Dasa, Agree on borrowing. You could be right about SAU. After all , OXIANA bought Minotaur to get P Hill.
431neb, OK here goes, I am handtyping in, soplease excuse typos.
P22 AFR Street Talk OZ Minerals eyes joint ventures and mine aquisitions
Oz Minerals has a new chief executive, Terry Burgess; $1 billion with which to create real project options, and is a pure copper play leveraged to LME copper prices. It could not be more ready to rumble.
Morgan Stanley's Craig Campbell and Cameron Judd reckon OZL may look at orphaned assets within some larger mining houses, such as Northparkes copper and Gold mine, or potentially a joint venture with a junnior on the basis of providing funding to gain an earn-in on prospective ground positions.
Northparkes is a joint venture between Rio Tinto (80%) and the Sumitomo group (20%) and is located 27kms NW of Parkes in NSW.
About 80% of Northparkes is for sale (Macquarie is advising RIO) and despite the fact the mine has suffered technical issues in the past 12 to 18 months, analysts believe it could be a good fit for OZ, resulting in an earnings uplift of up to 35%. Morgan Stanley value the Northparkes mine at $USD436M (100% basis) and forecasts ebit to peak in 2012 at $USD170M.
The analyst said the biggest challange for a new owner of the mine would be Technical support as it is a block caving operation, while another potential issue with the mine for a new owner is dilution of ore, as occured in 2008 when the head grade declined to just 0.54% from 0.91% in the prior year.
Obviously M&A for mature producing assets does carry a higher risk of overpayment, but cashflows at present are seen as highly vulnerable to any mine site incidents at P Hill.
Morgan Stanley has suggested that more time should be taken before developing the P Hill underground project.
Based on a real option valuation, the broker estimates that delaying the project up to 5 years could be worth $85M to OZL.
Me Burgess is due to provide the market with his stratgey for OZL on Nov 30
*** end ****
Things that caught my eye. a) Price is much better at $436m (100%) or $348.8m for 80% b) Not an easy mine to manage. c) Ebit peak of $170m in 2012. Need to know the EBIT curve before commenting more on this. d) Joint Venture with Juniors - SAU?????? e) Delaying the P Hill underground? Need more info to understand why on this point. f) None of these deals would stretch OZL.
HT1
OZL Price at posting:
$1.31 Sentiment: LT Buy Disclosure: Held
