Zinc the metal for 2006

[rederob]

Rederob, ZInc Live Warrants went up alot (from singapore), do you knwo why?

From Andy Home's team:
"The warranting of 10,400t of zinc at LME warehouses in Singapore was the first major inflow into the system since early-April, when 10,300t were warranted at Livorno in Italy.
It’s unclear whether this metal””Western brand from what we hear””has been displaced by recent higher Chinese exports, which moved up a gear in April to 19,000t from an average of 10,200t per month in Q1 2006. However, its arrival seems to have been talked about in some parts of the market and as such was not a complete surprise.
Monday was the first daily net rise in the LME headline figure since late April.."

 

[specman]

Could it be that China is selling some of their old reserves to take advantage of the high prices and in doing so,cause prices to drop so they can buy back cheaper?

I understood they were selling their copper reserves recently.

 

[michael_selway]

was gonna ask the same thing..... 8000 in....

coz if zinc loses its fundamental support (of supply shortage) then its back to the long term average for zinc... oh no..

1025 went in yesterday, from Singapore again

maybe just once or two offs as Rederob's quote appears to say

Btw here are the likely ZINC supply coming on in the next few yrs

The above chart demonstrates that during the period of low zinc prices, from about 2000 to 2004, few mines have been profitable and that it requires zinc prices above $0.60 for mines to be profitable. The Century Mine in Australia, one of the largest and highest grade zinc mines has cash costs of $0.37 per pound. With overhead added to cash costs to determine total costs even Century had marginal profitability until the recent rise in zinc price.

http://www.metalin.com/zincsilvercopper.html

 

[YOUNG_TRADER]

Total stock down under 230k t, with on warrant stocks down to 160kt

Can't wait for September!

Zinc's to your starting line, on your marks, get set...............

 

[YOUNG_TRADER]

Another day another good decline of zinc,

Total stocks down to 226k t on warrant @ 159k t

 

[Kipp]

Another day another good decline of zinc,

Total stocks down to 226k t on warrant @ 159k t

Yeah... the PRICE is declining just as fast...
I don't know much about Zinc supply and demand.. but doesn't it concern you that although the supply deficit is approx 700,000 tonnes p.a. a 7% drop in demand is all it would take for supply = demand. (total consumption is about 10 million tonnes).

And if demand fell 10%...
But hey, this could be a naive opinion, cause I don't know how easily achieved that is- (i.e. availabilty of Zinc substitutes etc)

 

[cuttlefish]

A question I have is how good an indicator are the LME stocks for supply vs demand - is all world zinc traded through the LME warehouses? Or does some zinc trade occur directly between producer and consumer (particularly for large consumers). Also just because its gone from the LME official warehouses doesn't mean it isn't still sitting in someones warehouse somewhere else does it?

 

[michael_selway]

A question I have is how good an indicator are the LME stocks for supply vs demand - is all world zinc traded through the LME warehouses? Or does some zinc trade occur directly between producer and consumer (particularly for large consumers). Also just because its gone from the LME official warehouses doesn't mean it isn't still sitting in someones warehouse somewhere else does it?

LME is a base for leftover world supplies basemetals you could say

E.g. ZFX produces zinc everyday, they get shipped to whoever needs them most (across the globe) and left overs are offered to LME, and usually they buy to store for the future. Those who need zinc but who are not offered can buy them from LME if there are supplies left. Although LME is a world base, it physically has warehouses in different cities in the world. LME is just a total count for them all. LME is also a benchmark price for producers to sell at. Something like that i think.

Cuttlefish, in specualtion pepel buy it but dont use it, just hoping to sell at a higher price, but i dont think they have that much.

Kipp u need to keep an eye on "On Warrant" which is about 160k atm, Only when "On Warrant" go down does Zinc price go up. This applies for all basemetals actually

Btw its not 700k deficit, only 400k deficit

Zinc - Outlook for 2006

8. Global usage of refined zinc metal is forecast to increase by 4.8% to 11.19 million tonnes in 2006. Growth will be strongest in Asia where demand is forecast to rise by 7.3% in China, 9.1% in India, 4.5% in Japan and 4.4% in the Republic of Korea. Demand in the United States is expected to recover by 11.4% after falling steeply in 2005. In Europe, increases in Finland, Germany, Poland, the Russian Federation and Spain will be partially balanced by falls in Belgium, France and Italy resulting in an overall rise of 1.4%.

