sfr a good choice for ozl, page-9

Total agree Ricstar and Whatsup.

SFR has been a great success story which is good to see and good on the shareholders who got set early, however, at the current SP it is certainly fully priced given that they have not been able to add to their resource (or even announce a positive drill result) in over 12 months.

The BFS states that pre-tax cash flow will be $ 2.4B (so probably under $ 2B after tax) so why would you pay $ 1.2B (current market cap) to get back less than $ 2B when you could probably get this return risk free with bonds / cash in the bank. Particularly given that they have had no additional drilling success for well over 12 months. If they had they most certainly would have announced it.

I can't believe that Goldman Sachs would be putting a
$ 11 price target on their shares, why would they be advocating paying around $ 1.6B for a life of mine after tax return of less than $ 2B. That just does not make sense.

If I was to spend $ 1.6B I would buy RXM for $ 600M (if you could get it for that amount) and then spend $ 1B on building the plant. A resource upgrade is due shortly and could be over 2m tonnes of copper and 2m ounces of gold. Some 3 times the size of SFR but also comes with huge exploration upside (just what OZ wants).

Although $ 1B is a lot to spend on a plant that is the cost of building such a plant in Australia but the operating costs will be with in world wide averages. I would rather spend that sort of figure in Australia rather than a lesser figure in an African nation for example. Recent events in Africa show that sovereign risk is risky business.

There would no doubt be cost savings through synergies if OZ were to take over RXM not only with Prominent Hill being 500km north but also with Carpantenna which sounds like it will eventually be a mine.

OZ take over or not I believe RXM will be the stand out copper stock over the next 12 months or so.