Zinc the metal for 2006

[YOUNG_TRADER]

wat about JML and AIM?

To put it in perspective,

JML's operation is a sure thing as it has funding equipment, mine plan/construction staff etc in place + CSM as major holder/financial backer

TRO is uncertain, however its mkt cap is like 1/6th of JML, yet its deposit is of similar grades and is 10x the size of JML's and finally its 51% owned by a large Candian/Toronto listed resource company, so funding shouldn't be a problem,

TRO is an amazing find and once again backed by you know who, Mr Barry Dawes of Martin Place Securities, he was recommending this stock at 10c, I should follow his advice (I did with UXA ) but not with AUM/CDU, SMM or CMR

As we all know he's an excellent promoter so expect TRO to rocket, see the TRO thread for my calcs on how undervalued it is

 

[YOUNG_TRADER]

The price of zinc has more than doubled since the start of 2006, while stocks have fallen by over 80 percent since their peak in mid-2005.

Zinc inventories in LME warehouses were at their lowest in more than a decade at 110,800 tonnes, down by 3,100, against average daily world consumption of around 29,000 tonnes.

 

[sleeper88]

how long can this zinc bull run last?!? (preferably a couple more years ), can someone give me a rough indication of the number of zinc projects moving towards production soon, around the world which can increase the supply of zinc?

 

[nizar]

To put it in perspective,

JML's operation is a sure thing as it has funding equipment, mine plan/construction staff etc in place + CSM as major holder/financial backer

TRO is uncertain, however its mkt cap is like 1/6th of JML, yet its deposit is of similar grades and is 10x the size of JML's and finally its 51% owned by a large Candian/Toronto listed resource company, so funding shouldn't be a problem,

TRO is an amazing find and once again backed by you know who, Mr Barry Dawes of Martin Place Securities, he was recommending this stock at 10c, I should follow his advice (I did with UXA ) but not with AUM/CDU, SMM or CMR

As we all know he's an excellent promoter so expect TRO to rocket, see the TRO thread for my calcs on how undervalued it is

Thanks YT
Is he the dude that put a $25/share valuation on CDU?
Hes a champion, every1 in this world only cares about making money for themselves; and the mustve made a squillion over that "valuation", what about the little guys who got burnt? Thank God i wasnt one of them...

TRO definately worth looking into....
Still a long, long way to production though..

YT what do u think of AIM, production scheduled for next year and their grade is 14.5% zinc? But i must admit its all still inferred but they have got funding... it took 6 months+ but it usually is a struggle to fund an inferred resource....

 

[michael_selway]

Cheers nizar
Just as oil has held back gold, so too has copper held back zinc.
However, at certain points in time, markets "disconnect".
That time for zinc has arrived, and LME inventories will now take the toll that previously were reflected by copper prices in the period to May this year.
Although zinc hopefuls and smaller producers will get a coat tail ride, the likes of ZFX and KZL will derive substantial profits, as will OXR from Golden Grove.
I therefore will pay little attention to daily price movements, and concentrate on the weekly numbers instead.
I suggest we look at retitling the thread to "2007", despite nickel having that tagline.

Red can you please explain to me why theres so many "ins" warrantings for Nickel in the past week? (on warrant is 5544 now, lowest was 800)

Is it because theres excess supply out there?

Also in the "LisbonOutlook.ppt" file from International Lead and Zinc Study Group, the below grpah which shows Zinc Stocks

But how come it shows 600k stocks at 2006?, is it beacuse its LME stocks + other warehouses?

thx

MS

 

[rederob]

MS
Every time nickel prices go into orbit, a small number of supply chain merchants take advantage of LME spot and deliver into it. Apart from that Norilsk is usually the largest supplier into Europe and it has been their practice for years to manipulate prices to the maximum extent.
Don't forget that consumers also refrain from buying into price strength, so we have a natural market reaction, and it will feed the warehouses for a short period.
The overriding consideration is what will happen next?
Is it a guessing game, or can we really know?
The answer is the latter.
The consumers of nickel (mostly for stainless steel) have full order books into 2007 and no real letup is in sight.
Can the supply chain overwhelm LME warehouses?
Not in the short term, especially as more incoming nickel will reduce prices and take away the premium for delivering into spot.
So expect the norm to be "tightness", with dips to possibly $25k and rises to $35k and beyond into 2007.

