping costs, transaction costs (though relatively small) and CGT are factors to consider ...

tech/a,

A bit more analysis of CGT:

Scenario 1:

30,000 shares of ZFX if sold at say $3.30 in Feb 05 (with average purchase price $1.60 in 2004) = NPBT $51K. NPAT (less than a year holding) = $25.5K (roughly).

Scenario 2:

30,000 shares if sold at $2.95 (today) after holding for over a year = NPBT $40.5K. NPAT is $30.37K roughly.

Did the figures on the "back of an envelope". Did not check for accuracy. Rough estimates will do.

Hence, I am still in front, on a NPAT basis (which is more critical than NPBT).

 

[tech/a]

Re: ZINIFEX..ZFX

Quite rightly so.
Well worth investigating if you havent long to make up 12 mths holding.

 

[Investor]

Re: ZINIFEX..ZFX

..... Between Feb. 05 and now, some occurrence has caused ZFX to be reluctant to proceed with the buyback in any meaningful way.

ZFX has spent a mere $13.6 million of the $70 million. With the passing of each trading day, ZFX has been sending a covert message to the market that it expects the SP to fall.

At any point in time, ZFX has a better idea of its likely SP movements than anyone else ..... If ZFX is expecting SP falls, it is likely that SP will fall.

.... If ZFX does not buy any today, it is probably best for everyone to avoid buying at this stage. .......

ZFX did not buy any shares last Friday and yesterday.

I decided to take heed of this "message" from ZFX this morning and sold 10,000 shares at $2.95 as part of my risk management. There is no way that I can analyse ZFX's SP better than ZFX. Glad I caught the intraday top price before the expected selling started with the release of latest BOP figures.

Will be interesting to see whether ZFX bought any shares today.

 

[Warren Buffet II]

Re: ZINIFEX..ZFX

ZFX did not buy any shares last Friday and yesterday.

I decided to take heed of this "message" from ZFX this morning and sold 10,000 shares at $2.95 as part of my risk management. There is no way that I can analyse ZFX's SP better than ZFX. Glad I caught the intraday top price before the expected selling started with the release of latest BOP figures.

Will be interesting to see whether ZFX bought any shares today.

Investor,

Looks like Mr Market knocked your risk management fragile side

WBII

 

[Investor]

Re: ZINIFEX..ZFX

Hmmm .....from the article below, from the internet; it looks like supply of zinc is increasing (yet another indication in the past few weeks). Other things being equal, increase in supply will bring the zinc price down.

Zinc price fell from USD 1,650 a tonne in 1997 to less than USD 900 a tonne in mid 2001 - Pasminco was breaking even at USD 1,000 a tonne.

Pasminco's share price went from $2.70 in 1997 to 5 cents on 19/9/01 (the day it went into voluntary administration) when the banks would not extend the loans.

Apart from low zinc price impacting on Pasminco, it was highly geared; had made a hostile takeover of Savage Resources without adequate due diligence and found a poison pill in the hedge book and it also got its own hedging strategy badly wrong. (reference source: 10 Best and 10 Worst Decisions of Australian CEOs, a book written by Robert Gottliebsen).

I had posted the following on 22/4/05 in this thread:

" ...... 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."

That rules Anglo-American out as a potential suitor for a takeover. I have also just read that Brazil's CVRD has domestic problems in Brazil with local interest rates around 20% (inflation at 8%). That rules out CVRD as well. Teck Cominco has already bought that mine in WA. BHP is busy with WMR. Looks like ZFX will probably not be a takeover target after all.


LONDON (AFX) 31May2005

Vedanta Resources PLC, the London-listed metals and mining company, said it has the completed the expansion project at its zinc facilities in India, raising the plant's capacity by 170,000 tonnes per annum to around 400,000 tpa.

The cost of the project is around 15 pct less than the original budget of 425 mln stg, it added.

The project included the construction of a 154-megawatt power plant and the expansion of mine output from 2.3 metric tonnes per annum to 3.75 mtpa.

Separately, Vedanta said the reserves at the Rampura Agucha mine, which feeds the smelter, have been increased by 25 pct to 50.1 mln tonnes following a drilling programme.

The life of the mine has therefore been extended by another 3 years, with potential to expand the reserves through further exploration.

 

[Warren Buffet II]

Re: ZINIFEX..ZFX

ZFX did not buy any shares last Friday and yesterday.

I decided to take heed of this "message" from ZFX this morning and sold 10,000 shares at $2.95 as part of my risk management. There is no way that I can analyse ZFX's SP better than ZFX. Glad I caught the intraday top price before the expected selling started with the release of latest BOP figures.

Will be interesting to see whether ZFX bought any shares today.

They did buy more shares yesterday and I believe they did not buy for the last days waiting to the price to go down. Well, it is up today more than 4%.

As Warren Buffet says Mr Market proposes every day and you should decide if that is correct or not.

It has been a bit of funny stuff happening here with people says they are long-term investors and they keep selling when there is a downturn and also there some other funny people with those "techniques" that only work when the market is going up and then the "technique does not work and they sell everything loosing money. (Someone here said before he has a 100 pages technique I'd like to see what has happened to it ) (I can't find that person to track the "technique" and if it is selling or has sold)

That is why Warren Buffet has made a lot of money because even there is people out there saying I read WB and I follow his teachings, well they do not do it correctly and in full extent.

WBII