Ann: Update - Change in Officers , page-11

Posters can blame each other and the CEO and the board, but it will not change what has happened, and is probably not all that helpful. I am not a holder, so maybe it is easy for me to say that; others will need to be the judge.

IMO, KZL has some important lessons for all those that invest in resource stocks.

1. Net debt is death. This is a broad statement and does not apply to all resource companies, but nowadays, I am very circumspect of buying any resource company that has net debt on it's books. When a business cannot manage the price it receives for it's goods or services, it's bal sheet needs to be strong enough to withstand price falls.

2. C1 cash cost is King. Resource stocks that have low C1 cash costs will see out the bad times, those that don't fail. When buying a producing resource stock, I always see where the C1 is relative to the global average and it's peers. This often takes a bit of research, but is well worth it.

3. Growth by acquisition is a warning flag that says "BE CAREFUL, WATCH OUT, DANGER AHEAD". How many resource stocks have made good M&A in the last 5 years? In the last 10 years? In the last 50 years?

Good ones. BHP and Pilbara I Ore from CSR.
BHP and Bowan Basin Coal from GE
BHP and Excondida from GE
BHP and WMC

Bad Ones. RIO and Alcan
ZFX and Wolfden
ZFX and Allegiance
IGO and Jaguar
NCM and Lihir

non Resource
NAB and English banks
NAB and American Banks
WES and Coles
IAG and English Insurance

I could go on, but IMO very few M&A actually create shareholder value.

4 Free cash flow. If a company is not making free cash from operations, then it is a recipe for receivership. If a company is not making free cash after operations and capex, then it is a recipe for receivership.

HT1