zinc cbh cobar v perilya broken hill

Another one of these comparisons which is probably made more simple than really is the case.

I have seen on many occassions in the past, whereby readers of hotcopper can generate some buying, which can start momentum, in these smaller companies, such as CBH....so thats why I keep posting. (even after many years full time in the markets)

Anyway - for whats its worth!!

Perilya out recently with future profit guidance of $130 million, pre-tax. Their annual mine ore production is 2.1 mtpa compared with CBH of 1.4 mtpa. (when back in full production) Grades of zinc/lead are very similiar.

That puts PEM on a PE of 6.(market cap of PEM is $600 m-)

But only $100 million annual profit. They produce more product than CBH, yet "we" are suggesting CBH will generate much more profit than $100 m PA.

How come;

1/. PEM have hedged 28,000 tonnes of zinc production in 06/7 at just $2,681 per ton and 24,000 tonnes at $2,451 in 07/08.

That hedging will cost the company some $45 million in revenue at current spot prices in 06/07 alone. PEM have also stated their intention to hedge on a shipment by shipment basis, with a recent consignment of 9,000 tonnes presold ex port at less than $A4000 per tonne.

2/. Second point....PEM have provided this guidance based on zinc spot at $US1.40 per lb. All zinc product into Japan/China is now being sold at a premium to spot (which right now is US$1.50 per lb)

3/. Third point....CBH will now will have copper credits of $15 million PA....and a one off payment of $30 million in 2006/7 for their silver production.

In summary...that guidance figure provided by PEM is lite anyway. PEM (twice the size of CBH) is on a PE of 6, AT that modest guidance. Their Broken Hill operation will extend out to ten years. To suggest that the operation will last 5 to 7 years, refers only to one section of their mine. So the point is....PEM is cheap, yet is double the market cap of CBH....

......BUT CBH WILL EARN MORE PROFIT.


note:things don't always work out the way it appears.