KZL

[jebigabre]

This zinc/copper/lead miner is one of those quiet achievers that hardly gets noticed by the market. It was listed in 1999 when the Internet bubble was just about to pop, acquired land and orebodies at dirt cheap prices and has gone about its business of mining in a no fuss way. At a market cap of $165M, its not exactly a minnow but there is a reason for that.

KZL is going to be a cash producing machine. Zinc costs are going to be below $0.27c/lb and zinc is currently selling at over 0.55c/lb. It is one of the lowest cost producers in the world and it is unhedged. The current mining operation is expected to last 10 years at a production rate of over 130kt of concentrate per annum. Management has shown however that by incremental discoveries the mine life will be significantly increased.

Kagara is run by capable people led by Kim Robinson who has close to a 15% stake in the company and has been a consistent on-market buyer. The same management at Kagara led the successful Forrestania Gold and is teamed up again for the KZL venture. Forrestania listed in 1987 at 25c and was taken over in 1994 for $3.35 by LionOre. In the process it paid a total of 70c in dividends. Here is a bit of history from the website:

In 1984, Aztec Mining Company Ltd ("Aztec") farmed into the tenements owned by Kagara, ultimately earning a 62% interest. Kagara's 30% interest in the tenements (which later increased to 38%) was transferred to Forrestania Gold NL ("Forrestania"), in exchange for shares. Forrestania was floated on the ASX in June 1987 at an issue price of $0.25 per share. During its history as a listed company Forrestania paid a total of $0.70 per Share in dividends.

In 1986, the Forrestania/Aztec joint venture discovered the Bounty ore body which has subsequently produced over one million ounces of gold.

Forrestania went on to develop another one million ounce gold resource at Mt McClure, and discovered the Maggie Hays and Emily Ann nickel sulphide deposits at Lake Johnston in Western Australia. Kagara maintained a substantial shareholding in Forrestania, whose founding directors included Kim Robinson and Max Cozijn.

In 1994, Mark Ashley joined the Forrestania group and became Finance Director. In 1997, Forrestania was acquired via a Part A takeover bid by LionOre Mining International Ltd ("LionOre"), a company listed on the Toronto Stock Exchange. Kagara accepted LionOre's combined cash and scrip offer of $3.35 per share for its Forrestania shares, and distributed the majority of the proceeds to its shareholders.

The upside is this:

Drilling is continuing to be encouraging at Red Dome and Mungana where the company aims to jointly develop a 150koz to 200koz per annum gold operation with a base metals circuit similar to the one that they already have at Mt Garnet. A prefeasibility study due is for April 2005. This second operation will double the companies earning and cash generating capacity.

It is expected that KZL will earn 14cps this financial year. If we take a reasonable PE of 10, the share price should be closer to $1.40.

I hold.

[jebigabre]

KZL has just raised $15M in an effort to delineate sufficient ore tonnage to establish a 2mtpa gold-copper operation in the Chillagoe
region. Should KZL be able to do this, Macquarie Equities Research believes that indicative value of the project would be $140–180m (73–93cps).

In addition, independent of the Mungana gold-copper deposits, a smaller operation in the Chillagoe region is increasingly appearing viable through the development of the Walsh River zinc deposits (King Vol, Montevideo, etc) and the Mungana zinc-copper resource. Indicative value of that project is assumed to be around $50m (26cps) by MER.

Reading the latest quarterly result, KZL investment case looks convincing. Low cost operation & very high grades. They are mining zinc at US$25c per pound and average realised price was US48c per pound, giving operating margins most zinc producers in the world can only dream of ($23c). The aim is to reduce costs even further to US20c per pound.

Nice to see the price moving in the right direction as well with the exploration potential there to more than double the company's size.

[k1w1]

We have a thread on this don't we ?

[Dr_Who]

I think it is time to revisit this interesting stock.

The Chinese recently paid 80 cents and will take up their rights at 60 cents. Looks like a company with huge potential, esp with their current up coming new mines Mungana and Lounge Lizard.

I ve recently bought shares in this little Co.

[Huang Chung]

You might have bought mine Doc .

I picked up stock at 90c and 92c after they recommenced trading, but sold when they started to slide (exiting at 83c). Now down to 70c I see.

[Dr_Who]

You might have bought mine Doc .

I picked up stock at 90c and 92c after they recommenced trading, but sold when they started to slide (exiting at 83c). Now down to 70c I see.

LOL...

Na mate, I got some stock in the institutional book build 60 cents and bought more today at 70 cents.

[Dr_Who]

KZL has gone mental putting on 40% in only a week trading 91 cents.

[Hoop]

KZL has gone mental putting on 40% in only a week trading 91 cents.

Selling pressure when the capital raising was in progress + the short term softening of the spot prices at that same time methinks... Geez...damn nearly sold down to buy up my 1:1 entitlement at 60c as well.... lucky I didn't


Doc its gone even more mental in the last hour... up to 95c now!!!!!!

Edit 5.17pm NZ................95c nah..now 96.5c

[Dr_Who]

KZL is now trading above valuation.

But then this market is illogical.

[Hoop]

KZL has gone mental putting on 40% in only a week trading 91 cents.


KZL is now trading above valuation.
But then this market is illogical.

10 days later ...now at 116.5c (up 8c today)

Earth calling Kagara!! .......