Oxiana (OXR) Share Trading Recommendation

Submitted by Craig Strzelecki on 23 February, 2007 - 13:34

Oxiana (OXR) have a maintained Outperformed share trading recommendation and a price target of $3.20 from analyst Macquarie Research Equities (MRE). The analyst observed the rally in Oxiana's stock price yesterday of over three percent after releasing its CY06 financials report, with a "solid" adjusted earnings number of $550m, broadly in line with consensus but 4.6% below MRE estimate of $576m. MRE believes the mining company to be good vlue because of the robust result: consistent with the market's expectations and with the ongoing solid performance of OXR's operations. Also because of the unchanged 2007 production outlook provided at OXR's 4Q06 operations briefing. The share analyst don't believe that OXR is expensive. Whilst they acknowledge Price/Net Present Value (P/NPV) multiples are stretched, MRE consider this partly to be a function of where OXR is in its project construction cycle. Forward P/E multiples are undemanding, OXR has readily identifiable potential growth from 2009 NOT presently factored into MRE numbers, and it offers corporate appeal to global resources companies seeking operating, commodity and geographical risk diversification. MRE also believe management's track record of meeting or beating production targets in this environment warrants premium trading multiples. At this point in the cycle, some smaller miners in the sub-BHP/RIO space have strong balance sheets but a somewhat poor project pipeline. Others are financially stretched in attempting to build projects to underpin (sometimes low quality) growth. But OXR has a solid balance sheet and a pipeline of long life projects with exploration upside to drive growth from the end of 2008. MRE also expect OXR to continue to pursue accretive acquisitions that make a good geographic and operational fit. Oxiana is an emerging diversified producer with a commodity exposure of about 50%:40%:10% copper:zinc:gold respectively. OXR's pipeline of projects include Prominent Hill in SA and Sepon copper, with additional potential from Golden Grove, Sepon primary gold and, subject to successfully completing the Agincourt acquisition, Martabe in Indonesia.

Oxiana Limited is listed on the Australian Stock Exchange (ASX) under stock code OXR. You can view their investor website here. OXR was listed on 1 January, 1970. Oxiana produces gold and copper from two mines in Laos and studies are also underway to expand both these operations. The Golden Grove zinc/copper mine in West Australia was purchased in mid 2005 while the Prominent Hill copper/gold project in South Australia is targeting a 2008 start-up. An aggressive exploration program is underway at all the above as well as in China and Thailand. Barry Cusack is the Chairman for Oxiana and the managing director is Owen Hegarty. Browse for Australian stockbroker recommendations. Check your charts and good luck with your share trading!

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