In relation to your zinc chart, it includes the full spectrum of available metal - at LME, with merchants, and with consumers. Don't forget that most consumers maintain their own stockpiles and keep these at levels which ensure their production facilities are not closed due to lack of raw materials.
The price hike relies on a small number of consumers bidding for metal and "topping" up their inventory so that when spot prices do get so high, they drawdown from their own material.
What we now have is this "small" pool of consumers growing in size - thus the constant and heavy drawdowns.
Note also that zinc cancellation rates have declined sharply in the past fortnight. Simple reason is that consumers are reluctant to pay the higher prices and are hoping their will be a zinc price retrace that will allow them back in.
Effectively we now have in place a "ratchet" process, whereby whenever zinc prices relapse, the ratchet locks in for a period while the market settles itself, and then off we go again...... higher.

Downside will only come when global industrial production falters badly (note that the US housing market collapse is so far only affecting Comex copper stocks).

A far as I can tell, nickel, lead and zinc are in good medium term fettle, copper will break up or down (?) and aluminium is defying the odds by also rising in price.

The commodity bull is alive and well.

 

[michael_selway]

MS
Every time nickel prices go into orbit, a small number of supply chain merchants take advantage of LME spot and deliver into it. Apart from that Norilsk is usually the largest supplier into Europe and it has been their practice for years to manipulate prices to the maximum extent.
Don't forget that consumers also refrain from buying into price strength, so we have a natural market reaction, and it will feed the warehouses for a short period.
The overriding consideration is what will happen next?
Is it a guessing game, or can we really know?
The answer is the latter.
The consumers of nickel (mostly for stainless steel) have full order books into 2007 and no real letup is in sight.
Can the supply chain overwhelm LME warehouses?
Not in the short term, especially as more incoming nickel will reduce prices and take away the premium for delivering into spot.
So expect the norm to be "tightness", with dips to possibly $25k and rises to $35k and beyond into 2007.

In relation to your zinc chart, it includes the full spectrum of available metal - at LME, with merchants, and with consumers. Don't forget that most consumers maintain their own stockpiles and keep these at levels which ensure their production facilities are not closed due to lack of raw materials.
The price hike relies on a small number of consumers bidding for metal and "topping" up their inventory so that when spot prices do get so high, they drawdown from their own material.
What we now have is this "small" pool of consumers growing in size - thus the constant and heavy drawdowns.
Note also that zinc cancellation rates have declined sharply in the past fortnight. Simple reason is that consumers are reluctant to pay the higher prices and are hoping their will be a zinc price retrace that will allow them back in.
Effectively we now have in place a "ratchet" process, whereby whenever zinc prices relapse, the ratchet locks in for a period while the market settles itself, and then off we go again...... higher.

Downside will only come when global industrial production falters badly (note that the US housing market collapse is so far only affecting Comex copper stocks).

A far as I can tell, nickel, lead and zinc are in good medium term fettle, copper will break up or down (?) and aluminium is defying the odds by also rising in price.

The commodity bull is alive and well.

Thanks red for that, also 2 further questions from what you wrote

1) small number of supply chain Nickelmerchants:

How many Nickel stocks do they have? where did they get them in the first place? These people dont consume Nickel obviously?

2) zinc cancellation rates have declined sharply in the past fortnight

True, but thing is there no "ins" either, so it not really a bad thing. Also how comes there no "small number of supply chain zinc merchants" selling into LME at these high prices?

thx

MS

 

[rederob]

MS
Nickel merchants typically work with a small number of consumers and source their material at competitive rates: In some cases they may indeed be regarded as the consumer company's "purchasing dep't".
I don't know how much material they have, and I suspect industry analysts would now be guessing badly as well.
I suspect dominant resupply to LME is via actual producers, who use the simplicity and certainty of delivering into LME spot rather than mess around with small orders to a myriad of consumers across the globe.

In relation to zinc "ins", again, your point is not well made.
For the market to be excited we are looking at demand, and not supply.
"Ins" are supply.
For the headline figure to collapse, we need drawdowns: These come from warrant cancellations and represent the demand side of the equation.
I have little doubt that demand will pick up soon as the drawdown rate implies strong demand: It's just that the high price of zinc is suppressing buyers.
Very soon they will not have a choice: They will be forced into the same position that nickel consumers presently are in - must buy!

 

[Fab]

Anyway monday should be a great day again for resources stock if I go by the zinc, nickel,lead,aluminium increase on overnight.

