the wizard of oz, page-8

Buyback could be the alternative for all that cash
Sydney Morning Herald
Edited by Jamie Freed.

Buyback could be the alternative for all that cash. That's the suggestion if OZ Minerals can't find a suitable acquisition for its money.

OZ MINERALS - the merged Oxiana/Zinifex - has long held big plans to leverage its war chest of $1 billion-plus cash to spend up to $4 billion on a copper and nickel acquisition spree. But could a share buyback be an even more rewarding possibility?

Coinciding with the appointment of PaperlinX chief financial officer David Lamont as OZ Minerals's new finance chief yesterday, Citigroup analyst Clarke Wilkins floated the idea of a buyback.

Oxiana shares are trading at two-year lows. Although the franking credit cupboard is pretty bare now, Wilkins said a buyback would be "highly accretive". A $1 billion buyback would increase earnings per share by 16 per cent next year, rising to 44 per cent if it bought back $2 billion of shares. But he noted management is likely to spend at least a year looking for appropriate acquisitions before seriously considering a buyback.

If OZ Minerals chooses to proceed with acquisitions as planned, Wilkins is betting Zambian copper miner Equinox Minerals, Laos copper-gold miner Pan Australian Resources and West Australian nickel miner Panoramic Resources (formerly Sally Malay) are among the top potential targets.

Both Oxiana and Zinifex have previously examined Equinox, which yesterday said its Lumwana project in Zambia should be producing its first concentrate in December, following recent damage to its transformer. The contractor, Ausenco, estimates the project - set to produce 170,000 tonnes of copper a year - will be complete in late October, but Equinox is taking a more conservative stance.

The biggest hurdle standing in the way of a potential acquisition of Equinox is Canadian miner First Quantum Minerals, which owns 17 per cent of the Zambian copper miner. Equinox's chief executive, Craig Williams, told Xchange First Quantum had given him no indications about its intentions for the strategic shareholding.