Originally Posted by
Roger
I don't think it will close either but its a risk nonetheless to the sector and an uncertain overhang that the market will have learn to live with. I decided a while back I didn't want to live with that risk on an ongoing basis unless the investment case was otherwise compelling which it was for a while there but now that their oil hedges are running out and retail price competition is growing ever more intense I find it hard to see them meeting their 16 cps divvies on an ongoing basis, adjusted for inflation as represented in the IPO documentation.
From a very modest amount of research I've done on this, (and I am always more than happy to be corrected), I think Rio have written the smelter down to $20m in the subsidiary's books that this smelter is carried in and last year it made $70m. No reason why you'd close it unless there's some major catalyst for doing so like a major update to the technology required, like there was with N.Z. refining. I think there's also been talk of a change in the transmission pricing model for Transpower that could materially benefit Tiwai point so it would appear to make sense for Rio to wait for the outcome of that review, at least.
Couta mate this is a really hard stock to value...best to let the brokers do their thing with valuing this but I have very little confidence in Jenny Shipley so that's a factor that discourages me.
For divvy hounds I see better prospects with HLG and PGW which both pay superior fully imputed gross yields and don't have the smelter overhang or Shipley issue this company does.