 

[michael_selway]

Anyway monday should be a great day again for resources stock if I go by the zinc, nickel,lead,aluminium increase on overnight.

do u reckon the lower DOW will have any affect also on these stocks?

thx

MS

 

[Fab]

I don't believe so as we have seen in the past a drop in the DOW resources stocks going up strongly. It might have a slowing effect but I believe resources based on the metal I mentioned in my previous post should do well on monday

 

[nizar]

I don't believe so as we have seen in the past a drop in the DOW resources stocks going up strongly. It might have a slowing effect but I believe resources based on the metal I mentioned in my previous post should do well on monday

Short-term share price movements shouldnt deter you from the bigger picture. Zinc is running out and the producers for a 6-12month hold will make you richer than your wildest dreams. For FY2007, producers like ZFX and KZL will have margins >us$2/lb on average IMO, and their net profits will be 2.5billion and 200million respectively. As for CBH, which is now profitable, hartleys 100million NPAT estimate was based on zinc averaging us$1.50/lb. Of course any sort of correction should be used as a top up opportunity, well thats my plan anyway. How long before we hit us$2/lb? I reckon before the end of the year, and after that these current prices will seem like a bargain to the smelters.

 

[michael_selway]

Short-term share price movements shouldnt deter you from the bigger picture. Zinc is running out and the producers for a 6-12month hold will make you richer than your wildest dreams. For FY2007, producers like ZFX and KZL will have margins >us$2/lb on average IMO, and their net profits will be 2.5billion and 200million respectively. As for CBH, which is now profitable, hartleys 100million NPAT estimate was based on zinc averaging us$1.50/lb. Of course any sort of correction should be used as a top up opportunity, well thats my plan anyway. How long before we hit us$2/lb? I reckon before the end of the year, and after that these current prices will seem like a bargain to the smelters.

yeah thats true, btw what do u think of PEM?

thx

MS

 

[nizar]

yeah thats true, btw what do u think of PEM?

thx

MS

Though they do alot of zinc, they are a bit too diversified for me. And quite high cash costs i think its us$0.60+ per lb of zinc.

Solid management, overseas backing and will see substantial earnings growth in the years to some. THeir recent announcement regarding broken hill expansion was very bullish.

But i dont hold this one, and i think zinc pure plays such as CBH and KZL and ZFX will outperform it.

Disc: i own some KZL and CBH

 

[Brasidas]

Zinc certainly is hot. There is a good discussion of the next "nickel" sector - zinc - in this week's Minesite weekly roundup which is here in full.

That Was The Week That Was … In Australia

By Our Man In Oz

Minews. Good morning Australia, another week, another record?

Oz. It certainly was for some stocks, especially those selling zinc and nickel to the steel industry. You probably saw the same reports we did down this way, that the world has almost run out of zinc, and the nickel price is showing no sign of retreating from its astonishingly high levels. The end result, naturally, is that zinc stocks such as Zinifex (ZFX), Perilya (PEM), CBH (CBH), Kagara (KZL) and Terramin (TZN) have moved into the stratosphere, joining the nickel brigade who where already up there.

Minews. A few price examples please?

Oz. Zinifex hit a 12-month high of A$15.05 during Friday trade, before settling back to close the week at A$14.65, a gain of A$1.14 (8.4 per cent), Perilya was up A70 cents (20.8 per cent) to A$4.05, down a fraction on its 12-month high of A$4.10 reached on Thursday and Friday. Kagara also set a 12-month high on Friday of A$7.34, before easing back to A$7.21, still up A82 cents (12.8 per cent). CBH, which received a severe setback at this time last year with a stope collapse in its Endeavour mine, was up A5.5 cents (8.8 per cent) to A67.5 cents, also a modest retreat from its high of A73.5 cents set on Thursday. Terramin, which is developing a small zinc mine close to Adelaide in South Australia, was up A14 cents (8.9 per cent) to A$1.70, down from a Thursday high of A$1.75.

Minews. And the nickel sector was strong again?

Oz. Yes, but not to the same extent as the zincs. Jubilee (JBM), which held its annual meeting during the week and said takeovers were off its agenda, was up a modest A20 cents (1.6 per cent) to A$12.60, down on its cracking start to the week when the stock hit a 12-month high of A$12.98. Western Areas (WSA) put on A25 cents (7.4 per cent) to close the week at A$3.64, also down from its 12-month high of A$3.79 set on Tuesday, and Minara (MRE) was up A11 cents (2.2 per cent) to A$5.20, which was some distance behind its 12-month high of A$5.55 set last week.

Minews. It looks from those price movements that the nickel sector is awfully close to a peak?

Oz. It would seem that way. It also seems to be the same with a number of the stocks exposed to the bulk end of the market where the future direction of iron ore and coal prices is being questioned. There were no dramatic falls, but the rises were modest, and not helped by a bit of corporate fiddling. Aztec Resources (AZR), which has been struggling with a takeover bid from rival Mt Gibson (MGX), and the sudden discovery of a royalty on its Koolan Island iron ore project, which it forgot to tell everyone about, resumed trading after a period in the sin bin, but hardly inspired. Volume was high on Thursday and Friday but the price only moved between A23 cents and A24 cents. There might be more to come on that royalty fiasco. Aztec’s takeover suitor, Mt Gibson, was treated more harshly, dropping A1.5 cents (2 per cent) to A70.5 cents. At the top end of the iron ore hopefuls, Fortescue Metals (FMG) returned to favour with a A78 cents (8.8 per cent) rise over the week to close at A$9.58.