9. It is anticipated that global zinc mine output will increase by 4.5% to 10.42 million tonnes. Production in Australia is forecast to rise by 8.9% and in India by 10%. European output will benefit from increases in Greece, Ireland, the Russian Federation and Sweden and is expected to rise by 8%.

10. A further 4.3% increase in world refined zinc metal production to 10.71 million tonnes in 2006 will be influenced primarily by rises of 8.6% in China and 44% in India. Increases are also forecast in Australia, Belgium, Canada, Kazakhstan, the Republic of Korea and the Netherlands.

11. Chinese net imports of zinc metal are forecast to rise to 285,000 tonnes. It is expected that most of this material will continue to be sourced in Kazakhstan.

12. Overall, after also having taken into consideration release from the United States Defense National Stockpile, the Group continues to anticipate a substantial deficit in the Western World refined zinc market. Current forecasts indicate a shortfall of 437,000 tonnes.

http://www.ilzsg.org/ilzsgframe.htm

 

[rederob]

A question I have is how good an indicator are the LME stocks for supply vs demand - is all world zinc traded through the LME warehouses? Or does some zinc trade occur directly between producer and consumer (particularly for large consumers). Also just because its gone from the LME official warehouses doesn't mean it isn't still sitting in someones warehouse somewhere else does it?

It's a good question.
Producers do not deliver to warehouses as a general matter of choice - they deliver to customers/consumers.
Excess metal is delivered to exchange warehouses and when markets are in oversupply the metal price is in contango, reflecting a premium for storage costs.
When the inventory trend shows sustained withdrawals leading to appreciable drawdowns, and the markets confirm demand is likely to tighten, you should see this reflected in LME stock levels.
That said, there is a lot more to it as you must bear in mind that warehouses are located globally, and stock might exist in quantities out of kilter with where demand is strong. This is especially the case presently with most copper stock in Asia, and with strong demand in both Europe and the US.

 

[cuttlefish]

Thanks for the answers michael and rob - thats explained it well.

 

[Kipp]

Thanks MS- the figure of 700K deficit was from memory in this thread... guess I was wrong...

Do you have any theory on why Zn and Cu prices are linked? It doesn't make sense to me as I thought they were used in different alloys... and funamentally Zn is much stronger than Copper.

 

[nizar]

Thanks MS- the figure of 700K deficit was from memory in this thread... guess I was wrong...

Do you have any theory on why Zn and Cu prices are linked? It doesn't make sense to me as I thought they were used in different alloys... and funamentally Zn is much stronger than Copper.

copper - plumbing, piping, electrical wiring

zinc - anti-corrosive, galvanising

they are linked partly i think because people are pouring money into commodity funds that invest in metals; they buy a bit of zinc, copper, gold, etc

 

[michael_selway]

copper - plumbing, piping, electrical wiring

zinc - anti-corrosive, galvanising

they are linked partly i think because people are pouring money into commodity funds that invest in metals; they buy a bit of zinc, copper, gold, etc

http://metalsplace.com/metalsnews/?a=5749

Australia's ABARE: Zinc prices may keep rising next year
Source: Dow Jones

Zinc CatalogZinc prices are expected to surge 17% in 2007, adding to a forecast more than doubling this year as growth in global mine output continues to fail to match demand, Australia's government commodities forecaster said Monday.

Zinc is forecast to average US$3,500 a metric ton in 2007, up from US$3,000 in 2006 and US$1,382 a ton last year, the Australian Bureau of Agricultural and Resource Economics, or ABARE, said in its June quarter report. Spot zinc closed at US$2,940 a ton in London Friday.

"The rise in prices so far this year reflects a market characterized by slow growth in zinc mine supply, concerns over supply disruptions, strong global demand for zinc and low and steadily declining zinc stocks," ABARE said.

"Compounding these effects has been an increase in targeting of base metals such as zinc by investment funds and financial speculators," ABARE said.

