ZFX - Zinifex Limited

[stoxclimber]

Down 8.25% now!!

Goddamn! It's almost like zinc has already crashed!!

 

[nizar]

I think it was expected after friday zinc drop but I believe this will be short lived and provide a very good opportunity to re-enter ZFX. Can't see why ZFX would drop as zinc is in short supply and with almost no reserve left.

Note that zinc was also in short supply and reserves were dropping in May when ZFX got absolutely smashed from 13.50 to 8.00.
There are corrections in every bull run.
I'd rather buy on the way up, thanks

 

[YELNATS]

Down 8.25% now!!

Goddamn! It's almost like zinc has already crashed!!

Good buying opportunity. Have bought 3 parcels today.

 

[YOUNG_TRADER]

Note that zinc was also in short supply and reserves were dropping in May when ZFX got absolutely smashed from 13.50 to 8.00.
There are corrections in every bull run.
I'd rather buy on the way up, thanks

I'm with you Niz,

wait for dust to settle, this thumping is coming from a slight drop in Zinc price + flat DJIA

Imagine Zinc testing $1.80 support + DJIA down 100-200 points


REMEMBER DON'T TRY AND CATCH A FALLING KNIFE!

 

[phoenixrising]

Zinc is showing +0.0157 = +0.80% on Kitco non LME atm.

Can anything be read into this?

Or does the real indicator's start later?

Cheers

 

[stoxclimber]

People are so quick to mention may/june...

In September zinc fell something like 8.5% in one day - zfx crashed, next day zinc down another 3% but zfx was up..

 

[Damuzzdu]

Note that zinc was also in short supply and reserves were dropping in May when ZFX got absolutely smashed from 13.50 to 8.00.
There are corrections in every bull run.
I'd rather buy on the way up, thanks

Agree with u Nizar....the fall in Zn from $2.07 to $1.99, has seen a big fall today in ZFX, but I'm thinking that this is just the first phase of a correction in Zn. Back in May this happened also on a friday nite, when Zn fell 5%, then continued to correct, and ZFX just fell apart...

Cheers

 

[Nick Radge]

Warning signs were there...note the date.



BOTTOM LINE
7/11:
EW Trend: Up
Price Trend: Up
Trend Strength: Strong
Broker Consensus: Intermediate BUY

LAYMANS ANALYSIS
7/11:
VIDEO ANALYSIS (2 mins 56 secs)
It's a difficult ask to suggest that a stock such as ZFX is in danger of declining, but the price action today does suggest some sellers have entered the market and if they're serious then we may see ZFX have at least a small reversal lower. Both the last two sessions have gapped higher; yesterday on low volume but today on higher volume. Today however probed higher and closed on its lows, the combination of which is a sure sign of supply in the market. This does not indicate that prices will drop like a stone, but it is a red flag as it shows the Smart Money may be lightening their loads. Should the supply increase and prices do start to tip one will need to be careful because this market is full of speculative fervour and we could see a repeat performance like we did in some of the Gold stocks earlier this year.

TECHNICAL DISCUSSION
7/11:
Prices gapped higher yesterday a travelled a fair distance on very low volume. This means no sellers were around to keep a lid on prices which in turn means that small buyers were able to push prices a long way. It also means that if sellers do decide to step up to the plate, it would not take too much effort to drive prices back down again, assuming they were in a hurry to distribute their stock. Today was another gap higher but the signs of sellers are clear. Another gap open, a probe to new highs, a close on the lows and increased volume all lead to sellers. We're possibly seeing a wave-iii high of a very strong trend. Usually when trends are this strong we tend to get a sideways correction as a wave-iv, although if the weaker hands panic we may see a quick exodus and a quick price drop. When Gold dropped back in May I indicated that you did not want to be the last person out the door, and that stands true here, albeit without the larger trend termination. Any decline would need to halt before the $12.39 wave-i highs but I'm thinking $14.00 would more than likely see it out. Bullish, but watch for a dip.

 

[Freeballinginawetsuit]

hmmm. not exactly Rocket Science was it!. Smart buyers already in (huge consolidation period with large holders buying and the little boys getting frustrated and bailing), bullish commodity driven stock with small buyers driving up weak sell depth, a few gap days, and out come the sellers!.

Agree with Bullish stance and that ZFX will bounce, considering its EPS and Zinc ATM, the big boys will be back in and bounce this one on their lap!.

 

[pacer]

hmmm. not exactly Rocket Science was it!. Smart buyers already in (huge consolidation period with large holders buying and the little boys getting frustrated and bailing), bullish commodity driven stock with small buyers driving up weak sell depth, a few gap days, and out come the sellers!.