Minews. And presumably your uranium stocks were hot after the production problems in Canada?

Oz. A strong week for that sector with most stocks trending up. Paladin (PDN) reached a 12-month high on Wednesday of A$6, but then fell away quite sharply to close on Friday at A$5.46, which was still up A54 cents (11 per cent) on the week. Pepinnini (PNN) also set a new high mark, trading up to A75 cents on Friday before easing back to close at A73 cents, still up A5 cents (7.4 per cent) for the week.

Minews. Much on the downside?

Oz. Very little, even the gold sector, which has been a bit of a laggard, managed to deliver some strong performances. Agincourt (AGC) reported good drill results from its Calais prospect near Wiluna and gained another A5 cents (4 per cent) to A$1.25. More importantly, last weeks’ rise took the gain over the past nine trading days to A25 cents (25 per cent). The only fall really worth noting was Consolidated Minerals (CSM) which dropped A10 cents (4.2 per cent) to A$2.30 as the takeover frenzy which gripped the stock earlier in the month seemed to run out of puff.

http://www.minesite.com/storyFull5.php?storySeq=3894

 

[MiningGuru]

Zinc again up today.

It can't belong before it breaks the magical $2 a pound barrier, and then we will see some real surges in the zinc stocks like ZFX, KZL and others!!

 

[juddy]

It never ceases to amaze me that INL is pretty much ignored on this thread.

Stage 1 starts tomorrow:

"The HZCP’s dredge has been launched on the Hellyer tailings dam, and is now in place. The shore tanks have been water commissioned, and work on the plant refurbishment is complete. Slurry commissioning of the plant is scheduled for 2 November 2006, with first production of concentrates due in the following two weeks, at the annualised rate of not less than 65,000 tonnes per annum (approximately 26,000 tonnes per annum contained zinc metal)."

That is not including the lead and silver production that goes with this stage.

Stage 2: starts in the new year (early as I have it) and then stage 3 the year after.

Funding from these two stages will come from cashflow from stage 1. The technology is there. Hellyer Mill and the Burnie Demo Plant are built, the infrastructure is in place. No exploration required, starting to acquire more eafd (recent announcement) for stage 2.

They own 22% of BSM who are continually throwing up decent announcements.

These fellas are building an empire and yet not a mention in recent times.

 

[pacer]

We realy need to see zinc move in price to gain stratospheric Sp value......been holding ZFX and KZL for the last 3 weeks....awesome SP gains but can see thier SP loosing momentum without the zinc price rising quickly....all the rises on Sp on these two have been good speculation but zinc price is not gaining as fast ....holding still...and enough to pay for the XMAS pressies, and a few parties along the way......

Wouldn't be surprised if zinc hits 2.20 tomorrow.....Guessing that zinc users will be, or already have bought large ammounts for themselves, on speculation(they aren't all dummies).... so I can only speculate that the zinc price may only rise slowly from now on.....untill there is more available in 2007-8....but cannot see any down trend at all.....good time for intra day traders to pinch a bit off the NEWBIES....lol...

I could spend all day speculating on the SP and the reasons for it rising/falling....but that's the guts of it from my point of view....and I'm still here!......

 

[nizar]

We realy need to see zinc move in price to gain stratospheric Sp value......been holding ZFX and KZL for the last 3 weeks....awesome SP gains but can see thier SP loosing momentum without the zinc price rising quickly....all the rises on Sp on these two have been good speculation but zinc price is not gaining as fast ....holding still...and enough to pay for the XMAS pressies, and a few parties along the way......

Wouldn't be surprised if zinc hits 2.20 tomorrow.....Guessing that zinc users will be, or already have bought large ammounts for themselves, on speculation(they aren't all dummies).... so I can only speculate that the zinc price may only rise slowly from now on.....untill there is more available in 2007-8....but cannot see any down trend at all.....good time for intra day traders to pinch a bit off the NEWBIES....lol...

I could spend all day speculating on the SP and the reasons for it rising/falling....but that's the guts of it from my point of view....and I'm still here!......

pacer
if you are concerned about short term sp movements instead of the bigger picture, then i suggest you sell and stress less

 

[imajica]

JML is looking bullish lately on solid volume
charging towards $1

MLS - the undervalued dark horse will be rerated soon