A strengthening of world economic growth is expected to drive demand for galvanized steel, zinc's main use, in the construction and automotive industries in 2006 and 2007, ABARE said.

World production is expected to grow to 10.7 million metric tons this year, up from 10.3 million tons in 2005. A further rise in output to 11.2 million tons is forecast for 2007.

The gains aren't expected to be enough to cope with demand though, ABARE said.

World consumption is expected to rise to 11.1 million tons in 2006 and again to 11.4 million tons next year.

Contrast above with below

http://www.smh.com.au/news/BUSINESS/Big-falls-in-major-minerals-Access/2006/05/01/1146335639645.html

thx

MS

 

[rederob]

Below is taken directly from ABARE.
ABARE has never been particularly bullish on metals and traditionally underestimate prices by a large margin.
zinc prices to rise in 2006
In the fi rst fi ve months of 2006, world zinc prices averaged US$2660 a tonne (US121c/lb). Zinc prices are forecast to average about US$3200 a tonne (US145c/lb) in the September quarter and around US$3000 a tonne (US136c/lb) for the year as a whole ”” the highest annual zinc price in real terms (2005-06 dollars) since 1974 when prices averaged over US$5000 a tonne (US227c/lb).
Growth in world mine output has been unable to keep pace with consumption owing to a lack of investment in new mine capacity over the past ten years. With consumption exceeding production in the fi rst half of the year, zinc stocks have fallen. Since the end of December 2005, stocks held by the London Metal Exchange have declined by over a third to 240 000 tonnes at the end of May.
Total reported stocks ”” which are stocks held by the London Metal Exchange, the private sector and governments ”” at the end of 2005 were the equivalent of 5.9 weeks of consumption. With consumption expected to exceed production in 2006, total reported stocks are forecast to decline to 2.9 weeks of consumption by year’s end.
In 2007, consumption is again forecast to exceed production, leading to a forecast rundown in stocks to 1.9 weeks of consumption. As a result, world zinc prices are forecast to rise by a further 17 per cent to average around US$3500 a tonne (US159c/lb) for the year.

 

[michael_selway]

Below is taken directly from ABARE.
ABARE has never been particularly bullish on metals and traditionally underestimate prices by a large margin.
zinc prices to rise in 2006
In the fi rst fi ve months of 2006, world zinc prices averaged US$2660 a tonne (US121c/lb). Zinc prices are forecast to average about US$3200 a tonne (US145c/lb) in the September quarter and around US$3000 a tonne (US136c/lb) for the year as a whole ”” the highest annual zinc price in real terms (2005-06 dollars) since 1974 when prices averaged over US$5000 a tonne (US227c/lb).
Growth in world mine output has been unable to keep pace with consumption owing to a lack of investment in new mine capacity over the past ten years. With consumption exceeding production in the fi rst half of the year, zinc stocks have fallen. Since the end of December 2005, stocks held by the London Metal Exchange have declined by over a third to 240 000 tonnes at the end of May.
Total reported stocks ”” which are stocks held by the London Metal Exchange, the private sector and governments ”” at the end of 2005 were the equivalent of 5.9 weeks of consumption. With consumption expected to exceed production in 2006, total reported stocks are forecast to decline to 2.9 weeks of consumption by year’s end.
In 2007, consumption is again forecast to exceed production, leading to a forecast rundown in stocks to 1.9 weeks of consumption. As a result, world zinc prices are forecast to rise by a further 17 per cent to average around US$3500 a tonne (US159c/lb) for the year.

Hm contrast that with

Copper above historical price levels until end-07 -SocGen
Source: Dow Jones

Copper CatalogCopper prices will remain far above historical norms until late during 2007, outperforming other base metals on the basis of strong supply and demand fundamentals, Societe Generale said Monday.

Market tightness is sufficient to reignite the bull market in the third quarter, making copper the London Metal Exchange metal most likely to reach new highs, the bank said in a report. LME three-month copper hit a record high of $8,825/ton in May.

Copper is forecast to show a deficit of 100,000 metric tons in 2006 and a balanced market during 2007.

During 2006, LME cash prices will average $7,250/ton and $6,300/ton.

However, copper prices will also be particularly sensitive if and when investor sentiment turns, SocGen added.

