PEM - Perilya Limited

[doogie_goes_off]

Strength coming back into the cobalt price should see PEM tick up on the back of Mt Oxide...

"New York (Platts)--25Aug2008
Cobalt prices have bounced sharply as a result of traders buying around
100 mt of cobalt from BHP Billiton in the space of just four working days,
with prices of transactions climbing by more than $5/lb since last Thursday"

 

[legs]

got a rocket in its butt today...up 56% so far 10 minutes before close. Obviously traders liked the spin off of Mt Oxide and acquisition of purchase of 200m shares in Chalice.

Not before its time though.

 

[Hendrik]

got a rocket in its butt today...up 56% so far 10 minutes before close. Obviously traders liked the spin off of Mt Oxide and acquisition of purchase of 200m shares in Chalice.

Not before its time though.

It was heavily oversold in recent months, this week was a real downer for it pushing it below 52 week lows and support, so anyone who scalped this one today, well done

 

[fighting41]

I got on Perilya when it went to $0.40 and yesterday was watching my portfolio at 3.25pm when it colapsed from $0.32ish to around the $0.17.

After wasting a minute trying to work out what had happened and why, I was able to get on again at $0.19

I was cheering when it was up 70% at one stage today.

Sept. 12 (Bloomberg) -- Perilya Ltd., an Australian zinc and lead producer, rose the most in 17 years in Sydney trading after Credit Suisse Group boosted the company's rating, saying the stock is ``well below'' its value.

Perilya jumped 61 percent to 33 cents on the Australian stock exchange, making it the benchmark index's biggest gainer. Perilya has lost more than 88 percent of its market value this year.

Credit Suisse upgraded the stock to ``outperform'' from ``neutral'' in a note released today, saying the net recoverable cash on Perilya's balance sheet and its bonds were worth A$67.4 million compared with its market valuation yesterday of A$40 million. The rise in Perilya's share price today has taken its market value to A$65 million.

``We see this stock as too cheap'' given Perilya does not pose a solvency risk, the note said.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aTvqMZ49Hwpw&refer=home

 

[michael_selway]

I got on Perilya when it went to $0.40 and yesterday was watching my portfolio at 3.25pm when it colapsed from $0.32ish to around the $0.17.

After wasting a minute trying to work out what had happened and why, I was able to get on again at $0.19

I was cheering when it was up 70% at one stage today.



http://www.bloomberg.com/apps/news?pid=20601087&sid=aTvqMZ49Hwpw&refer=home

Hm that sounds scary

Earnings and Dividends Forecast (cents per share)
2008 2009 2010 2011
EPS -10.3 6.2 14.6 12.7
DPS 1.0 0.5 0.0 0.0

Date: 12/9/2008
Author: Jamie Freed
Source: The Sydney Morning Herald --- Page: 21
Investors have again been disappointed by Australian zinc miner, Perilya. It hashad a difficult year in 2008, with falling zinc prices, a failed merger,redundancies, write-downs and poor results, with its share price falling from apeak of $A4.42 in November 2007. Perilya sold its Mount oxide copper project inQueensland to Chalice Gold Mines for $A25 million on 11 September 2008. However,the fact that the transaction was for scrip, not cash, caused its share price tofall by $A0.115 to $A0.205

thx

MS

 

[legs]

"Date: 12/9/2008
Author: Jamie Freed
Source: The Sydney Morning Herald --- Page: 21
Investors have again been disappointed by Australian zinc miner, Perilya. It hashad a difficult year in 2008, with falling zinc prices, a failed merger,redundancies, write-downs and poor results, with its share price falling from apeak of $A4.42 in November 2007. Perilya sold its Mount oxide copper project inQueensland to Chalice Gold Mines for $A25 million on 11 September 2008. However,the fact that the transaction was for scrip, not cash, caused its share price tofall by $A0.115 to $A0.205"



Thats old news as it didnt fall today...it went up 61%.

The fall was from the day before. It rebounded very strongly today.

 

[oremo]

PEM - Perilya Mining

I'm holding 100,000 shares at average cost 27 cents..
I kept buying in at what i thought was the bottom.

I know...some say that's dumb.

Seemed simple at the time...

buy when everyone else was getting out
Zinc stockpiles will be consumed & create demand...eventually...

Am I any chance of recouping?

Appreciate some feedback

Oremo the newbie

 

[UMike]

Re: PEM - Perilya Mining

I'm holding 100,000 shares at average cost 27 cents..
I kept buying in at what i thought was the bottom.

