MINI Trading Buy: Zinifex Limited (ZFXKZH) – There is still growth in ZFX
ZFX has been aggressively sold off since peaking near $22 in July 2007 on the back of a falling zinc price, concerns over its growth prospects and the fact it is sitting on a big pile of cash. After reaching a recent low at $8 support, we believe ZFX has been oversold given the strength in its sales volumes, a robust zinc price and growth options through exploration and acquisition. Zinc trading up over 7% overnight, buy ZFXKZHJ for move to $12
The ZFX chart above shows ZFX peaking in July 2007 above $21, before declining in the August market correction, where it has failed to recover. Since spinning off its smelting assets, the stock has fallen out of favour as the zinc price weakened and early talks of a big acquisition faded. In January 2008 the stock tested previous support at $8 and managed to hold and bounce.
With the zinc and lead price looking like basing out with demand still remaining robust, and the potential upside from exploration and acquisitions, we believe ZFX presents a good buying opportunity. Given recent market volatility and credit problems, it may actually prove to be a wise decision on the part of ZFX not to make an acquisitions immediately following the spin off of the smelting assets. With Andrew Michelmore now at the helm, the outlook for ZFX is much better than what the market is pricing. Near term the share price is also likely to be affected by developments in the AGM takeover
ZFX Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
