This is not a whinge. The stock is actually broken. Forget the...

This is not a whinge.

The stock is actually broken. Forget the charts, fundamentals and the like. We're talking broken, as in kitchen sink broken.

Let me explain.

The share price is held to ransom by a few factors, all in which will ensure that there will be no panic buying/short covering unless something drastic happens.

1. The liquidity substitute factor. This is not restricted to Ozminerals, but anything with liquidity. Ozminerals trades 20 million shares a day, it is an easy stock to get out of. Felix Resources, Western Areas and other illiquid shares trade less than 2 million a day. For a fund which needs to hedge out in the resource space, OZL is the prime choice be63 to cause there is plenty of liquidity. In this current environment, where PLENTY of hedge funds/private money are taking short positions to balance out their longs in the resource sector, opt to short OZL primarily for this reason, its liquid and easy to do. (plus its actually a good proxy to short OZL as a hedge against base metals - zinc,copper,nickel and gold)

2. Following on point one, the money managers chose OZL to short because if they have to cover, they are not going to pay 50 cents more on the get go. They will get a chance to cover and pay maybe 10/20 cents to get their entire position back. Small price to pay for being hedged against your 239816347536541876448888 million dollars worth of complicated mining exposures worldwide.

3. Following on point 2, when its time to cover their shorts, EVERY single trader in the market who has been soaking stock up between 1.63 to 1.85 will be on the offer, to let these guys lap up sub 2.00 and get out of jail. When they finish, perhaps its time to reinstate their short position once more, and the cycle begins.

Thats what I mean when I say the stock is broken. Its got nothing to do with fundamentals, nothing to do with charts. Its liquidity and which funds need to balance their resource book by shorting a diversified position that has a low risk to cover.

I would say that if you take to account the short position in this stock, you would see that the number of shares floating around out there is significantly more than the 3.1 billion on issue, hence its liquidity and ENDLESS supply of sellers.

So how did it get this way?

Previously Oxiana's registry had hedge funds, special situation funds and people who believed the story Owen Heggarty promoted to the market. In essence, it had a good "takeover/sexy" premium built into the share price.

Zinifex's registry was filled with moms and dads chasing the post Pasminco story, and yield conscious managers who wanted exposure to the resource sector which was outperforming at the time.

Once they combined, the resource sector became shaky, and the dilution of shares and cross ownership became too complicated.

So the "sexy" premium came out. Thats 3.40 to 2.70.

Then Barclays left. Thats 2.70 to 2.40

Then AXA began selling their Zinifex holdings (converted to Ozminerals). 2.40 to 2.20

Then the convertible bond guys started hedging their positions. 2.20 to 2.00

When it broke 2.00, everyone jumped in. Resource funds. Long only funds. Chartists. CFD traders. Momentum traders. 2.00 to 1.63 in 3 days. All selling. Either to hedge or to speculate.

And all along the way, people have been buying, and buying and getting margin called and stopped out, and it snowballs.

Hence....the word broken. It's not manipulation. It's not fundamentally wrong. It's not suppression or a big holder getting out. It's actually broken. As in nothing will fix this, except time or a takeover.

It's got to get to a point where the value funds meet the short sellers. That point is nowhere in sight.

The truth is, our highly paid fund managers are just no scared and too reliant on others to jump in first, in order to defend their positions, even though its fundamentally cheap. (the cost of the mines OZL has might actually exceed its market capitalisation...think about that).

In the midst of subprime and debt being a taboo word, a company with 105 million dollars worth of notes as its only visible debt, plus a billion dollars in cash in the bank, producing commodities...the very anti thesis of CDOs, mortgages and complicated financial instruments (they dig stuff up and sell it to Chinese..how hard is it to understand)....and yet no buyers. Only sellers.

Hence broken. Stocks don't behave like that if they are fine.

I mean...lets do a checklist.

a) Debt Covenant? - They have ZERO debt
b) Subprime Exposure? - haha.
c) Costs blowouts? - maybe, but 2 billion destruction of wealth must have accounted for them using petrol in the shower stalls instead of water.
d) Directors margin calls? - non disclosure
e) Mine problems? - would have informed the market in their quarterly
f) Charts? - according to a chartist friend of mine, it "broke out" yesterday at 1.83.
g) Short selling campaign? - Obviously there is, see my explanation above as to why.

Nothing seems to be wrong. Just broken.

I'm giving this till Thursday to turn. Then, I will clear out and go back to growing mushrooms...at least when I'm kept in the dark it pays.

I'm typing this in hope that someone from the OZL board actually reads this. Or someone from Xstrata or Teck Cominco, they can have ALL my stock and my family's at 2.75.