FYI | Jun 28 2006
Questions. Often they pop up in my head when I am surfing the internet, reading research reports or flicking through the newspaper.
For instance: how is it possible Nicole Kidman married Keith Urban in the old fashioned Catholic way? Did they convince the Vatican Nicole’s previous marriage with Tom Cruise had not been properly "consummated"?
Answer: Nicole and Tom married according to ceremonies prescribed by the Church of Scientology whose authority is not acknowledged by the Catholic Church – as far as the Vatican is concerned prior vows between Nicole and Tom have never been valid.
How does an increasing number of Chinese spammers get hold of my personal email address?
This is obviously going to be a growing nuisance. Most anti-spam filters and programs use language arithmetic to help determine whether you and me are about to receive spam-mail. No wonder so many of those emails simply end up in my inbox: their content is Chinese to these filters!
If Johnny Depp’s Captain Jack Sparrow from the Pirates of the Caribbean movies was inspired by Keith Richards, what does the Rolling Stone himself think of this?
Answer: Apparently Richards has agreed to play Sparrow’s father in the yet to be filmed third movie. I guess this means he feels honoured.
A question I hear regularly from some befriended active investors is how much would this or that share of a uranium explorer be worth?
Answer: Absolutely nothing. Australia has a three mine policy. No matter how large the potential of what’s beneath the surface: unless this country changes its official policy there won’t be anything coming out of the ground outside these three mines. This means there is no value in owning shares in any of the other uranium companies, other than for the purpose of trying to on-sell them to the next sucker (only applies to those with 100% Australian assets).
When are we going to see some M&A among the larger Australian resources companies?
Answer: soon, my friends, soon. At least, that’s what my sources in Australia have been assuring me for weeks.
To their defense: the likes of BHP Billiton and Rio Tinto are generating above normal levels of cash and one can tell from the growing attention for the matter in local media and analyst research reports that market speculation is on the rise.
Surely if Falconbridge, Inco AND Phelps Dodge can overcome all differences and cluster together into one big corporate giant, we should see some similar action in Australia sooner rather than later?
Resources specialists at GSJB Were agree. They concluded in a recent report it is only a matter of time before we will see the next big announcement in Australia (it’s been fifteen months since BHP and Xstrata fought over WMC).
So who’s likely to be the next target?
There’s a short list of usual suspects which is nearly always mentioned whenever the subject comes to the fore: Iluka (ILU), Newcrest Mining (NCM), Oxiana Resources (OXR), Jubilee Mines (JBM) and Kagara Zinc (KZL).
For what it’s worth, I regard Oxiana, Iluka and Kagara Zinc (in that order) as the prime candidates.
Newcrest, while being Australia’s largest gold miner with a large foothold in copper as well, has the disadvantage of a shaky hedge book (seldom reported but everyone inside the industry is well aware of it) – a risk again highlighted with Croesus (CRS) going fresh into administration this week. (I am not implying Newcrest is going to be the next one, but a costly hedge book is a massive turn off, any way you look at it).
Jubilee Mines still has to come up with the goods to extend its Cosmos mine operation beyond 2008.
Some, like GSJBW, believe Lihir Gold (LHG) should be considered as having take-over appeal as well. Others believe there are too many risks with the one mine operation in the midst of very challenging surroundings. A significant expansion of the operation should increase the company’s appeal, GSJBW argues.
I always think who would want to pay a premium to own so much risk? But then again, who knows?
If you apply the Who Knows-principle there are many more candidates available, from Macarthur Coal (MCC) to Kimberley Diamonds (KIM) to Zinifex (ZFX).
Sino Gold (SGX)? Pan Australian Resources (PNA)?
One word of advice from the experts in the market: look for accident prone assets with a long life, low operational costs and preferably with further expansion potential.
Till next week,
Your "not in a bidding mood myself" editor,
Rudi Filapek-Vandyck
(Supported by the Fabulous Four: Greg, Chris, Terry and Rob).