big call, page-17

Okay.

This are the reasons why this stock isn't going up. I'm going to say this until I am blue in my face, and you can tell all your brokers that I said so.

a) WAY too many day traders. Any buyers are on the offer 10 cents higher (some even 5 cents) I saw someone today buy 100T shares at 173 only to come up immediately at 174. I suspect is the same person because the offer came on immediately after it got bought. No stock is going to go up with half the volume daily doing this. Because when it runs 5 cents, no one is there to lift the next level, and the parcel gets passed down again.

b) I still believe, and firmly believe, majority of the sales under 2.00 are shorts from convertible bond holders. You are talking 111 million shares exposure that the bond holders have to hedge if the share price starts ticking down. The lower it goes, the more stocks get shorted. The only way is if the share price stablises and starts grinding higher, until their trigger point is broken and they have to cover.

c) OZL need to replace BGI as a shareholder. 74 million shares floating around in the market place in weak hands, and margined positions is bound to suppress the stock in a weak market. People argue its 3 days volume. But honestly, they held it for yonks. Try holding 74 million shares at 2.50 in the most turbulent time possible.

d) Many resource funds have had redemptions, or had to reduce their exposure. Unfortunately, because of the nature of their chosen sector, some resource stocks are illiquid and they are not able to reduce on a broad basis. So they pick the most liquid, to raise cash. I.e. OZL, LGL etc etc. Multiply this effect by 100 funds around the world with Australian exposure and having to ring fence their australian portfolios. It's far easier to sell 10 million bucks worth of OZL than it is to sell 10 million bucks worth of lets say Western Areas. And furthermore, when the tide turns, its easier to buy back 10 million bucks worth of OZL than it is to buy 10 million bucks worth of FMG. So if a fund has 20 million bucks in Australia, split between 50 stocks, and he needs to liquidate his position because the mandate changes and they have to go to full cash, they would choose to sell (or short) OZL, raise the cash, and declare themselves cashed up for book marking purposes. Its far easier to do this than to manually liquidate each position.

e) The sentiment to resources is really bad at the moment. Witness the mass liquidation of gold price, and the Olympics is actually hampering factories and steel mills and the like, so demand is low, even for the seasonal decline. It's unlikely to pick up until after the Olympics.

f) There is a concern with regards to the zinc price. Real concern that it may slide to multi year lows at 50/55 cents per pound. Having said this, the caveat is, when zinc was at 60 cents a pound, Zinifex was at 5 dollars per share. Now it's valued at zero (assuming OXR stays equal at 5 billion)

Having said all of that, I contine to hold and believe that when this turns it will turn so fast, and so hard that if you aren't long, you'll be paying 20% higher just to get set. There are that many shorts out there, and that many underweight positions, and thousands and thousands of sold calls that will all trigger in a snowball effect. All it needs is a catalyst.

I had hoped Lonmin's bid would have been a good catalyst, but it seems we might need some M&A closer to home. It really bugs me why Xstrata advisors chose Lonmin for 9 billion when they could have bid 9 billion for OZL and actually got full acceptances, since everyone on the register now probably owns them at much lower prices (sub 2.30)

Now I look to their report card next week, and their capital management (if any) announcement. A fat dividend, special or ongoing, would put a floor on the stock for good. If that doesn't work, then I'm going to go back to work, since I have no more money.

Pound for pound (no pun intended) this is the cheapest fundamentally in the market place. No question. Doing my homework (its funny how your research runs deeper when you are long and down big), their cash backing, and they cost of building their mines are far in EXCESS of their current market capitalisation. That means, if Xstrata were to spend money and build Century, PH, Golden Grove, Avebury and Sepon, it would cost WAY MORE than 5 billion. Not to mentioni their cash.

If its got no debt, and cash in the bank, with a real business and real customers, it can't go broke.

Not even Michelmore can stuff this up. This is a buy, no question. Its just frustrating that people are buying it to trade 5 cents, because there is plenty of volume. (Of course there may be some killing it by selling and buying it back lower)