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Zinc, Discussion
ricky99
post Posted: Jul 6 2007, 01:37 PM
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In reply to: herger on Friday 06/07/07 01:12pm

This is a hard one to resolve as you have to factor in each mine that is currently producing (esp the super mines) and what their production forecast is like, are they coming to the end of their natural life, moving on to lower grade ore etc and then you need to try to predict whether new mines will be bought on stream on the dates promised, at the capacity promised or whether they are likely to slip.

That starts to give you the supply side view, then you need to work out the demand side. What will slow it down, what influence will China and India etc have.

While I agree that the current prices will not last forever and everything longterm reverts to the mean - and average longrun profits a company in the near term (3 - 5 years) can still make very good money by looking in some of these prices via longterm hedges. In saying that though you do give away the chance of even higher prices unless you write hedges with open upside and a protected floor.

I'm only into Zinc in a small way via INL and BSM but have noticed that INL is now looking at hedges and for a small company like BSM current zinc prices are a once in a lifetime chance to get good early cashflows so that they can go and play the bigger game.

Also don't forget that a lot of these miners mine a mixture of metals zinc, lead, copper, silver and gold all in the same ore so do have some diversity in the mix

 
herger
post Posted: Jul 6 2007, 01:12 PM
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Re: "there is a lot of money to be made in this sector" - I disagree.

I've done some research using google and my conclusion is that there is a real chance of catastrophe for the zinc price some time in the future.

Take a look at the 5-year zinc price, attached to the bottom of this post.

You'd have to ask yourself, would you buy zinc right now, after it's risen so much?

Keep in mind there's no cartel in zinc like there is for oil. There's no collective global zinc organisation to cut back supplies when supply exceeds demand. In such a situation the POZ will do what it has done for the 50 years, as producers have to compete or price or have customers go elsewhere.

There is an interview with the CEO of Zinifex on the website www.brr.com.au where he makes a comment along the lines of "when the price of zinc has decoupled from the marginal cost of production you know it's not sustainable", and the marginal cost of mine production is much lower than $2, $1, levels.

There's a common view in the markets that supply simply cannot catch up to demand, as demand grows at a quicker pace than supply. In such a situation I can see how the POZ can stay high or even go higher. But you can't ignore the possibility that supply will grow quicker than demand within the next five years. Based purely on historical data this is the most likely scenario. If you look at long term historical charts everytime there's a spike in the price of zinc, or for that matter most other metals such as copper as well, the price spike manages to create enough supply to bring the price back down to around the levels that preceded the spike.

[chart of historical prices obtained from this website: http://minerals.usgs.gov/minerals/pubs/com...zinc/720798.pdf]

Importantly the price spikes never lasted more than 5-10 years.

So based purely on a laymen's knowledge supplemented by information from google and internet searches I reckon there's also a "dark picture" along with the one we're told in the news frequently, about the "super cycle". sad.gif
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pukin
post Posted: May 9 2007, 06:30 PM
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Zinc stockpiles down 4800t on LME today... thats about 5%!!!!

We are now getting down to the stockpile levels we were around at the end of november when the Zinc price was above $2 a pound....

 
filament
post Posted: Oct 30 2006, 11:56 AM
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In reply to: healyn on Monday 30/10/06 11:53am

SP looks to be about to breakout and targeting 20c.

Good suggestion !



--------------------
<p align="center"><b><font size="2
" color#0000FF" face="Verdana, Arial, Helvetica, sans-serif">What lies behind us and what lies before us are
small matters compared to what lies within us.
- Ralph Waldo Emerson </font></b><br>
 
healyn
post Posted: Oct 30 2006, 11:53 AM
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In reply to: filament on Monday 30/10/06 09:17am

Have a gander at INL. Commenced producing zinc concentrate last week. No debt, resource life 20 years, 22.5% of BSM and a very nice price atm.



--------------------
"Good judgment comes from experience, and a lotta that comes from bad judgment.
 
filament
post Posted: Oct 30 2006, 11:17 AM
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We should have a new topic for this commodity and companies to invest in which explore and mine this metal.

LME stocks are plummeting.

Copper has a value of over $3 pound and now has more inventory than Zinc which also has a lagging price of $1.80.

There is a lot more money to be made in this sector.

CBH is up from 45c to 70c in weeks.

Exciting time ahead !



--------------------
<p align="center"><b><font size="2
" color#0000FF" face="Verdana, Arial, Helvetica, sans-serif">What lies behind us and what lies before us are
small matters compared to what lies within us.
- Ralph Waldo Emerson </font></b><br>
 
 


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