Today's Herald Sun
http://www.news.com.au/heraldsun/story/0,21985,22754890-664,00.html
Zinifex outlook remains cloudy
Felicity Williams
November 14, 2007 12:00am
ZINIFEX'S soon-to-be-named chief executive could have his work cut out - the mining giant has warned that lower zinc prices and a falling US dollar will hit sales revenue.
And the fact that analysts are tipping Zinifex as a prime takeover target in the rapidly-consolidating resources sector could further complicate life for the lead and zinc miner's new boss.
Zinifex's acting chief executive, Tony Barnes, said yesterday that zinc prices might fall as more supply came from new mines and expansions.
"Lower zinc prices and higher Australian dollar-US dollar exchange rates will lower revenue," he said in a presentation to investors.
"Cost pressures persist - a similar rate of increase to financial year 2007 is expected."
Zinifex shares fell as low as $14.05 before rebounding to finish the day at $14.38.
Mr Barnes has been filling in as chief executive in addition to his regular duties as chief finance officer since the departure of former Zinifex boss Greig Gailey in June.
Zinifex expects to appoint its new chief executive by the end of the year, with former WMC Resources head Andrew Michelmore now considered the likely choice.
Former BHP executive Chris Lynch was rumoured to be frontrunner for the position until he accepted the top job at toll road operator Transurban last month.
Citigroup analyst Clarke Wilkins yesterday downgraded Zinifex's target share price to $15.20 from $18.50 and reduced his forecast for 2007-08 earnings per share to $1.72 from $2.50.
"Our estimates and target price for Zinifex have been mauled by a 29 per cent downgrade to our 2008 zinc price forecast to $US1.25 per pound from $US1.75 per pound previously," Mr Wilkins said in a note sent to investors.
Zinifex has previously been tipped as a potential merger partner for fellow Melbourne-based miner Oxiana, as well as a possible takeover target for Anglo-Swiss mining giant Xstrata.
The company pocketed some $1.6 billion from the sale of its smelting assets via the public listing of Nyrstar in Belgium last month.
Mr Wilkins also noted that Zinifex's bulging cash wallet of around $2.6 billion gave it "substantial options" to undertake its own M&A activity, fast-track projects or return capital to shareholders.
Zinifex reported a $1.3 billion net profit in 2006-07, up 24 per cent on the previous financial year on the back of higher zinc and lead prices.