Cashing in on zinc
March 3
Greetings investors!
Last spring we wrote up Aussie zinc producer Zinifex Ltd. , based on the long term pricing fundamentals and the company’s immediate prospects for enhancing its reserves.
We’re advising investors to sell on the heels of a successful takeover offer by rival base metals producer Oxiana Ltd. The company is buying Zinifex at a 14% premium (all stock) to last Friday’s closing price. That’s a better than 30% gain over the past 9 months.
Buying Zinifex will more than double Oxiana’s sales and give the copper and gold mining company zinc, lead and silver projects in Australia and Canada.
Zinifex has A$2.2 billion of cash to fund new projects and acquisitions.
Oxiana is trading at 19 times estimated earnings, or A$3.93 per share on the Australian Stock Exchange today. Zinifex, which trades at 11 times earnings, rose A$1.15, or 10 percent, to A$12.28 - but still below the A$12.68 Oxiana offer price.
The combined company has A$2.8 billion in revenue and posted net profits of A$918 million in 2007.
Be careful out there.
Kb
The BarkerLetter on March 2nd 2008 in Commodity investing
