ZFX - Zinifex Limited

[barney]

Again, I may be out of my depth here, but I still see ZFX in the balance ......... I think it will test the low $18 mark , (now resistance .... ex- support level) ( I was wrong about the low $17 ish, but the chart is very "each way" atm), but if it fails to rise above and consolidate, I see that as a confirmation of the short term trend change in early January (emphasise "short term") .... back to $16.50, and if the market in general takes a dive (which looks on the cards) high $15 ish looks feasible, .............. of course I may have no idea and could just be talking jibberish ..............

PS my motivation for attempting to "read" ZFX is due to losing money on them a couple of months back when I should have been making it .... therefore any new punters please disregard my comments, and concentrate on the more learned chaps around here (certainly would not want anyone following my advice ............yet ) ........ Good luck to holders

 

[Nick Radge]

Reece,
My count remains valid. If my analysis is correct ("if" being the key word) then we're still tracing out wave-b of a secondary corrective pattern. Rather than have an "expecatation" of what the future may hold, have probabilities for what pattern could unfold. Remember that EW is not about the "only" count, but the most probable count. Therefore, I see the following as the most probable and as they appear more likely then we can place a trade accordingly:

(1)
A failure before we see the Jan 24 high broken would suggest the Feb 9 lows will be breached, albeit by a small margin. That would take prices into the typical wave-(4) corrective zone and possibly act as a retest of the major support set back on May 5 last year. So long as we see volume support the move, a buying opportunity will occur.

(2)
A break above the Jan 24 highs would suggest a running flat, in which case the subsequent decline will more than likely termiante at the same level as the Feb 9 lows. In other words, we've more than likely seen the worst - assuming the Jan 24 highs are broken. If we do get that decline back to the Feb 9 lows and we see some volume support then a long trade is likely.

(3)
A break to new highs. Well this is more than likely the sign that the correction was completed at the Feb 9 lows and the corrective count outlined in prior posts was incorrect. An opportunity lost, yes, but we could then continue to look to take part in the wave-(5) higher.

I am neither long or short and will not initiate any positions until the pattern has completed.

Nick

This post may contain advice that has been prepared by Reef Capital Coaching ABN 24 092 309 978 (“RCC”) and is general advice and does not take account of your objectives, financial situation or needs. Before acting on this general advice you should therefore consider the appropriateness of the advice having regard to your situation. We recommend you obtain financial, legal and taxation advice before making any financial investment decision.

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[rwkni1]

zfx paid too much for the acquisition imho, they could easily pay for Terramin or Tennant creek, cheap as chips

But they already have a JV with Terramin, and Wolfden's projects are a pre-feasibility stage with significant JORC resources and reserves. Terramin doesn't even have a JORC resource yet, let alone getting to reserve status.

 

[Halba]

but paying an extra $200M CAD just a bit silly to get it up to JORC? We know the resources are there in Algeria.

And also $700M capex CAD, because its in the frikkin arctic circle! Ice roads have to be built!!

I think ZFX just wasted shareholders money here.

 

[rwkni1]

but paying an extra $200M CAD just a bit silly to get it up to JORC? We know the resources are there in Algeria.

And also $700M capex CAD, because its in the frikkin arctic circle! Ice roads have to be built!!

I think ZFX just wasted shareholders money here.

I don't think its silly at all.
Both Wolfden's projects are at pre-feasibility stage, Terramin are a couple of years away from getting to the same point, provided the drilling confirms what they think. Wolfden's assets have super low cash costs because of the massive copper by-product which hits the bottom line - High Lake is expected to have cash costs of 2c/lb of zinc, that would have to make it just about the cheapest operating zinc mine in the world. Lets not forget the sovereign risk of Canada vs. Algeria. Also, I don't think C$700m capex is outrageous at all for two projects that will add 230kt super low cost zinc production per anum. If you look at Wolfden's most recent presentation, the NPV calcs on the projects are very robust even with zinc at 60c/lb.

 

[peterthomas]

Nice mid year report

Highlights

· Excellent net profit after tax of $751.2 million, more than three times the net profit of the same period last year

· Cash balance rose to $834.2 million more than 250% higher than at 31 December 2005

· Record zinc and lead prices driven by falling global stocks was the major driver of the increased profit

· Total production fell by 10% due largely to longer than normal planned shutdowns at Century and Port Pirie as well as lower lead grades in ore at Century

· Substantially increased dividend of 70 cents per share announced, seven times the dividend for the same period last year

· Safety and environmental performance improves continuing the trend of recent years

· Significant progress made on Zinifex’s long term strategy including:
- Announcement of intention to combine Zinifex and Umicore’s respective smelting and alloying businesses to create the
world’s pre-eminent zinc metal producer
- Successfully completed the Dugald River pre-feasibility study and elected to proceed with a full feasibility study of a
200,000 tonne per annum zinc mine
- Exploration budget doubled to $90 million over the next three years
- Included in the exploration budget is a commitment to spend a further $19 million over three years drilling the Rosebery
mine lease to extend the resource
- Drilling identified a new mineralised zone at Rosebery mine
- Exploration expanded overseas with projects in Tunisia, Sweden and Mexico
- Announced a non-binding and conditional proposal to acquire all the outstanding common shares in a listed Canadian
based mineral exploration and development company Wolfden Resources Inc. ("Wolfden") for C$3.90 cash per
share, valuing Wolfden at approximately C$358 million

Glad im in a buywrite for this one

 

[silence]

The market doesn't seem overly impressed, however.


Also, I thought the dividend was expected to be a fair bit higher? Not sure where I read that though.

 

[Kauri]

The market doesn't seem overly impressed, however.


