Zinc the metal for 2006

[rederob]

LME zinc inventories are declining around 1500 tonnes/day and there is about as much copper as there is zinc presently in their warehouses.
However, copper inventories have been relatively static.
October will herald in a massive price breakout for zinc, on trend, and we should look to a 30% price rise before end of year.
If zinc follows copper's early year lead, then a 100% price increase is on the table within 6 months.
Zinc-based equities will be the best performers in the last quarter of this year or my name is MUD.

 

[tasmanian]

i think you could be right there rederob.

the rate zinc is going there will be no stockpile left by the end of this year

cheers

 

[Sean K]

LME zinc inventories are declining around 1500 tonnes/day and there is about as much copper as there is zinc presently in their warehouses.
However, copper inventories have been relatively static.
October will herald in a massive price breakout for zinc, on trend, and we should look to a 30% price rise before end of year.
If zinc follows copper's early year lead, then a 100% price increase is on the table within 6 months.
Zinc-based equities will be the best performers in the last quarter of this year or my name is MUD.

What are your top picks rederob?

 

[Kipp]

LME zinc inventories are declining around 1500 tonnes/day and there is about as much copper as there is zinc presently in their warehouses.
However, copper inventories have been relatively static.
October will herald in a massive price breakout for zinc, on trend, and we should look to a 30% price rise before end of year.
If zinc follows copper's early year lead, then a 100% price increase is on the table within 6 months.
Zinc-based equities will be the best performers in the last quarter of this year or my name is MUD.

Rob, you called the Nickel price blowout to perfection, so it's very hard for me to doubt your opinions now. How long will we see Zn above 1.50? For all of 2007? Or at least FY07?

 

[YOUNG_TRADER]

LME Warehouse Stocks 29 Sep 2006
Close In Out +/- On Warrant Cancelled
Copper 117575 500 4300 -3800 106900 10675

Zinc 140375 0 1825 -1825 110775 29600


There is currently about 4kt more zinc on warrant than copper, freaky!

Long live Zinc the metal for 2006

 

[michael_selway]

Rob, you called the Nickel price blowout to perfection, so it's very hard for me to doubt your opinions now. How long will we see Zn above 1.50? For all of 2007? Or at least FY07?

Rederob called Nickel yeah, but Nickel is a bit diff to zinc, more speculative i think as funds "fake buy" to jack up the price. Too much regular "ins" still

Zinc on the other hand has hardly any "ins" (none if you see above) but cancellations on the increase!

Yeah btw Red, which Zinc shares u think will rise the most at current prices?

thx

MS

 

[nizar]

For what its worth, i reckon the zinc spike to will see it go to us$2.00/lb++ maybe 2,20 or 2,30 who knows. This will probably happen between january-february next year. Then it will ease to maybe 1.80-2.00 and stay there until the end of the year (2007). No significant new supplies will come next year for zinc.

As to which stocks, CBH "seems" a standout to some people, but remember market sentiment towards this stock aint all that great. For some reason people think CBH will rally the most because it hasnt been going anywhere and has been underperforming other zinc stocks. (It has a good reason for that). This, IMO, is FLAWED REASONING. A stock that has been going up is more likely to keep going up then one that has been in a downwards/sideways trend. Its called MOMENTUM. That being said, if i was gonna buy CBH i would wait for the next 2 weeks when TKR holders dump on market. Sulfur Springs will be a beauty.

ZFX mine life problems but still may rally, but i think KZL will be the one that fires the most. With Thalanga from 2007, and Mungana from 2008, they have by far the best pipeline of growth compared to ZFX. Plus u can exploration upside from Admiral Bay. Consensus is 4x increase in NPAT from FY06 to FY07, but how about if Cu stays the same and Zn rockets? ..
FY08 earnings estimates much less, but if production increase will more than offset any fall in metal prices, which i believe will, then this will be higher still than 2007.

