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| Analysts bullish on zinc, lead in long term |
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| Code:MFN002720 Prpduct:Zinc Date: 2010-07-26 |
Last year, if you exclude money spent on exploring for iron ore and associated metals, gold accounted for 48 per cent of exploration outlays around the world. Copper took another 22 per cent of non-ferrous exploration budgets globally, with nickel third at 9 per cent.
Zinc (and presumably lead) accounted for only 5 per cent of non-ferrous exploration. Tony Parry at Resource Capital Research, who sent us these figures, makes the point that this low spending on zinc exploration is one of the reasons that analysts are bullish on zinc-lead in the longer term.
He adds that this explains some recent strategic acquisitions -- Toho Zinc battling to grab CBH Resources (CBH) and a key slice of the Broken Hill ore body, while China's Henan Yuguang Lead & Gold has taken a 25 per cent stake in the Sorby Hills lead-silver-zinc deposit owned by Kimberley Metals (KBL).
Overseas, Brazil's Votorantim Metals, part of one of Latin America's largest conglomerates and which has already swallowed Atacocha, is seeking control of a second Peruvian zinc miner, Milpo.
The commodities team at Ocean Equities in London says that while we may see weaker zinc prices for the rest of this year, the fundamentals in the longer term are positive. India is expected to be one of the main growth areas for zinc demand, while Chinese production of galvanised steel -- more than half of zinc produced goes into galvanising -- has been on the rise for some months.
But the people at BNP Paribas are not so sanguine. They see another zinc surplus in 2011. (And, it should be noted that, at Friday's close, stockpiles at London Metal Exchange warehouses stood just 50 tonnes short of their 52-week high of 620,825 tonnes, which was recorded the previous day.)
"In our view, the fundamental position is worse than is indicated by visible stocks," the BNP report continues. They suspect that the stockpile in China is "well beyond" the 150,000 tonnes officially reported. Zinc, the report concludes, has a steep hill to climb before it reaches the sunny uplands of growing market tightness due to the closure of key mines.
Kevin Moriarty, executive chairman of Terramin Australia (TZN), comes down on the side of the zinc optimists. The company, which runs the small, high-grade Angas zinc mine in South Australia, has just reported what it calls promising results from the Oued Amizour zinc project in Algeria.
The deposit, which lies just 15km from the deepwater port of Bejaia and also close to a power station, was discovered in the 1990s, but it has been only in recent years that the government in Algiers has been encouraging foreign investment in mining in order to lessen the country's dependence on oil and gas exports.
Terramin still does not have a handle on the full size of the deposit but expects it to be well beyond the early estimate of 70 million tonnes. Exploration has extended beyond the area covered by the definitive feasibility study.
Moriarty believes the key to his Algerian project is that infrastructure is already in place. With zinc, you have to keep down the capital costs.
Zinc fell 2.2 per cent on Friday on a day when most of the other base metals were rising. It closed at $US1921 a tonne while lead finished at $US1979/tonne. These figures are interesting in light of the recent pre-feasibility study for Kagara (KZL) on its Admiral Bay lead-zinc-silver project. The study used lead and zinc prices of $US2600 a tonne, which is certainly on the optimistic side.
Potash in recovery
SCOTIA Economics, part of Canada's Scotiabank, devotes a good portion of its latest commodity bulletin to potash. Its bottom line is that world potash shipments are normalising after last year's slump and a significant price recovery awaits in 2011.
The report notes that farmers around the world "mined" the nutrients out of the soil in 2009 to cut fertiliser costs, but this year have to replace those soil nutrients. In the first four months of 2010, Brazilian potash imports climbed by 720 per cent and China's by 36.7 per cent. Potash sales to India look as if they will have a strong year.
The expectation of a price rebound (although not to 2008's record) will be encouraging news for ActivEX (AIV). The company has just received its final scoping report on the Lake Chandler potash project north of Merredin in Western Australia.
On Wednesday, the junior noted that while potash prices have halved, the mining boom here has caused rising labour and materials costs. It says Lake Chandler would be a marginal proposition at today's prices. But the deposit is only 50km from the main east-west railway line, giving Lake Chandler a transport cost advantage, so AIV says it will keep working on the project expecting improved fertiliser demand.
Tailenders
SPACE is our enemy today, so just some brief mentions.
lMagma Metals (MMW) reported more high-grade platinum, palladium, copper and nickel results at its Thunder Bay North project in Ontario. Last week BNP Paribas described palladium as the "prince of the precious metals". It's been the best performing precious metal since January 2009 and BNP expects it to outperform the others in the months ahead. (We'll post more platinum news online during the week.)
lANALYST Luke Smith at Sydney-based Stonebridge Group put a "conviction buy" recommendation on Beadell Resources (BDR) and its Tucano gold project in Brazil. He has a price target of 49c against Friday's close of 19.5c. Smith expects Tucano to have a 4 million ounce resource by December. Beadell is his preferred offshore gold developer due to its long life and potentially low cost.
lKairiki Energy (KIK) gets a "spec buy" tick from Southern Cross Equities analyst Johan Hedstrom. Production at the Tindalo oilfield in the Philippines has been running at up to 18,000 barrels of fluid a day, but the high water ratio means only 4000-5000 barrels of that is oil. A work-over of the well is planned for next month and Hedstrom sees a good chance of fixing the water problem. |
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| 08 Sep 2010 | | | Cash Ask | 3M Ask |
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| Copper | 7620.00 | 7635.00 |
| Aluminium | 2120.50 | 2150.00 |
| Zinc | 2170.00 | 2197.00 |
| Lead | 2151.00 | 2179.00 |
| Nickel | 22450.00 | 22400.00 |
| Tin | 20980.00 | 21075.00 |
| Al.Alloy | 2230.00 | 2130.00 |
| NASAAC | 2081.00 | 2110.00 |
| Steel Billet | 506.00 | 527.00 |
| Cobalt | 41000.00 | 40700.00 |
| Molybdenum | 35300.00 | 36000.00 |
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2010-09-09 |
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| PRODUCT |
BID
(US$/TON) |
ASK
(US$/TON) |
2B Coil-OCT |
3,300 |
3,380 |
No.1 Coil-OCT |
3,120 |
3,200 |
2B Coil-DEC |
3,300 |
3,380 |
No.1 Coil-DEC |
3,120 |
3,200 |
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MetalFirst China Average:
US$16.025/lb
As of Sept. 3, 2010
(updated weekly)
MetalFirst Average:
US$16.00/lb
As of Sept. 3, 2010
(updated twice weekly)
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