why is ozl rising, page-2

Now for something completely different ..... (for all those monty python fans)

I have been doing a bit of research in the companies that are in the merger games (Lundin, Inmet, EQN) and I ask myself why did not OZL participate?

Inmet has a mine in Panama that will produce 250,000tpa of copper, but requires $5.3B to bring to production. OZL has the cash and the cash flow to buy in at 50% and increase the amount of copper for OZL to about 225,000tpa. The issue is that it would be $2.6B for 125,000tpa of copper for OZL. Compared to P Hill, it is more than double the cost for not much more copper. Also, the grade is 0.46%. P Hill is about 1.7%.

I think TB is being very choosy and not buying the first opportunity presented to him. I think he realises that P Hill is a very special Tier 2 asset with the grade and yearly volume that it is producing and does not want to dilute the quality of the assets in the portfolio. Why did he buy 19% of SFR? I think it was because of grade and location. Why hasn't OZL provided financing to HGO, bought into INMET Panama resource, done a merger of equals with EQN etc? Because, IMO, TB regards them all as vastly inferior to P Hill.

Remember, TB has been in the mining copper game since the 70's. He has seen the highs and the lows of the copper price and probably has a pretty good mental model of what is required to make a company sustainable through the cycle. Again, this is my opinion, but I think his model is a bit like this.

You are either big like BHP (think Escondida) or you have a resource that sets you apart from the rest via good grade, stable location (although that is questionable with the current govt) and low C1 cash cost. Again, IMO, I do not think TB wants to break that model.

So what does this mean for OZL holders?

It means that we have to trust TB to do the right thing by the shareholders. If you do not agree with what he is doing, then I would suggest that you sell. I have noticed recently that the OZL thread seems to have a lot of "whingers" posting (I cannot think of a better term). They want OZL to "do something". I am glad that TB is not swayed. Remember, as shareholders, we vote for the board, who appoints the CEO. If someone does not like the way the company is being run, nominate yourself for the board.

Sorry to be a bit harsh.

HT1