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Zinifex stocks at share market Dips lower Double whammy with contamination news

Zinifex is Over and Headed Lower

MELBOURNE AUSTRALIA 7 February 2007 - There is the saying when looking at stock charts that share prices “go up the stairs, but down the elevator.” This hasn’t quite happened with Zinifex (ASX: ZFX), but a quick look at the chart could make the faint hearted think that the cable is hanging on by a thread. The slightest bit of pressure and… whoomp! It could be gone.

And it isn’t as though Zinifex hasn’t been subjected to a sizeable retreat before. Less than a year ago the shares fell from $13 to $8 within the space of a month. As it stands now they are down by around $3 from the peak reached only a month ago. Having broken through a couple of support levels there isn’t much to stop it from hitting $12 or even lower.

Charlie Aitken at Southern Cross Equities certainly thinks there is more room to the downside, he told Marcus Padley that “Everyone has been long Zinifex. There are momentum investors all over the register, but both the share price and earnings momentum has turned negative.”

He went on to say, “ZFX is probably cum -30% downgrades to consensus earnings, and this won’t be pretty as the over-exuberance towards this stock unwinds. Don’t be tempted to buy the dip in ZFX; it’s over and it’s headed lower.”

The problem with Zinifex? That it is seen as a one trick pony. The argument is that if you are still reasonably bullish on the commodity sector you are better off punting on a diversified company such as Rio Tinto or BHP Billiton. At least with them, if one metal turns sour they’ve got a bunch of others they can turn to.

Only when/if the whole resources sector goes pear-shaped will they suffer too. In fact Padley suggests “For Resources action you’d start trawling the Gold Sector as a safer commodity price bet in the face of a US dollar on the way down.”

Joe Singer, a Shanghai-based director of Penfold Ltd., who specialise in zinc told Reuters that China’s sway on international prices was waning, “China’s important but it is not the overall driver of the zinc price… It is very close to becoming self sufficient by balancing its zinc production and consumption.”

All this thanks to the fall in metal prices overseas on Friday night our time. As the Australian Investment Review reported yesterday, “Zinc fell more than 9 per cent to $US3,065 a tonne, and briefly dipped below $US3,000 for the first time since July. Zinc was down 15 per cent over the week even though zinc stocks are still at relatively low levels of under 100,000.But they are moving higher and last week’s forecast from Zinifex that the metal would become easier to obtain in 2007 didn’t help sentiment.”

This was, according to the AIR the biggest fall that Zinc has had “in at least 18 years and copper dropped as much as 6.3 per cent at one stage. Aluminum, lead and tin also were also weak.”

But just as commodity prices start to take a tumble, they come back not quite with a vengeance, but almost. Overnight according to Reuters, “copper futures settled up over 3 percent on Tuesday as a third straight decline in London copper stocks bolstered speculative interest and provided some price stability following last week’s heavy losses.”

“I think if you begin to see further declines in the stocks, the argument for Chinese restocking becomes more prevalent,” one copper dealer told Reuters.

“There are forecasts calling for Chilean production to jump by close to 6 percent. We’ve seen how the market achieved a global surplus with flat output growth in Chile. If Chilean production were to meet these expectations, demand in China and elsewhere would have to increase by an extraordinary amount to draw this market back into deficit,” Sholom Sanik, futures analyst with Friedberg Commodity Management, Reuters reported.

On top of that BHP Billiton releases its results which saw the share price rise by over 5% in early trade and even Zinifex has managed to recoup most of yesterday’s losses. Clearly the market and the company continue to see plenty of further upside for the company, whether that has now been fully built into the share price is another thing, but as BHP’s presentation this morning says, the “Outlook remains positive.”

Ref :http://www.dailyreckoning.com.au/zfx/2007/02/07/

RElated links

Double whammy for Zinifex
The Age - 12 hours ago

ZINIFEX is scrambling to find a replacement concentrate - transfer barge to ensure shipments from its Century zinc mine in north Queensland can continue.The scramble follows damage to the operation's ...

Australia's Zinifex sees zinc price recovery dependent on China exports
Forbes - 20 hours ago

SYDNEY ( XFN - ASIA ) - Zinc producer , Zinifex Ltd , said a recovery in zinc prices back to the record levels seen in the December quarter will largely depend on whether Chinese producers continue ...


Australia Zinifex to shut down Port Pirie lead smelter for 7-10 days after blast
Forbes - 6 Feb 2007

SYDNEY ( XFN - ASIA ) - Zinifex Ltd said it will shut its Port Pirie lead smelter's blast furnace in South Australia for 7 - 10 days to carry out repairs to associated equipment damaged in a ...

Market Indices

Rises: 17 Falls: 5 Feb 8, 2007 1:00:46 PM

Index
Price Index
Movement
Turnover ($A)
Volume

XAO
All Ordinaries
5879.0
up
8.1
0.1%
3,063,234,019
369,241,959
Chart

XBW
S&P/ASX Buy-Write Index
42256.5

XDJ
Consumer Discretionary
2818.8
up
6.0
0.2%
84,337,273
11,624,213
Chart

XEJ
Energy
12133.5
down
-46.7
-0.4%
132,834,423
15,607,373
Chart

XFJ
Financials
7105.9
up
31.6
0.4%
559,866,860
63,192,981
Chart

XFL
S&P/ASX 50
5750.0
up
7.4
0.1%
2,422,556,330
153,258,257
Chart

XGD
Gold
4374.3
down
-4.7
-0.1%
44,145,854
25,913,880
Chart

XHJ
Health
7974.1
down
-67.3
-0.8%
89,237,132
11,629,008
Chart

XIJ
Information Technology
596.7
up
5.6
0.9%
11,853,865
1,635,668
Chart

XJO
S&P/ASX 200
5907.9
up
8.1
0.1%
2,957,336,143
295,000,493
Chart

XKO
S&P/ASX 300
5915.3
up
8.4
0.1%
3,010,592,132
334,409,632
Chart

XMD
S&P/ASX MidCap 50
6009.0
up
9.1
0.2%
326,802,397
74,732,279
Chart

XMJ
Materials
11018.5
down
-60.0
-0.5%
1,640,948,549
102,180,917
Chart

XMM
Metals & Mining
3663.4
down
-33.3
-0.9%
1,454,888,805
87,897,497
Chart

XNJ
Industrials
6651.8
up
9.1
0.1%
213,159,819
36,075,014
Chart

XPJ
Property Trusts
2540.2
up
18.5
0.7%
193,793,776
45,105,135
Chart

XSJ
Consumer Staples
7759.4
up
36.1
0.5%
64,434,388
8,477,667
Chart

XSO
Small Ordinaries
3500.1
up
8.3
0.2%
261,233,403
106,419,096
Chart

XTJ
Telecommunications
1583.9
up
8.7
0.6%
122,153,195
35,056,458
Chart

XTL
S&P/ASX 20
3135.8
up
2.0
0.1%
1,952,819,349
101,002,787
Chart

XTO
S&P/ASX 100
4781.4
up
6.3
0.1%
2,749,358,728
227,990,536
Chart

XUJ
Utilities
7593.6
up
15.9
0.2%
38,510,636
9,521,194
Chart

XXJ
Financial-x-Prop. Trusts
7231.1
up
26.1
0.4%
366,073,083
18,087,846
Chart


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