Following flat global demand growth in 2005 due to large scale destocking, copper substitution will confine world demand growth to 4.5% during 2006.

On the supply side, mine capacity utilization no longer looks likely to improve this year, although refined output should rise by over 5%, SocGen said.

"Mines could perform better in 2007 but refined growth will slow," the report said.

The zinc market is seen in a 350,000-ton deficit during 2006, contracting to a 150,000-ton deficit in 2007.

LME cash prices are forecast at $3,175/ton for 2006 and $2,350/ton next year.

"In the case of zinc at least, therefore, we doubt the boom-bust pattern is a thing of the past and prices should eventually fall sharply. However, this is not yet on the market's radar screen and growing tightness suggests that zinc should return to outperforming for the next few months," SocGen said.

Aluminium on the other hand will continue to underperform given its weaker fundamentals and is likely to average $2,740/ton during 2006 basis LME cash and $2,350/ton in 2007.

http://metalsplace.com/metalsnews/?a=5773

thx

MS

 

[YOUNG_TRADER]

Spots above $1.50 a lb even with copper falling 3% last night, de-railing? Would need to see more evidence of this but it looks like mkt is starting to appreciate Zinc fundamentals,

More and more focus of near linear drawdowns, more and more specualtion of Zinc running out of stock, I doubt that, but inventory levels will get dangerously low IMO,



Nice article on ZFX, also mentions JV's with 2 of my fav's TZN (enjoyed my run) BSM (Yet to run)




Zinc bull takes future by the horns
Robert Gottliebsen, Vision 2000
July 08, 2006
ZINIFEX believes the next three years will be good for zinc and that the stock market is under-pricing its future prospects.
Chief executive Greig Gailey says analysts have not factored in his long-term plans to ensure the company will still be prospering in 15 years. So when you ask him whether he would recommend a bid at a 30 per cent premium to the market, he comes back quickly: "We would probably hold out for 60 per cent."

But Gailey is a realist and knows the resource industry is undergoing dramatic consolidation and Zinifex has an open register, making it vulnerable. But the zinc boom has given him strong cash flow, which means that Zinifex could itself do a share-exchange deal with a company that had major developments requiring finance.

Gailey has had an incredible roller-coaster ride since leaving BP and becoming chief executive of Zinifex's predecessor, Pasminco, in August 2001. He had barely put his feet under the desk when the operation was put into administration.

But Gailey stayed with the enterprise and worked with the administrator, finally helping to engineer the float. In the year to June 30, he will be rewarded because analysts expect Zinifex to earn $950 million - paradoxically, the exact sum the banks received in the public float which crystallised their $2 billion loss.

Zinifex's 2005-06 earnings received a big boost from zinc prices in the second half so analysts are looking for a profit in the vicinity of $1.5 billion, or around $2.70 per share, in 2006-07. That puts the company on a projected price/earnings ratio of between three and four.

It is at this low level because around 80 per cent of the Zinifex profit comes from the Century zinc mine, which is a discrete ore body that will produce at full capacity (500,000 tonnes) until 2016 when production will suddenly come to an end. Until 2011, the company will need to spend around $100 million annually on overburden removal. In the final five years, cash generation will skyrocket, depending on the zinc price.

Gailey is a zinc price bull for at least the next three or four years. He points out that during the decade to 2000, many big new zinc mines, including Century, were commissioned, flooding the market and causing the price to slump to uneconomic levels. Exploration was halted and new projects mothballed. Then demand from China took out the surplus production, and there are no new major, committed projects, so the price has risen to above $US3300 a tonne - a more than fourfold increase from the level of the tough years.

After 2011, whether the price holds that level, goes higher or slips back will depend on demand at that time and whether the major miners ramp up major new mines. But Gailey points out that because no major company has committed to a significant new mine, it will be four or five years before one is started.

There are very few major ore bodies awaiting development because exploration was stopped. The biggest undeveloped ore body is in Iran and, not surprisingly, the political risks are deterring capital investment. Others are in frozen areas of North America that will be very costly to develop. The majors are hesitating because capital costs have ballooned and they need a sustained zinc price that is substantially above previous levels to justify investment.