Also, I thought the dividend was expected to be a fair bit higher? Not sure where I read that though.

Maybe the last 10 days or so was the reaction to the expected report, today and yesterday is selling into the official news????

 

[chops_a_must]

Maybe the last 10 days or so was the reaction to the expected report, today and yesterday is selling into the official news????

Yeah. Both the ZFX and the OXR reports were both rather underwhelming.

 

[rwkni1]

The market doesn't seem overly impressed, however.


Also, I thought the dividend was expected to be a fair bit higher? Not sure where I read that though.

Consensus divvy was 80c, came in at 70c. But, take into account the bid for Wolfden which will use some cash. Earnings beat broker consensus by about 20m, pretty solid.

 

[eMark]

Well that was an anti climax. Not the result or dividend itself, but the markets reaction? Any thoughts why? Any analysis re ZFX's current wave? The Zinc price was good last night etc, but the money seems to be with the banks today regardless.

 

[Kauri]

My short-term trade looks likely to be stopped out.... might drop to the W2 area and turn up into a W3, alternatively it may also drop through the W2 area in which case a more complex W(4) is still forming. And quite possibly am wrong on both counts.. will wait and let the market tell me what it wants to do.

 

[trendsta]

Beats me...

It was running hot at around 17.70 then dropped to 16.90 by end of day??

 

[toothfairy]

Definitely only good for short term trade, follow the trend and don't form any opinions. Definitely don't fall in love.
That's my thought.

 

[rederob]

Definitely only good for short term trade, follow the trend and don't form any opinions. Definitely don't fall in love.
That's my thought.

Spot zinc price up 6 cents so far tonight.
I think I'm in lerv, again :1luvu:

 

[eMark]

Spot zinc price up 6 cents so far tonight.
I think I'm in lerv, again :1luvu:

...and this is despite a 'hefty' rise in inventories overnight

London Metal Exchange Warehouse Stocks
February 22
Metal Tonnes in Storage Change from previous day
Zinc 99825 +3225

------------------------------

Zinc February 22,08:05
Bid/Ask 1.5877 - 1.5968
Change +0.0805 +5.34%
Low/High 1.4936 - 1.5968

Must be some speculation on after Chinese New Year buying...

This could be what the ZFX share price is looking for....

 

[Kauri]

From The Age... explains yesterdays falls, will the overnight zinc rally overcome this negativity today??

Zinifex admits to pressure on profits
Barry FitzGerald
February 23, 2007

IT MIGHT be that its birth was a result of Pasminco's collapse. But any way it is cut, Melbourne-based Zinifex earned its stripes yesterday by being the first metals company to admit that profits are under pressure following price weakness in the opening months of 2007.

Managing director Greig Gailey acknowledged that earnings for Zinifex would be lower in the second half, assuming zinc prices remained at current levels. It was boom zinc prices that powered Zinifex to a December half result of $751.2 million, up from $227.6 million in the previous corresponding period.

Zinc prices have weakened since, but if they hold at near current levels, Zinifex and other base metal producers will still have nothing to complain about, given that prices remain well above long-term averages.

"Zinc prices have retreated from the record levels during December quarter. However, this has to be seen against the backdrop of historical prices and, in this context, we are still witnessing very strong price performance" the company said.

Zinifex's profit was in line with expectations. Much of the profit is to be returned to shareholders in the form of a 70 ¢ a share (fully franked) dividend to be paid on April 20 to those registered on April 5.

The company is looking to offset metal price pressure in the June half from production levels that should be better after the broad 10 per cent reduction in the first half due to planned maintenance shutdowns at key operating centres.

Zinifex was also more up-front than most on cost pressures. It disclosed a 10 per cent increase in "underlying operating costs" in the December half. Add once-off cost increases associated with the planned sale of its smelting assets and other issues, and the increase was more like 16 per cent.

Zinifex shares fell 29 ¢ to $16.91 yesterday.

 

[Magdoran]

Latest Update to the Zinc musings chart...

 

[Kauri]

From The Age... explains yesterdays falls, will the overnight zinc rally overcome this negativity today??

Looks like someone is taking this opportunity to lighten their load a tad. Negativity overcomes rally???

 

[rico01]

Some research by citigroup

Strong Result
Great Result - NPAT of A$751m was slightly ahead of our A$745m estimate, but well ahead of ~A$700m consensus. Slightly lower than expected A70 ¢ dividend was not surprising given proposed bid for Wolfden Resources (WLF.TO - C$3.90; Not Rated) and certainty not limited by the A$834m in cash. We maintain our Buy recommendation and A$20 target price driven by zinc price leverage, smelter spin-off and exploration upside.
Estimates Unchanged, but at Risk - Our estimates remain unchanged, but there is downside risk of 8% in FY07 and 35% in FY08 given our expected recovery in zinc prices to US$2/lb as China returns to being a net importer after a tax driven export surge in late-2006. Zinifex expect a small zinc market deficit in 2007 before a modest surplus in 2008.

Wolfden Bid - Proposed $A390m Wolfden Resources bid is a premium to the indicative NPV we derive for the assets of A$250-300m, but value gap could easily be breached by increase in resources and/or assumption of higher long-term prices. Key risk is the capex cost pressure endemic in the industry, especially given location. As part of a multi pronged assault to address relatively short mine-life the acquisition stacks up, and increases diversification by adding more copper.

Smelter Spin-off - Due diligence has been completed by both parties and a binding agreement should be signed by late-March/earl-April. We derive a post de-merger target price of A$24-34/share for Zinifex based on what multiples the peer group for the respective mining and smelting entities trade on.


Don,t forget to make up yur own opinion
Cheers All!!!