Even though zinc miner and processor, Zinifex, is looking at another record profit in the year to June, the shares are under a bit of pressure.
This pressure is on top of the sell off in the market on those credit market and sub-prime worries emanating from the US.
ZFX shares lost ground for the second consecutive day on Friday, as investors worked out that a 5% drop in annual production would be more than offset by a surge in the price of lead and zinc in the year to June.
Zinc prices were about 74 per cent higher in the June 30 2007 year than in 2006 and lead prices were up 58 per cent.
Analysts believe the company is heading for net earnings up around 40% on the 2006 figure of just over $1 billion. That would put net earnings around $1.4 billion, or perhaps $1.5 billion.
Despite this, ZFX shares ended down 59c or 3%, at $19.10 on Friday to extend the two day slump that started in the wake of the extraordinary general meeting on Thursday to consider and approve the spin-off of the company's processing and smelter assets into a new company with Unmicore of Belgium.
Despite some odd investment analyst approvals, the surprise from the meeting was that ZFX shares would not be receiving any shares nor would the issue be extended to Australia.
That was because to do so would take additional time and the company clearly wants the sale to happen quickly, rather than to be democratic.
The resolution received strong support from 98.47% of proxies.
And investment analysts reckon ZFX's share price will rise by around 30% because it is a takeover target (for whom, with the buyout boom ending), the expansion of the mining businesses (Dugald River in Queensland and a possible new mine in Canada), strong zinc and lead prices (although lead fell 14.6% last week from the $US3,500 a tonne record on July 20!) and a sizeable buyback.
It certainly is puzzling that Zinifex shareholders will not get a look in with the smelter business sale which is being done by forming a joint venture with the smelters currently run by Belgian company Umicore.
Zinifex is planning to sell its entire 60% shareholding in the joint venture as quickly as possible through the float of the business to be called Nystar.
Cash will come back to ZFX and that's made the company more attractive, as well as a possible takeover target.
Perhaps they are trying to minimise any future association with Australia and any possible problems with pollution at Port Pirie and in Hobart around existing processing facilities (or in Europe).
Zinifex shareholders are not going to get an entitlement to the Nystar float, and they will be given no priority allocation.
The explanation to Thursday's meeting was that European investors better understand and value smelting businesses.
But Australian investors have a much better appreciation of mining and processing because of our long history in valuing the likes of Rio, BHP Billiton and even Zinifex.
So you have to wonder why this reluctance?
After all, the Australian superannuation-driven market supports some pretty big valuations for resource companies and has allowed global mining services businesses like Dyno Nobel and Boart Longyear to be bought and fixed up and transplanted from offshore to Australia.
And we have allowed new mining services giants such as Leighton, Orica and Campbell Bros to emerge. So you have to wonder why the ZFX board is nervous about exposing the accounts and liabilities of Nystar to eagle-eyed Australian investors.
In the meantime, ZFX shareholders can expect some good news next month: higher earnings and the probability of a higher dividend.
Zinc stocks remain low and the lead prices have visited record levels.
Acting ZFX CEO, Greg Barnes, said: "For the first time, the lead price is higher than aluminium and is now closing in on the zinc price".
But he also warned about the effect of the Australian currency's rise against the US dollar. "A weaker US dollar will impact revenue, with lower Australian dollar zinc prices being achieved," he said.
For the year, zinc production fell 5% to 1.489 million tonnes, while production in the last quarter was broadly flat at 396,612 tonnes.
"Century mine (in northern Queensland) did well to finish within 3 per cent of last year's zinc output, despite an extended planned shutdown and an unplanned thickener failure," Mr Barnes said. "Lead output, however, was well down, largely as a result of lower lead grades in ore.
"Rosebery mine (in Tasmania) overcame lower grades by increasing mill capacity to deliver similar production to 2006."
Mr Barnes said its Hobart zinc refinery had a record year, with zinc 18 per cent ahead of fiscal 2006, while Budel in the Netherlands increased zinc production, but was constrained by heat issues in the roasters. Port Pirie in South Australia and Clarksville in the US delivered lower output, with planned and unplanned maintenance shutdowns.
During the quarter, Zinifex increased its resources at the Rosebery mine in Tasmania by 65% and Mr Barnes said he expected expenditure to rise to $100 million in fiscal 2008 on the Dugald River feasibility study, further expansion of the resources at Rosebery, Izok Lake and High Lake (in Canada), and increased exploration activity.
With the turmoil in markets and worries about financing big budget buyouts, a bid for ZFX would be hard to see for a while.