Agree with Bullish stance and that ZFX will bounce, considering its EPS and Zinc ATM, the big boys will be back in and bounce this one on their lap!.

Well were all geneouses after the event, NICK....wy not post earlier so we don't all die form a mental breakdown......I suspect all mums and dads ran away today....rise tomorrow?.....sideways is the only way.......

DONT PANIC.....hitch-hikers guide to the Galaxy!

 

[Damuzzdu]

Great analysis Nick...last Tuesday was nearly a blow-off top, although volume was not quite there (I was looking for something over 10M). However vol had been falling off for last 4-5 days prior to the 7/11/06, when suddenly vol nearly doubled on that day. A close lower than open was a sign that sellers might be chasing it down.

The next two days seemed to signal a confirmation of this, but what was surprising to me was the run up on Friday, with stock finishing on its high for the day. I suspect this might have buyers seeing the stock close up from its lows on Thursdays and seeing Zn run up again, decided to buy in for fear of missing out, only now to caught with a big fall in ZFX today.

Today's vol is a confirmation of this (13.8M) that sellers were clearly chasing prices lower. This was a combination of traders booking profits and those traders with fear in their minds that may have bought in the high's $16.00's not wanting to hold o/nite and seeing prices open much lower tomorrow.

Any furthur falls in the price of Zn over the next 2-3 days could see ZFX test the 50% retracement level on high vol. The first level of support is the old all time high formed back in early May, but a break of that may see ZFX testing the $12.20-$12.40 band which took a number of weeks to break down, eventually giving way around early Oct.

Cheers

 

[Damuzzdu]

Imagine Zinc testing $1.80 support + DJIA down 100-200 points

YT,

Zn testing $1.91 down another 3.43% as I type...ZFX to fall more on Tuesday

Cheers

 

[pacer]

Ohh pooooo.....doom and gloom again.... I can handle it dropping to 12.50....but seriously...LME is drawn down too much...Get a grip.......this was a commodity correction today...I went fishing...Zinc is all powerful....All stupidity on panic will pay me a 6-12% rise tomorrow....I bought more today....come see me in a week for some shares if u want them..they'll be expensive though....wooohooo....going fishing again tomorrow..who needs this Bearish/bulls/hype......hehe....don't really care now.....am HAPPY BUYING AT 12.80 average and some on the way up.

All is good with the all powerful zinc......zinc is being manipulated....galvanised steel is a huge thing.....Wake up !!!!...and buy more!...one scary day does not mean a total correction....LET'S SEE YOU TRY AND GET SOME ZINC NEXT WEEK!...or even tomorrow....hehe!

Just my opinion.....don't be weak...just because it happened before (major correction) doesnt mean it'll happen again....traders have smashed this.....should rocket to $18 within 2 weeks if I'm not mistaken.....buy now...LME is sooooooo sad...and no reprieve in sight....hold or buy more is my attitude....

LOVE IT!!!!!

 

[nizar]

Ohh pooooo.....doom and gloom again.... I can handle it dropping to 12.50....but seriously...LME is drawn down too much...Get a grip.......this was a commodity correction today...I went fishing...Zinc is all powerful....All stupidity on panic will pay me a 6-12% rise tomorrow....I bought more today....come see me in a week for some shares if u want them..they'll be expensive though....wooohooo....going fishing again tomorrow..who needs this Bearish/bulls/hype......hehe....don't really care now.....am HAPPY BUYING AT 12.80 average and some on the way up.

All is good with the all powerful zinc......zinc is being manipulated....galvanised steel is a huge thing.....Wake up !!!!...and buy more!...one scary day does not mean a total correction....LET'S SEE YOU TRY AND GET SOME ZINC NEXT WEEK!...or even tomorrow....hehe!

Just my opinion.....don't be weak...just because it happened before (major correction) doesnt mean it'll happen again....traders have smashed this.....should rocket to $18 within 2 weeks if I'm not mistaken.....buy now...LME is sooooooo sad...and no reprieve in sight....hold or buy more is my attitude....

LOVE IT!!!!!

Excellent ramp, pacer.
I almost thought it was H/C for a moment there.

 

[stoxclimber]

I'll gladly sell pacer my zfx holding at 6% premium on todays closing price tomorrow!!!

 

[swingstar]

This calls for a cliche:

Markets can stay irrational longer than you can stay solvent.

Albeit I am bullish overall. I'm with Nick's analysis. I have a similar count on page 40 or so.