I know...some say that's dumb.

Seemed simple at the time...

buy when everyone else was getting out
Zinc stockpiles will be consumed & create demand...eventually...

Am I any chance of recouping?

Appreciate some feedback

Oremo the newbie

If "Zhongjin Lingnan" aquired 50.1% of PEM for $0.23 we have buckleys of seeing $0.27 anytime soon.

That they didn't merge with CBH astounds me.

Life goes on.

 

[oremo]

The "Zhongjin Lingnan" aquisition (50.1%) for PEM for $0.23 was interesting.

At least they value PEM at $0.23 in the current market conditions which indicates that it's good long value at the moment. Only needs a bit of demand to send the price up.

They are obviously thinking long.

News out of China points to stockpiles slowly running out.

Feel a bit of confidence coming back

Anyone out there got some concrete info?

Life goes on and on and on.........:walker::walker::walker:

 

[oremo]

Knew PEM would go up. Hit up to 29 cents today and settled back to finish up at 27.5 cents. Up 8 cents on the day. Not bragging just relieved and happy to go square. What will happen tomorrow? Dow futures look good for tonight.

Seems China is either stockpiling Zinc at cheap prices or their consumption is growing. Lots of good news out of China in general.

Holding 77,000 shares and am up by $850

Tempted to bail out but going to sleep on it. Anyone care to comment on where this stock is or sector is going?

 

[misterS]

Knew PEM would go up. Hit up to 29 cents today and settled back to finish up at 27.5 cents. Up 8 cents on the day. Not bragging just relieved and happy to go square. What will happen tomorrow? Dow futures look good for tonight.

Seems China is either stockpiling Zinc at cheap prices or their consumption is growing. Lots of good news out of China in general.

Holding 77,000 shares and am up by $850

Tempted to bail out but going to sleep on it. Anyone care to comment on where this stock is or sector is going?

Hi Oremo,

This Perilya and Kagara action has spurred me to start thinking about zinc again, which I did when making a quid out of Zfx as zinc got to $2/lb.

I wouldn't pretend to advise you, being just a mug punter, but will presume to volunteer the little I learnt from that period anyway.

Perhaps you already know, although I didn’t to begin with, the very basic thing is that there is a base metal cycle - demand rises above supply, the prices goes up sharply, speculators increase the effect, but the price is absolutely pole-axed eventually by the overpowering massive over-supply response. Zinc is a common metal and a good price gets miners cranking it out. The price movement is aided and abetted by mysterious speculators. ("Nuclear winter in base metals" by Frank Veneroso was an interesting read in that respect)

So, the price of the metal is the driver of the SP of producers, bearing in mind debt level, the amount of resource they have and the price of their production per lb – which reflects its accessibility, ratio, contaminants, etc., etc. and of course the lead you get when mining zinc.

So, provided you are happy with the recovery cost, the management, the resource, it is all about the price of zinc (and lead). This is primarily where you have to concentrate your research.

Simple things like having a Google on "zinc demand supply" and so on will give you a start on what sorts of articles and opinions / statistics / forecasts are around. Kitco has some good historical charts of prices and LME holdings of the metal. Of course, there are non-LME stockpiles as well and stockpiling and de-stocking by the various producers and users alike (and sometimes, it is rumoured, by price manipulators). There are all sorts of commentaries about supply/demand and futures trades and so on. A poster called “Brend” seemed to be the ducks nuts on commodities and zinc on Aussie stock Forums

From a very quick squiz at their website, (you’d need to check what I am saying is correct - have a gander at their website) Perilya says it has no debt, and currently claims to produce at around 60 - 65c per lb, having recently reduced costs (and production).

Despite the lack of debt, it appears they would have collapsed without a capital injection provided by the Chinese getting 50.1% for $45m. You can’t keep producing something that sells for less than it costs you to produce for any length of time.

This Chinese intervention is predominately a comforting one (to me). For one thing, it indicates the resource is very satisfactory. Resource security is clearly important to China. It seems reasonable to expect China is pleased to have snapped up these resources cheaply and so the short-term price is probably not their primary concern. They are not likely to relinquish them just because they lose money for a period. Although, the other side of that coin is that they may not feel compelled to mine it at a loss - happy enough to know it is there – and theirs.

So, as always, whether the price keeps going up seems to be the question that will bear on whether Perilya SP does too, but since the Chinese have come on board, this may allow some leeway in how critical the immediate zinc price is.

