criterion

OZ Minerals (OZL) 52.5cFont Size: Decrease Increase Print Page: Print CRITERION: Tim Boreham | November 21, 2008
Article from: The Australian
ONLY a few weeks ago, the not-so-smart money was on the market bottoming out at about 4000 points, if only because that's a nice round number.

After yesterday's now routine 4 per cent selloff, 3000 points is fast emerging as the benchmark.

The good news is, at this rate of value destruction, we won't have a market to worry about in 22 more trading days.

OZ Minerals was by no means yesterday's sole victim, but its 10c, 16 per cent price slaughter -- 28 per cent over the past two days -- is especially surprising.

The finger was pointed at short sellers and margin-called retail holders, but who really knows. No one should have been shocked by OZ Mineral's sparse statement on Wednesday that write-downs were likely and earnings would not match those posted by antecedent companies Zinifex or Oxiana.

We already know low commodity prices mean some of the zinc, copper and gold miner's operations -- notably the Century lead and zinc mine -- could be making losses.

On broker UBS's reckoning, OZ Minerals' seven mines are all profitable at current spot prices, but on the firm's more conservative commodity assumptions, Century and the early-stage Avebury nickel mine become loss makers.

UBS values the stock at $1.16 a share. Coincidentally, we had OZ Minerals as a spec buy at $1.16 in mid-October and retain the call on the intrinsic value of its assets. Perhaps there's no hurry: be prepared for red ink for at least the next year, if only because of non-cash write-downs.

The difference between OZ Minerals and other trashed stocks such as Rio Tinto is that it has negligible net debt.