 

[pacer]

Beats the down rampers I suppose....damn fish scales are getting stuck in the damn keyboard again.....gotta go wash my hands.....sorry!

Excellent ramp, pacer.
I almost thought it was H/C for a moment there.

 

[squish]

re: may get hammered - I don't think so...

A few thoughts about what is happening to this stock of the year called 'Zinifex'.

This stock came onto my radar screen early April this year. I was new to the sharemarket at that time.

Since then it has had the wildest ride ever. But to be brief, I got in at $8.50 with a large holding in one hit on the 14th June 2006 (Yes that huge disastrous opening when there was panic selling). I made some mistakes that day (ie sell RIN BHP thinking further falls), but ZFX was NOT one of them.

So panic sellers can be a blessing if you pick it right, and some luck.

At that time I had not read any reports from the company whatsoever. Just hearsay from the AFR.

But now:

I encourage all speculators to carefully read ZFX quarterly production reports for every quarter since 2005-q1, and calculate ZFX revenues based on the average price of Zn for that quarter.

As a personal back of the envelope calculation:

With the average price of Zn at ~ US$1.50/lb in the previous quarter (q1 2007), and with a modest rise in costs (in line with the rise from 2005 ($1.5B) to 2006 ($1.9B ), 2007 (?) ), if the price of Zn holds at this level (US$1.50/lb) for the full year then ZFX is on target to increase their 2007 EPS by ~ 2.3 times F/Y 2006. That's approximately $5 / share F/Y 2007. ZFX have also promised to return surplus cash to shareholders, so most of this will be paid out in a dividend.

Furthermore, look at the current assets per share of $4.51 (which will have dropped post recent dividend, so I may be corrected on this) and if you take the peak high of $17.00, then the 'at risk' capital of your investment is somewhere around $12.50.

So for your $12.50 'at risk capital', forecast EPS is ballpark $5 with the AVERAGE Zn price of US$1.50/lb for all 4 quarters of Fin Year 2007.

From my own personal estimates, every US$0.01/lb of Zn for which the price stays ABOVE any selected floor of the price; for the entire year (localised around $1.50 for the logarithmic folks), is worth $0.056 EPS in ZFX. So an increase of 20c/yr average is an extra ~ AUD$1 EPS.

If Zn rises above US$2.00 and holds, and achieves an average above US$2.00, then ZFX may outperform ANZ on absolute profit (for a silly cross industry comparison). On an equivalent number of outstanding shares( ANZ 1.8B v ZFX 487M ) , ANZ trades at close to $108.00 / share equivalent.

Whilst sustainability is a concern, does it warrant this much of a discount?

Within two years from now I estimate I will have my entire initial investment returned to me in EPS, but of course, remaining will be the net tangible assets, just incase ZFX liquidates (like the panic sellers and the quasi 'stop loss' sellers).

... and to top it all off ... Zinc is about to become scarce for the next two years.

as Greg Gailey says it "we remain positive about the outlook for zinc prices and anticipate continued strong demand for our products."


And some speculate more falls to come...

The falls in May this year were prior to the 2006 reports, and did anybody really have an accurate hold on ZFX yearly incremental costs. I think things are a little more clearer now.

If it falls to $13.50, with Zn average above US$1.50/lb, I will be liquidating other stocks 'at market' to add more ZFX.


--------
This post has calculations in it from my own person efforts, please do not rely on these numbers and read the official reports of Zinifex Ltd and perform you own calculations. This is not an endorsement of Zinifex Ltd shares, only a written verse of my own personal thoughts about the current situation surrounding Zinifex Ltd. There is no warranty, express or implied in the accuracy of the above information.

 

[stoxclimber]

Just one thing squish, and thats that last year ZFX actually got money from the ATO in tax - 100m worth approximately - I don't know what their tax situation will be this year. If they had to pay corporate tax of 30% as opposed to -10% the EPS situation for last year would be much changed...but I agree with you that ZFX is on track for a good financial result.

Zinc price has recovered somehwat -only down 2.44% overall! I'm still short term nervous about zinc after the (effectively) 7.5% intraday fall...

 

[pacer]

I saw it hit down 9% today ... and shat my pants....not!.....

just one thing squish, and thats that last year ZFX actually got money from the ATO in tax - 100m worth approximately - I don't know what their tax situation will be this year. If they had to pay corporate tax of 30% as opposed to -10% the EPS situation for last year would be much changed...but I agree with you that ZFX is on track for a good financial result.


Zinc price has recovered somehwat -only down 2.44% overall! I'm still short term nervous about zinc after the (effectively) 7.5% intraday fall...