You would think China is not taking these cheap companies with good resources to just let them fold due to short-term market price problems – after all, that is exactly how they came to acquire them in the first place, isn’t it? China wants resource security, it doesn’t care about losing a quid for a year or however long they think is tolerable – quite a long time I suspect. The profit imperative is not so demanding when your access to capital is not really constrained.

As a cycle, zinc will go back up again at some stage – and the money made during the boom times is considerable. If you had China’s resources, you wouldn’t be too upset by a delay in realisation of an investment. Let’s say the price of zinc gets above a dollar again in 2012 or 2013?

On the other hand, there are some commentators who say the zinc price will remain flat for a couple of years. Even if this proves correct, it will not be falling after that.

If I understand it correctly, when the massive over-supply response shocks the base metal price, it reverts pretty much to cost of production. However, in this case, rather than massive over-supply causing it in the usual way a base metal price rout occurs, it has been due to the sudden erosion of demand caused by the general financial crash that has affected demand and perhaps more accurately, “perceived demand”, and not over-supply itself – except relatively speaking. I’m not sure the distinction drawn there necessarily holds much water, of course demand / supply is relative, or whether it can be extended to a meaningful consequence, but it is a working hypothesis for me for the time-being.

Accepting that proposition, then stimulus and any sort of recovery could have a sharp effect on base-metal price, because the usual true cause of base-metal flat-line is massive over-supply response which overshoots demand by a long way because of how long it takes to bring production on-line, not merely temporary demand erosion, which at least has the potential to be more quickly restored.

Prior to doing any sort of real contemporaneous reading or research, my initial feeling is that the base-metal prices will continue to improve simply because of the absence of massive over-supply. Demand erosion skewing the demand supply equation is not of the same long-term magnitude as the classic massive over-supply response which cruels the price for an extended period.

Perilya looks to be a good company with no debt, who made sensible rationalising moves when the zinc price crumbled, has improved production costs which are around the current price of zinc and better financial depth and therefore the luxury of more time because of its new major stockholder.

I wouldn’t presume to give advice to you about your holding, but there should be some comfort in the fact the independent advisor gave a valuation around 30-33 cents when the Chinese took their stake, although I don’t know what price they assumed in their valuation. The fact the price of zinc is around 65cents tonight on Kitco is not bad either.

Given the previous Perilya SP there must be many, many unhappy holders who wished a price of 29 cents put them in the black and I would be feeling more excited than anxious being in that position. The Chinese backing and the cash itself both provide some longer term security, but of course, depends on what else you hold, risk appetite, etc.

I might have a bit of a nibble myself after a bit more of a sniff around. I always feel stupid talking actual prices because I am seldom right, but after a 41% increase, a retrace of a couple of cents would not be unheard of.

On the other hand, if their longer-term survival looks more certain now, then significant increases could well be sustainable. The aftermath of this crash sees the Chinese snapping up resources at bargain prices and people making real money in the market.

A modest base metals rally doesn’t depend on the world booming again - it just has to be going along wanting more zinc than is available. There will presumably be some production curtailed (as by Perilya) and some imbalance in re-starts versus immediate demands.

As far as the condition of the world economies, I slightly discount the bears’ current profile in forums and the media because this prominence flows from a natural bias towards the flavour of events which have already occurred – which is not to say everything is rosy, but there is a lot of things that still need to be going on and a lot of money wanting a profit and an awful lot of people with aspirations which generally manifest at some level as “wanting stuff”. The various stimulus packages have a big infrastructure component, good for copper and zinc.

Sorry to have gone on so long, but it has got me thinking zinc again in my amateur way and the straightforward equation once you make the complicated decision of whether and who (and when) to invest in with a zinc producer has its own appeal:

Open Kitco -check zinc & lead price - hooray, or boo hiss.

Cheers,

 

[oremo]

Hi MisterS

Thanks for your reply. You have illuminated me. You spoke my language and raised many thought-provoking viewpoints. So many in fact that I am giving serious considertaion to your logic as I like to digest information and then ponder. I'll come back to you with some feedback.

Today PEM is up 3.5 cents so far. To say someone out there has faith in zinc would be an understatement.

Thanks again for you eloquent and informative reply and I'll check out the information resources.

Cheers

 

[misterS]

Hi MisterS

Thanks for your reply. You have illuminated me. You spoke my language and raised many thought-provoking viewpoints. So many in fact that I am giving serious considertaion to your logic as I like to digest information and then ponder. I'll come back to you with some feedback.