The memory of the slump of 2000 is still fresh. The market is pricing Zinifex shares on the basis that by 2016 it will have only token zinc production and will be left with four smelters.

Gailey has a four-point plan to prove the market wrong. The first step is to develop the Dugald River mine near Cloncurry. Dugald River was sold to Zinifex (then Pasminco) by Rio Tinto as part of the Century zinc sale. It is high-grade zinc ore which contains manganese which previously made it very unattractive to smelters. But modern Chinese smelters can treat zinc concentrates containing manganese.

The company is conducting a pre-feasibility study and, if this proves successful in 2007, there will be a full feasibility study leading to a mine that will produce around 200,000 tonnes of zinc a year (two-fifths of Century).

Zinifex has no net debt and will be able to fund the $500 million Dugald project from cash flow.

Gailey's second plan is to accelerate exploration around Century. When Rio Tinto explored the area, it was looking for copper and Gailey is optimistic that he can find at least one ore body that will enable zinc production from the company's Century facilities to continue after 2016.

Zinifex exploration outside these two projects is designed to take a majority stake in highly prospective areas found by junior miners. In South Australia, it is funding an $8 million exploration program to earn a 70 per cent stake in the highly prospective Minninnie zinc deposit owned by Terramin. If the exploration produces disappointing results, Zinifex will walk away. It has done a similar deal with the Base Metals group in Tasmania.

Zinifex also believes the company should do joint deals with junior explorers in North and South America where there are highly prospective zinc prospects.

In all, it plans to spend $90 million over the next three years on exploration.

Greg Gailey's policy of not attempting to peg out leases in areas outside of the mining sites but to allow junior explorers to do the early work is a radical departure from conventional exploration thinking.

The third plan is to further develop the company's second mine at Rosebery, Tasmania, which has been producing for around 70 years. The company is to spend $19 million to determine exactly how much ore is in the mine and, once again, the company is confident Rosebery will still be producing well after 2016.

Modern, conventional miners rarely have a substantial investment in smelting. Indeed, one of the reasons why companies are reluctant to bid for Zinifex is its ownership of four smelters. Potential bidders fear that if any of these smelters need to shut, the company will be hit with an enormous clean-up bill.

Gailey disputes this, pointing out that the cost of closing the smelter at Cockle Creek was less that $50 million. The company has no plans to shut any of its smelters, but, theoretically, if it shut its Dutch smelter, the value of the real estate would yield a profit on the closure. The Dutch smelter is very profitable and expanding because it is efficient and Europe is now short of smelter capacity.

The company receives periodic bad publicity from the historic problems at Port Pirie. Gailey says the company is moving to overcome the Port Pirie problems created by Zinifex's heritage. Longer term, he believes the Port Pirie complex will help the company make an important thrust into zinc recycling.

Gailey can see smelting as an important source of future profits for Zinifex but does not plan to open new smelters because that would involve investing in new projects in Third World countries. Any surplus cash will be returned to shareholders.

If Gailey is wrong (and the market is right), then by 2010 Zinifex will only have six years to run at Century, although it should be starting to ramp up Dugald.

But Gailey's vision is that the company will have by then found two ore bodies the size of Rosebery so that it can maintain production beyond the Century closure.

Most resource giants have projects coming forward and are not faced with the stark reality of mine closures as a result of a failure to explore. But the zinc boom has given Gailey and his people the cash to reverse their history and create their own future.

Gailey might, of course, recommend a bid a little lower than a 60 per cent premium on the market. But it won't be much lower because he is supremely confident Zinifex can be a major zinc producer well beyond 2016.

He believes demand for zinc will continue to rise because of the development of China and the high cost of alternative products like aluminium and stainless steel.

 

[michael_selway]

Spots above $1.50 a lb even with copper falling 3% last night, de-railing? Would need to see more evidence of this but it looks like mkt is starting to appreciate Zinc fundamentals,

More and more focus of near linear drawdowns, more and more specualtion of Zinc running out of stock, I doubt that, but inventory levels will get dangerously low IMO,



Nice article on ZFX, also mentions JV's with 2 of my fav's TZN (enjoyed my run) BSM (Yet to run)




Zinc bull takes future by the horns
Robert Gottliebsen, Vision 2000
July 08, 2006
ZINIFEX believes the next three years will be good for zinc and that the stock market is under-pricing its future prospects.
Chief executive Greig Gailey says analysts have not factored in his long-term plans to ensure the company will still be prospering in 15 years. So when you ask him whether he would recommend a bid at a 30 per cent premium to the market, he comes back quickly: "We would probably hold out for 60 per cent."

