The neglected miners

Political instability

The share price of Orogen Minerals (OML - $1.32) is still well below the NTA of about $1.90, thanks to PNG's lack of political stability. However, a deal which gets the PNG-Queensland gas pipeline going should buoy the stock in the short term, even though the price is down since our issue 37 brief (Buy - $1.80). No one likes the stock at the moment, but like BHP, it will eventually return to favour. If you're prepared to wait it remains a BUY.

Ian Edwards, CEO of Capral Aluminium (CAA - $1.90) has announced he'll be leaving the company, effective 31 July. Edwards has been with Capral for over three decades, but he really didn't add too much value in his seven years at the top. Capral shares were $1.46 at the beginning of 1993 (Edwards was appointed in 1992) and have gained only around 3.2% a year since. Little wonder that news of a proposed break-up of Capral's smelter and fabrication assets has been met with sceptical indifference - the stock is down 5% since our issue 43 review (Accumulate for yield - $2.00). On the other hand, the company does not have great capital reinvestment needs and so can pay a fully franked dividend in excess of 8.5%. Should an outsider, particularly one from overseas, succeed Edwards, we may see sentiment change. Continue to ACCUMULATE.

North (NBH - $2.96) is buying back 10% of its shares at the moment, always a good sign of undervaluation. The company has also been investigating the possibility of buying an iron ore mining operation in Brazil, a shrewd move that would make it a world player in iron ore. While the shares have gone backwards since our issue 44 brief (Accumulate - $3.17), they're still good value, paying a 5% fully franked dividend. Continue to ACCUMULATE.

The shareholders of Bougainville Copper (BOC - $0.19) may be in for a capital return soon. The company is now considering 'alternative strategies' than trying, in vain, to gets its Panguna Mine back. That it took 10 years to figure this out suggests management may dither a lot longer, so, as per our issue 33 review (Avoid - $0.21), continue to AVOID.

Thanks to the venerable gold producer Normandy Mining, stock of Queensland Metals (QMC - $0.51) has broken out of a two-and-a-half year slumber, jumping 52% between 22 and 24 March and remaining consistently above 50 cents since. We've been interested in Queensland Metals for a while. We noted back in issue 31 that big demand was looming for magnesium. That has caused a number of resources juniors to pursue a magnesium El Dorado, but Queensland Metals is actually ahead of the pack.

Trump card

The company's bread and butter since 1992 has been the mining of a magnesia deposit near Rockhampton in central Queensland, and producing from it two materials known as calcined and deadburned magnesia, products used mainly in fertiliser applications and to line steel-making furnaces. The stock hasn't excited, but Queensland Metals has an interesting trump card - a venture called Australian Magnesium Corporation which has been working on technologies for the production of pure magnesium. A feasibility study has found that a 96,000 tpa plant is a bankable proposition, news which prompted the initial price spike. Queensland Metals had owned 50% of Australian Magnesium Corp before Normandy, which owned the other 50%, announced on 5 April that it would vend its share in Queensland Metals in return for shares in the company, which would take Normandy's interest to 62%. That makes Queensland Metals one of the few 'pure' magnesium plays in the world, and likely to attract attention. We rate it a SPECULATIVE BUY.