Another dodgy Australian takeover situation story from London on a Sunday that was not backed up by the facts.
London financial markets leak like a sieve when there’s a big deal – banks, brokers and analysts all get in on the chat as they try to scoop each other, or claim front position in deals, real or imagined.
BHP Billiton, Rio Tinto and many other companies (for example, numerous rumoured bids for Fosters before the real one a couple of years ago) have been mentioned in reports from London papers, usually on a Sunday.
Now Melbourne-based OZ Minerals (OZL) has been the subject of another highly misleading and just plain ignorant report – it’s enough to make you wonder if someone in London was engaging in a spot of market jigging.
The Mail on Sunday (not the most authoritative of sources, the Financial Times would have more credibility) claimed the huge Glencore Xstrata mining and commodities group was eyeing a possible bid for OZL.
No sources, and it was claimed that Glencore had built up a stake of just on 10% – ignoring the very simple fact that any holding of greater than 5% would have had to be exposed by being reported to the ASX.
The Mail on Sunday said UBS had been appointed to advise OZ on a defense.
A very important point escaped the Mail on Sunday, as did what Glencore is actually been doing for months – cost cutting, closing mines, selling mines and sacking staff around the world, including in its huge Australian coal and copper operations that came with the Xstrata purchase.
Those facts weren’t obvious to local day traders and other urgers yesterday, so OZ shares jumped 6.7% at one stage (in a market that was easier all day).
But by the close, that surge had run completely out of puff and OZ shares were up just 2c, or less than half a per cent to $4.43.
OZL YTD – OZ Minerals not on Glencore’s shopping list
In a statement on Monday, OZ Minerals said, "The company advises it has not received a substantial shareholder notice from Glencore nor has OZ Minerals been approached by Glencore in regard to any proposal" .
OZ Minerals is probably one of the least attractive stocks on the ASX at the moment, for several reasons.
OZ Minerals is struggling from the impact of lower gold and copper prices and the fact that its Prominent Hill mine in South Australia is getting old and more expensive to reach deeper deposits containing lower grade ore.
There are one or two new areas at Prominent Hill due to come on stream in the next couple of years that will help steady OZ Minerals decline, but the group remains under pressure and must continue to cut costs.
The company’s future is the nearby Carrapateena deposit, but that is several years and many hundreds of millions of dollars away from development.
OZ had boasted of a $1 billion or so cash pile a couple of years ago, but that has been shrunk by spending at Prominent Hill, work on proving up the Carrapateena deposit and dividend payments. The cash pile was down to $433 million at June 30, 2013.
Superficially that cash pile makes it attractive, but Prominent Hill’s problems and limited future and the absence of a new big mine on the horizon, makes the company a tough ask.