Today PEM is up 3.5 cents so far. To say someone out there has faith in zinc would be an understatement.

Thanks again for you eloquent and informative reply and I'll check out the information resources.

Cheers

Hi Oremo, thanks for that generous reply. The philospher and scientist Herman Helholz said that the genesis of an idea lies in a process of saturation, incubation, illumination, so you are in good company with getting info and pondering it.

Good to see Pem put another quid, (potentially, at least) in your pocket today. On that point, if you take a profit and then get back in to the same company later, at a higher price, you do not lose any of your capital, it has still increased by your profit. You merely have less shares and still suffer or enjoy whatever fate befalls the price going forward from that point. The bit between is not really something you have "lost", except in the sense it is a profit foregone (or a loss avoided) and of course the CGT issue.

Although, I found CGT considerations to be a distortion and a trap. You hang on to shares come hell or high water waiting for the 12 months to be up and sometimes your profit dwindles or turns into a loss. I finally realised I should rather pay tax on a profit and trade as I saw fit, than passively wait to see where the price is in 12 months. Of course, it shouldn't be ignored, but be seen only as a side-issue, not the central decision driver.

I've pondered a bit more myself about whether the sheer sudden dislocation to zinc producers is a positive factor for Pem. Plenty have shut or reduced production and ramping back up is not an overnight process, but if you are a user, you need it when you need it. Smelters lay off workers and suspend operations for lack of concentrate, or cash to operate because the margins are too tight, etc.

This brings me back to my hypothesis that because the cause of the recent price rout of base metals is different, therefore the consequences will have a different pattern. The immediate effect was the same, reversion to production cost, the same as if the cause had been the traditional massive oversupply response. However, even the improvement to date is probably quite different. (I'm too slack to do the research to see if there actually are any little rallies when massive oversupply kicks in, but I suspect there are very few).

Also, reviewing some old notes, I see China uses about 2 and a half times as much zinc as the USA, so China's economic performance is more important to the zinc market than the USA. I read that the Shanghai price is currently higher than the LME price and that is causing imports for China and also increasing the LME price. Not ignoring the fact that USA is a big market for China, but infrastructure is not an export.

Bloomberg says zinc futures surged 5% for July delivery on the Shanghai futures market, but at the same time they have an article about the Chinese economy slowing, so which way are they going?

The fact China is buying zinc mines may be an indication of what they think about it - although, not to forget they may be more interested in supply security more than simply profit, in my opinion. Of course, not suggesting that these are mutually exclusive objectives for China to pursue.

Everything has so many facets, doesn't it? You can be completely wrong and make money and completely right and get shafted if the market disagrees. Or you can think you know why something is happening and yet it may be happening for reasons not known to you.

Anyway, I think my hypothesis is fair enough, it may even be blindingly obvious, and so silly to refer to it as "my hypothesis" but whether it follows that the consequences are better zinc prices remains to be seen.

I would be happier to get some PEM under 30 cents, so I might wait until the late afternoon tomorrow to see if I can get them from the profit-takers who have no reason to hold over the weekend - in case the DOW does something really ugly on Friday night.

Lots of getting out on each Friday given the volatility at the moment and the run having gone for a while now. You would hate to see a sudden five hundred point fall and the PEM price 17 cents next Monday. (No points deducted for a bit of self-serving scare-mongering there, I hope)

Otherwise, i might keep my powder dry and see what transpires next week.

Another thing I am struggling to learn is not to be always rushing in like a cat crossing a road, all anxious dithering followed by an arbitrary sprint. Not that a bit of caution really compensates for my lack of real financial insight regarding the "real" value of particular companies and whether it is already fully realised in the SP.

This ultimately makes my buying pretty much arbitrary, certainly with regard to the important timing element, but I guess the whole market suffers a bit from the arbitrary nature of things. With zinc, at least there are broader factors that I can have a think about and an an easy to understand primary factor - the price of zinc today and what the futures market can tell you about the price next month.


cheers

 

[Boggo]

From a charting view it had "look at me" written all over it on the 9th when it closed on its high and was poised for a break.

[I hold at 22c]

(click to expand)

 

[misterS]

Hi Boggo - Perhaps that illustrates how a picture is worth a 1000 words. As I'm stuck with the 1000 word, rambling, inconclusive narrative, and am considering buying today, is there any chance of sharing the message delivered by today's chart, with particular reference to whether it is still saying "look at me", or has it come over all self-concious?

