While I quite like the implied connection and it brings back fond memories, I am very much in the camp that KZL is not yet "an ex parrot".
It certainly has some cash flows problems and the lack of a pristine bal sheet is obviously not helping - but it should be liquid and it should be a going concern.
For KZL, the bigger issues are longer term:-
1) What impact (if any) do the current problems have on the 5 year strategic plan? I now get into assumptions. If ANZ does NOT renew the loan - KZL will find it difficult to execute the plan - cash flow will be a continuing issue. They will probably need to go back to the drawing board and re-asses their whole strategy and timing. If ANZ does renew the loan, it will give them more "wriggle" room - but the strategy will probably need to be tweeked a little.
2) What to do with AB? There is quite a bit of support on HC for KZL to sell AB. Like the English gentry in the 1950's, sometimes you need to sell a bit of the family jewellery to see you through a tough patch.
3. C1 cash costs for KZL are terrible. - there I said it. They are a high cost producer of Zinc and continually get squeezed when ever the POZ moves down due to their position on the cost curve. This will not change for at least the rest of this financial year. Putting all Zinc mines on care and mtce until the POZ moves up and concentrating on copper production in the mean time seems a good way to "cut your coat to suit your cloth". Copper C1 costs are also terrible, but the POC is so high, all marginal producers are still making money.
4. Fixing C1 cash costs - can they? The 5 year strategic plan was all about moving down the cost curve - this whole plan is now shot - they do not have the cash and cash flow to even begin to execute the plan - IMO, it needs to be revisited - See point 2 above to help get it back on track.
5. Trust - Like what happened to OZL, KZL has seriously depleted the trust that the market has in the company, management and the board. Rebuilding that trust can take some years to do. KZL's share price could struggle for some time (2 years maybe?) while that trust reserve is filled again. Any more "hiccups", issues, problems, not delivering on time to promises made will not be well received by the market.
6. Does KZL have a future? IMO, it does - but it will be a long hard slog back.
HT1
KZL Price at posting:
11.5¢ Sentiment: None Disclosure: Not Held