Hi Thanks

http://www.theaustralian.news.com.au/story/0,20867,19716193-5001942,00.html

Heres the Full Transcript

Zinifex: More Than a Miner
By Robert Gottliebsen
Watch the Greg Gailey interview
Hear the Greg Gailey interview

PORTFOLIO POINT: Zinifex’s smelting operations and active exploration program underline its determination to extend its resource base.

Background, by Eureka Report editor James Kirby. Greg Gailey, chief executive of Zinifex, may be sitting on Australia's cheapest mining stock (see Mike Mangan's story today), but the group's heavy exposure to a single commodity ”” zinc ”” and more specifically, a single mine ””Century mine ”” has kept institutional shareholders away from the stock.

However, as Gailey makes clear to Robert Gottliebsen* in today's video interview, Zinifex has been making every effort to ensure that once the Century mine runs out in 2016, his company will be well placed to extend its operations through new mining projects already under development.

Zinifex is a two-year-old company but it carries the baggage of one of the mining industry's biggest recent failures. The company was reborn from the ashes of Pasminco, which went under after a hedging program went spectacularly awry in the mid-1990s.

Rising costs across its mining operations mean Zinifex is now heavily dependent on strong industrial demand to drive zinc prices higher in the near future. As Gailey stresses throughout the interview, Zinifex is more than just a mining company: it also has extensive and profitable smelting operations.


The interview

Robert Gottliebsen: What’s your view on the outlook for the zinc price over the next three or four years?

Greg Gailey: We’re very bullish about the zinc market and the reason we’re very bullish is we see China demand as continuing for a prolonged period; that is, what’s happening in China today is not just a couple of years; this is a decade-long phenomenon. Second, we see constrained supply. It takes some four to five years to bring a major project to market ”” a new mine and those projects are simply not in the pipeline, so we think an ongoing shortage of supply is with us for at least a couple of years and possibly beyond that.

But there’s a big deposit in Iran which could change the outlook at little.

I don’t know that it’ll change things. That deposit is certainly earmarked for development by a company called Union Resources in cooperation with the Iranians, but Iran’s a very difficult political environment and I think companies are going to require relatively high rates of return to operate in those countries.

Around 80% of the Zinifex profit comes from the Century mine. What are you doing to maintain it and how long will it last?

Century is due … the current ore body will expire in 2016. It’s a well-defined discrete ore body. We hold some 2000 square kilometres of exploration leases around Century and we’re very active in exploring in that area, looking for another deposit that we will be able to exploit through the infrastructure that exists there. We’re also actively exploring in Tasmania; and we’re in partnership with Terramin in South Australia; and we’re actively looking for other joint venture opportunities to explore. So we believe that we will be successful in discovering additional orebodies and the company will renew its resource base.

What are you doing at Century to maintain production to 2016?

Century was constructed to operate at 500,000 tons a year and it will do that right through till the last day, effectively, and we therefore have no issues in terms of the production out of Century over the life of the mine. Costs are certainly a key problem for the industry at this point in time. Costs are escalating. Operating costs are up. Capital costs are up and we’re doing everything we can to contain that. We have a project called Project Productivity, which was designed to take 450 positions out of the company over two years. We’re 12 months into that. We’ve taken more than 200 out in that period so we’re doing everything we can to contain costs, but quite frankly they’re escalating at a more rapid rate than we can contain them.

Are you accelerating the removal of overburden?

We are at Century. We are bringing forward overburden removal over the next three years and that will mean that costs in the last few years of that mine’s life will decline and the cash flow therefore coming out of Century increases actually as the mine nears the end of its life.

Zinifex has four smelters. Do you see that as a long-term business for the company?