 

[Boggo]

Hi Boggo - Perhaps that illustrates how a picture is worth a 1000 words. As I'm stuck with the 1000 word, rambling, inconclusive narrative, and am considering buying today, is there any chance of sharing the message delivered by today's chart, with particular reference to whether it is still saying "look at me", or has it come over all self-concious?

Still seems to be interest in it but that is not a recommendation by any means.

Re the 1000 words, I find the pattern first in a Metastock scan, then look at the results on a blank chart, only if it comes down to the need to find the most likely from four or five do I consider looking for news/rumour etc.
Whole process takes twenty to thirty minutes.

PEM type patterns have been the performers over the last few weeks, not using targets, just trailing stops at a safe distance after I achieve break even.

Cheers

 

[oremo]

Hi MisterS & Boggo

Thanks for your replies to this post. I didn't exactly rush out and buy more shares in PEM but your points of view helped me stay in. I needed to hear what you guys had to say.

MisterS thanks for your ramble. it was informative and well thought out. generous.

Boggo, thanks for your short, sweet, to the point feedback.

PEM has rallied nicely now. I siverely hope you guys hopped on.

Even though I was beginning to doubt the faith in my own belief it has been now been restored.

"Do I take the money and run?" "Will they profit-take?" Those are the thoughts going through my mind right now.

I'm also thinking that my in-depth study of the zinc situation indicates that this is just the beginning of the stockpiling going on.

The buying of zinc reminds me of my shopping expedition on Saturday where I found my favourite spaghetti was on sale at 67 cents as opposed to the usual $1.12. I thought I'd top up my pantry at the great price given I will continue to eat spaghetti for a long time to come.

Do you share the same opinion that the price will continue to rise back to "normal" consumption?

I'd love to hear from you guys.

Cheers

oremo

 

[misterS]

Hi Oremo,

Glad to see you are further in front. Sadly, I am unable to translate my general surmising into timing sensible buying and selling, so wouldn't pretend that my advice on that would be any good.

That said, on general principles, it seems a bit of a retrace tends to follow a couple of large percentage rises and actually taking a nice profit is always gratifying.

Maybe depends if you are eyeing anything else in the market, or would just like to briefly "short it" by selling in the hope or expectation that it will at least retrace a bit during the course of a couple of days trading, allowing you back in a bit cheaper than your sale price?

Perilya responded quite adroitly to the zinc price crash and their new majority holder has funds and is itself also part of the zinc market. Perilya production costs of about 52c a lb was re-assuring, but I think there was reference somewhere to a few cents of other costs to be counted also?

If the zinc price reversion to cost + hovers around 60cents, then that should see them do alright, even if prices do not recover very much. The brief 70cents last week would look pretty good, so in the medium term it looks reasonable to hold, if that is what you decide to do.

It made me feel suddenly very nervous to see drawdowns and falling prices at the same time during last week. In fact, and this should serve to ensure you are not confusing my ability to string a few thoughts together with any sort of trading nous, let me emphasise my general trading stupidity (should have put this on the losers thread) by telling you I bought some PEM for 31.5 cents after waxing on about zinc on this thread and then panicked and sold them for 25 cents three days later when I misinterpreted the falling zinc stocks plus falling price as the harbinger of another market armeggedon...you can see what happened next.

My only thin excuse is swearing to stop losses "this time" before they get out of hand and just cop the consequences on the chin.

The only saving grace of the whole embarrassing affair was buying some PDN at 3.88 the day after, which thankfully compensated somewhat (though not entirely).

Anyway, "loser" confession out of the way, if the forecast of around 260k tonnes surplus for 2009 gets reported as diminishing in any major chunks over the next few months, that might suggest that the supply dislocation caused by the price crash was having at least a temporary ongoing effect.

It is the fact that the base metals price is probably going to continue to be volatile that would make me lean towards taking the money and running, but not running very far...and then running back. (Kind of the opposite of how I often find myself trading...losing money quickly and running away and then running back later, cursing).

Hopefully PDN will fully reimburse my stupidity tax, and then I might come back and have a more considered look at PEM.

cheers

 

[CAB SAV]

Mate travelling through Broken Hill last Monday was told by a local that PEM was going to put on up to 120 workers.
Funny how PEM & CBH both ended up 34% today.

 

[MACCA350]

I baught in Thursday at 0.305, would have been nice to have picked it up around the 12c lows

cheers