KZL's NPAT this year was achieved with us$1.00/lb zinc and us$2.07/lb copper being the average prices acheived. ANd dont forget about their 17% stake in MLM

In terms of profits, ZFX is the most sensitive to movements in the zinc spot price. BUt due to market sentiment about century's mine life, in terms of sp appreciated, it MAY be limited, but a $2/share divvy is looking likely.

I dont know the order but with CBH, ZFX and KZL, IMO u cannot go wrong...

Though its a spec, and wont start production until June 2007, AIM could be the darkhorse.

 

[rederob]

K
kennas/MS
My zinc tips are present producers; ZFX, KZL and, with a twist, OXR via Golden Grove (partly because lead prices are also due to kick strongly north).
I think zinc oriented equities will generally do well, but the larger producers are making "real" profits.

Kipp
I think the 5 month consolidation phase for zinc is about to end very soon and quite abruptly.
$1.50 is likely to become long term "support" to zinc prices, and do not be surprised to see the number 3 in front of the price per pound next year.

MS, btw I think your "fake buy" talk is plain silly and does you no favours.
Zinc and nickel have an extraordinary amount in common. In particular, they add to the price and "value" of steel-based products, yet contribute only a small part to the total price.
As we go forward it is not impossible to see zinc well and truly surpass copper prices and, dare I say, rival nickel. Nickel can be substituted, but zinc has qualities that make substitution less practical.

 

[nizar]

$1.50 is likely to become long term "support" to zinc prices, and do not be surprised to see the number 3 in front of the price per pound next year.

Wow good to see you super bullish!

 

[YOUNG_TRADER]

LME Warehouse Stocks 02 Oct 2006
Close In Out +/- On Warrant Cancelled
Copper 116875 300 1000 -700 106750 10125

Zinc 139125 0 1250 -1250 109425 29700

 

[YOUNG_TRADER]

LME Warehouse Stocks 03 Oct 2006
Close In Out +/- On Warrant Cancelled
Copper 116850 0 25 -25 105950 10900

Zinc 138375 300 1050 -750 105525 32850


Less Zinc on warrant than there is Copper!

 

[Fab]

Did I read well on my commsec account today that Zinc went up 3% overnight. I suppose this should be great opening for share such as ZFX on monday

 

[rederob]

Did I read well on my commsec account today that Zinc went up 3% overnight. I suppose this should be great opening for share such as ZFX on monday

Actually up 6.3cents so closer to a 4% rise overnight.
As good news was the decline in warehouse stock and a warrant cancellation percentage approaching one third of total metal available.
This can only mean zinc prices will go crazy as the rate of attrition has been maintained for weeks on end and cancellations have been increasing.

 

[michael_selway]

Actually up 6.3cents so closer to a 4% rise overnight.
As good news was the decline in warehouse stock and a warrant cancellation percentage approaching one third of total metal available.
This can only mean zinc prices will go crazy as the rate of attrition has been maintained for weeks on end and cancellations have been increasing.

Yep, on warrant about to breach the 100k mark

Btw Red, what do u think of Lead atm? maybe "fake buying" from funds or is it genuine demand / supply?

thx

MS

 

[rederob]

Btw Red, what do u think of Lead atm? maybe "fake buying" from funds or is it genuine demand / supply?
thx
MS

MS
As I don't know what "fake buying" is on the LME (because it's not possible), I can't answer that part of your question.
The funds seldom take delivery, unless they get caught out and have to cover a position.
It's easy to determine genuine supply/demand as the data trends are transparent.
In the case of lead, exceptional demand is occurring and supply cannot be met.
Lead is often seen as a laggard, drags the chain, don't go overweight there!
However, the present trend suggests we are likely to see it hit a new high within the month.
Then again, I suspect zinc will be there first, and maybe nickel after that.
Copper and ali are treading water, by comparison.
Bottom line as far as I am concerned is that the commodities boom is have a good tilt at new highs before year end.
I reserve judgement on 2007.

