stop clutching at straws ozl has been over

Stop clutching at straws OZL has been over sold it will eventually go up I. Have a read of the blow article.

OZ Metals, formerly Oxiana (ASX:OXR)

OZ is another victim of two trends this year: base metals selling and the scorn investors have piled onto acquiring firms in takeovers.

It was initially a gold tip. But since 2006, the company has taken on more projects. Not to mention the Zinifex takeover this year. Oxiana has grown rapidly.

It's now the second largest zinc producer in the world. But Owen Hegarty, former boss of Oxiana, is keeping his eye on the firm's upcoming projects in two other sectors: copper and gold. So are we.

The addition of Zinifex brought around $2 billion of cash to OZ Metals. That has made funding new projects a lot easier. The development of Oxiana's precious metals unit is what we're most excited about here. It has the potential to become one of Australia's largest gold producers.

That cash should also give it the opportunity to add the one type of asset it doesn't have: energy. Throw in nickel, lead, zinc, copper, gold and silver, and this outfit is shaping up as the third largest diversified miner in Australia. Only BHP and Rio mine more commodities at greater rates.

OZ is in the doldrums because base metals are unpopular. Many commentators are calling for a financial-style bust in metals as speculation winds down a bit. We disagree completely. The speculation argument discounts future demand from China, India, and other developing nations.

You can't discount them. Twice in the last two years China has pushed up the copper price significantly during rapid periods of stockpiling. The first happened very early last year. The second occurred during December last year.



During these periods, the copper price added 40% and 38% respectively. It illustrates how much influence non-Western parties have over commodity prices. The balance of power is clearly not where it used to be: it's shifting away from the US.

So, OZ Metals is in a slump. But we expect it to turn up. Metals fundamentals are more robust than a lot of people think.

This doesn't contradict the reasons we're selling Kagara. OZ Metals has bigger scale, better prospects, and greater diversification than KZL. It's less risky, and less likely to falter in a high-cost environment. Over and above all that, it has exposure to precious metals.

All of those are compelling reasons to own OZ Metals shares. It's a better company than Kagara, and it has more exposure to better commodities.

We'll go so far to say this: the company has a shot at becoming the third mining superpower in Australia. It's worth owning for that reason. Now's the time to get on board, while the tickets are cheap. OZ Metals is a buy.