Smelting’s actually a good business and, interestingly enough, despite the fact that the treatment charge the smelter gets ”” which is what the mine pays the smelter to convert the concentrate to metal ”” are actually at record lows, smelting profitability is actually at record highs. And the reason for that is one of the idiosyncrasies in the zinc market: that smelters only pay for about 90% of the metal they receive so they actually recover about 10% more than they pay for. With current metal prices, that incremental metal is very valuable and hence smelters are actually making record profits. We see smelting as an ongoing part of the company and one that will make a contribution to its profitability.

Does the clean-up factor and the pollution worry you in the smelting business?

No. We have a very clear policy that we want to be good corporate citizens and we want to be welcomed in the areas we operate. We are addressing legacy issues and we acknowledge we inherited some when we acquired the assets from Pasminco. We’re actively addressing those. We have a plan to spend, for instance, $56 million in the next three years in South Australia addressing some of the lead issues in Port Pirie, and we believe that the clean up ultimately is manageable, when and if it occurs, when a site is closed. But we have no intention to close any of our smelters.

Greg if you’re right about the zinc price, the market is taking a very conservative view about the prospects of the company.

One of the issues we have with the market is the market doesn’t give us any value for the ultimate renewal of the assets we have, and in a resource business if you can’t renew the assets then clearly you disappear. We have a very active exploration program. We think we have some exceptional prospects in highly prospective areas such as around Century in Queensland and, quite frankly, the market is giving us no credit for us being successful in that regard.

What are you going to do with your cash?

Again, we’ve got a very clear policy on that, which we’ve stated and we’ve lived by ””that is, that if we cannot use that cash internally to shareholders’ benefit then it will be given back to shareholders, and in our short life of two years we’ve had two dividends and a share buyback.

If I made you a takeover offer of, say 30% on the current market price, would you take it?

No it wouldn’t be enough.

How much do you want?

As much as I could get.

Seriously, do you see a likelihood of more global mergers in the mining business?

think it’s inevitable, for two reasons. One there is clearly advantages to the industry in having fewer larger players, and when I say advantages, the key advantage to me is you get a more sensible scheduling of increments and expansion. One of the industry’s biggest problems is too much additional capacity comes in in too short a time frame and the price drops. So you get a more sensible structuring of project development. The other reason is that it’s the nature of the beast; that is, if you look at most of the large mining companies that exist today they’re products of amalgamations and that amalgamation will go on. The other interesting thing about the industry is that as the food chain … people move up the food chain … a whole lot of new people come in at the bottom and there’s never a shortage of new companies coming into mining. So new companies coming in all the time and amalgamations occurring and bigger companies emerging.

And, of course, you’re using those new companies as part of your exploration?

Absolutely.

* Robert Gottliebsen is a national business commentator for The Australian.

Video:

http://www.eurekareport.com.au/iis/iis.nsf/pages/3D16FA4D99411755CA2571A30081CF87/$file/060630%20Greg%20Gailey.wmv

 

[YOUNG_TRADER]

C'mon 200k level break break break!!!!!!!!!

LME Warehouse Stocks 11 Jul 2006
Close In Out +/- On Warrant Cancelled


Zinc 205825 525 1950 -1425 155600 50225

 

[YOUNG_TRADER]

Zinc stock levels continue to fall!


Total stocks down to 229,250 t's they were 242,025 2 Weeks ago
Thats a 5% decline in 2 weeks

On warrant stocks are @ 158,275 t's they were @ 168,775 2 weeks ago
Thats a 6% decline in 2 weeks

Supply/Demand fundamentals are still dangerously tight, once volatility settles I expect Zinc to charge towards $5000 t

Be prepared!

Well that was mid june, roughly 1 month ago Zinc stocks 230k t's today 205k t's a decline of 11% or so in 4 weeks

On warrant were 158k t's today 155.6k t's a decline of 1.5% in 4 weeks (hmmm not as big!)

 

[michael_selway]

Well that was mid june, roughly 1 month ago Zinc stocks 230k t's today 205k t's a decline of 11% or so in 4 weeks

On warrant were 158k t's today 155.6k t's a decline of 1.5% in 4 weeks (hmmm not as big!)

yeah might hit a snag at 155k abouts

thx

MS