 

[Kipp]

MS
As I don't know what "fake buying" is on the LME (because it's not possible), I can't answer that part of your question.
.

Possibly MS's term "fake buying" refers to speculative buying of commodities (as opposed to Zinc consumer (Maunufacturers etc)... that is my interpretation anyway. Whilst such buying could not be really be dubbed "fake" I agree with MS that spec is worth considering if it is what is driving the Zn shortage (as at any point spec buyers can dry up, as opposted to industry)... in any event... inventories are plummeting at a good rate now (down from 148K approx 2 months ago... thought I'm the first to admit I though tthey had plateaued back in August).
<p>
Rob... was is your thoughts on PEM... they don't get much coverage on the ASF. Pretty much just another Zinc play like any other?

 

[rederob]

Possibly MS's term "fake buying" refers to speculative buying of commodities (as opposed to Zinc consumer (Manufacturers etc)... that is my interpretation anyway. Whilst such buying could not be really be dubbed "fake" I agree with MS that spec is worth considering if it is what is driving the Zn shortage (as at any point spec buyers can dry up, as opposed to industry)... in any event... inventories are plummeting at a good rate now (down from 148K approx 2 months ago... thought I'm the first to admit I though they had plateaued back in August).
<p>
Rob... was is your thoughts on PEM... they don't get much coverage on the ASF. Pretty much just another Zinc play like any other?

Kipp
PEM is hedged for near half their production this year (see p.63 of PEM Annual Report) at below AU$3000/tonne while our prevailing spot prices are at least AU$1500/tonne greater.
I think PEM is a good equity, but I would rather have money on an unhedged producer like KZL or ZFX in this environment.

In relation to "fake buying", if inventories are declining then buying must be real (speculators do not go through the trouble of buying, taking delivery, storing, and re-selling: or they would not be speculators!).
I have another buy order on ZFX today, and will go "at market" if it is not filled before close today.
Zinc is getting seriously tight and consumers will start to hunt around the globe for it in a few months time.

 

[michael_selway]

Kipp
PEM is hedged for near half their production this year (see p.63 of PEM Annual Report) at below AU$3000/tonne while our prevailing spot prices are at least AU$1500/tonne greater.
I think PEM is a good equity, but I would rather have money on an unhedged producer like KZL or ZFX in this environment.

In relation to "fake buying", if inventories are declining then buying must be real (speculators do not go through the trouble of buying, taking delivery, storing, and re-selling: or they would not be speculators!).
I have another buy order on ZFX today, and will go "at market" if it is not filled before close today.
Zinc is getting seriously tight and consumers will start to hunt around the globe for it in a few months time.

hi red what do u think of CBH, are they unhedged also?

yeah ZFX and KZL, are defintely good zinc companies, zfx will also pay good franked dividends

thx

MS

 

[2020hindsight]

Johnny found a gold pan lying near a stream
Johnny shook some mud around and thought he saw a gleam
Pulse became a Latin dance and life a grinning dream
Since then Johnny's featured... in a mental health scheme
Double check the barricades and lock the little lever,
A most familiar case of the gold bloody fever..

John gets well pronounces "hell, I'll change my tune to zinc"
wrote out IOU's till he'd run right out of ink
dumped it on the ASX and bought his wife a mink
then the ASX went mad, ....and back came Johnny's blink
Straight jacket over here he's singing like a diva
the first of many cases of the zinc bloody fever.

THAR'S ZINC IN THEM THAR HILLS!! IM OFF!!

Just to confuse you here's a quote that I don't understand either ...Kin Hubbard: It's pretty hard to tell what does bring happiness. Poverty an' wealth have both failed

 

[rederob]

2020
The Tooth Fairy brings happiness, or was that the stork?!?!?

MS
CBH is totally unhedged.
There are many good zinc equities - but when the prices are at their highest, always buy the biggest unhedged producers in preference.

ZFX 70cent ff div coming soon and there might be a run on it in the next few days.