buy recommendation, page-3

From todays age ALB gets a brief mention in the 3rd last para


Wizards of OZ keep an eye out for acquisitions
Email Print Normal font Large font AdvertisementBarry Fitzgerald
July 23, 2008

THE equities crunch and base metals price weakness that have wiped 40% from OZ Minerals' value in two months have given the cash-rich group's hunt for a big acquisition new impetus. There might just be some bargains out there.

The group's mergers and acquisitions team is on high alert as the equities sell-off could create potential targets — what managing director Andrew Michelmore describes as more readily "available" or "vulnerable".

OZ is the group created from the Oxiana-Zinifex merger. It holds about $1 billion in cash and could fund a $3 billion acquisition if the right target was found. The group is Australia's fourth-biggest listed miner and begins trading under the ASX code OZL today, replacing the Oxiana code of OXR.

When announced almost five months ago, the combination of Oxiana and Zinifex was worth $12 billion. But the slump in zinc prices and the equity market shakedown have pushed the combine down to $6.5 billion.

Potential acquisition targets have also been hit hard.

"We are in a strong position to make acquisitions — that has not changed at all," Mr Michelmore said. He said the views of value had changed significantly from six months ago and that the much lower prices meant that, like OZ itself, companies were trading "down below net asset value".

"A hell of a lot of work was done by both companies ahead of the merger and a lot more work has been done since the merger … so that we are in a position to act when we need to act," Mr Michelmore said of the search for an acquisition.

He emphasised that OZ was not desperate to make an acquisition.

"We don't have to go and do it," he said. "There is not a timetable. The cash is not burning a hole in our pocket. If we do something, it will be because that window is open and it is in the best interests of our shareholders."

Two locally listed companies mentioned by the market — Albidon ($475 million) and Equinox ($2.36 billion) — closed 7.6% and 4.4% higher respectively yesterday. Apart from a potential acquisition, OZ has also flagged a possible share buyback. Mr Michelmore said OZ shares were a "very low-risk investment". That comment and the generally better day for mining shares fuelled OZ's 8¢, or 4%, share price increase to $2.08.

The company is yet to announce its dividend policy. That will come with the June-half profit report next month. Mr Michelmore said there had been a "very clear signal … that our shareholders are looking for a continuation of dividends".

He was speaking on the release of OZ's maiden June-quarter production report. Higher costs and lower production in Laos and Western Australia prompted analysts to trim expectations for this year.