the results are not as bad as first thought. Obviously commodity prices have softened and costs are up, however, when combined with the ZFX half yearly, we have close to $300m npat.
The fact is we are expecting commodity prices to rebound strongly in 2009. The important issue for me is the cost of production and they seem to be very low cost producers of zinc, copper and nickel which will see them through this period while others close up mines.
OXR was always very volatile in terms of profitability. If OXR was a lttle more diversified (ie. iron ore/coal exposure) the results would have been very different.
Add on Prominant Hill coming into production this year, it will place them in a position of strength.
I would have preferred a buyback, however, they know what they are doing, so obviously there may be an acquisition sooner than later. As I mentioned, the presentation talks about diversifying and it seems they would like more nickel exposure. Based on this, they expect nickel to have bottomed, so probably a good opportunity to make a play for PAN or MBN. Both off considerably from their highs and both quality operations (particularly MBN).
They still have over $1b in the bank.
I think the next month or two is going to be very interesting. Now the results are out, would an Xstrata or the like take the opportunity to get in?
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