OZL 0.86% $9.43 oz minerals limited

the bullish scenario (buyback)

  1. 496 Posts.
    I'm a bit hesistant to post this after being so bearish.
    Some might call me a manipulator.
    Anyway I thought about what could make me bullish on this stock, outside of management changes & mine closures.

    I have assumed some metals price bounce back 10-15% but underpining this recovery is an assumption that the management are prudent enough to buyback some shares now.
    If they are still bullish on a price recovery in metals then this would be a wise (something new for them) strategy.

    Now I don't know about badly the financials have deteriorated inside OZL.
    The debt blowout is the concern, especially the amounts needed to be paid in USD on the debt.
    Assuming they spent some of the $1billion to buyback 700million shares, so outstanding shares are 2.5billion.
    Assuming the buyback costs around 500million (average purchase price is 70c) that leaves roughly 500-600million in cash.
    I'm assuming no payments need to be made for PH or have already been made. Even if they do need to be made, I think that will be about 200-300million and debt repayments are 50-100million that would still leave 100million or so for protection against a further slide in prices.
    Now this could be hedged I think will puts, perhaps another 50million.

    If copper bounces back to 1.70, zinc & lead to 60c, nickel to $7 and assuming 2.5billion shares left. I get valuation of $1.80. If no buyback then value drops to $1.05 at those prices.

    Plugging in current prices and no buyback I get a valuation of 22c for operations + 30c cash so about 52c for the company.


    Now I've gone crazy and put in a big recovery for metals with the reduced share base and with a $2 copper price, zinc at 70c, nickel at $8, gold $800
    I get a valuation at around $3.40. With no buyback then its only around $1.95.

    I've used lower costs to reflect lower input costs for fuel, power, materials etc
    Also the Golden Grove copper increase/zinc decrease I've assumed a lower cost with the by product credits.
 
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$9.43
Change
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Last trade - 13.30pm 26/05/2020 (20 minute delay) ?
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Last
$9.45
  Change
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