My feeling is that KZL wants to sell AB. They spent $600,000 to 1 mill either in Jan or late last year suring up exploration/drilling data. They have spent almost 35 million on drilling programmes etc to date, so this plus 2.5 million to buy it seems to be the minimum ask. i.e. 40-50.
Be a nice card to play if Europe falls apart over the Euro summer. An announcement to sell AB around Sep/Oct could be finalized by March 2013 and right when the majors will be shopping for such projects and likely to bid it up. We saw that with the Canadian company that overbid (in my opinion) for that copper project in Romania.
Also, the information flow about AB has been weak at best, and it wasn't really featured at all in the 5 year plan, which leads me to think they probably forged a plan to sell it some time ago.
It will prove to be a nice property investment, but it doesn't make sense to hold onto it for too much longer with much needed capital locked up in it. KZL have made some good acquisitions, Einasleigh, Liontown etc - ranging from 5 mill to 16 mill. 1 billion for AB, is just out of their league. Xstrata is a logical suitor as they will lose 2-3 major zinc mines in the next few years.
The other thing here is playing to management strengths. Geoff's background was a GM at Lihir Gold in PNG and a GM for Africa and Europe at Rio Tinto. I'd like to see KZL trade AB for growth opportunities beyond Australia and to capitalise on Geoff's extensive overseas experience. A 25-50 million dollar copper, gold or zinc project in South East Asia, would be a better trade for AB. This would go a long way to eliminating capital risk, diversifying operations and lowering the group's C1 costs.
KZL Price at posting:
15.0¢ Sentiment: Hold Disclosure: Held
