Jabiru still not motoringMichael Quinn, 12 May 2010GOOD news...

Jabiru still not motoring

Michael Quinn, 12 May 2010
GOOD news release after good news release seems to be the trend for copper and zinc miner Jabiru Metals in recent times but despite the positive vibe there hasnt been much in way of market interest. Why?

The stock has averaged a little under A40c for the five months of calendar 2010 to date, despite the copper and zinc price strength, and in particular, despite zinc cash costs from its Jaguar mine in Western Australia falling to negative US13c per pound (after credits) against an average LME zinc price for the quarter of $US1.04/lb for the 11.4 million pounds of zinc metal in concentrate produced.

In the first half of 2009-10, Jabiru reported a 40% gross profit margin on revenue of $A57 million, with no debt and a $A35 million cash balance. The company was capitalised this week at about $A200 million.

Meanwhile, exploration success continues to be enjoyed at the nearby Bentley deposit which is said to be shaping up as a better mining proposition than Jaguar while the arrival of Metals X on the register back in February suggests an opportunity is apparent.

A suggestion that Jabiru is perhaps doing some penance for a $A4 million after tax net loss in the first half of fiscal 2010 including $A23 million of losses derivative financial instruments relating to the companys hedging program isnt ruled out by managing director Gary Comb. Not completely anyway.

You could be right, although its not a comment I get very often, Comb told HighGrade. I am inclined to think that the reason the base metal stocks generally have been fairly flat is because of the sentiment in the segments, that is, gold had a good run, then bulks, maybe base metals may be next. You can't stand in the way of bull, or bear, market sentiment in any segment.

While the final comment may be true in a general sense, whether Combs overall assessment is accurate is highly debatable.

Last month Argonaut, which has been a backer of Jabiru and which has rated it as one of the value picks in the sector, said: Despite offering high grade copper/zinc production, a growing mine life, and corporate appeal, Jabiru has been left behind in the current resources sector rally.

However, Argonaut doesnt canvas why.

Perhaps a relative change in fortune will be forthcoming in the current quarter all things being equal on the macro front as Bentley continues to take shape. Work on a resource update and a feasibility study is underway, with completion of both expected in the June quarter. A further resource revision is planned for later 2010 as extensional drilling advances.

Bentley is shaping up as a superior deposit to Jaguar higher ore tonnes per vertical metre should translate into higher productivity and lower costs, Argonaut said.

Whether that convinces a market that seemingly has already been given plenty of good news, remains to be seen.