the year ahead - 2011, page-6

Nextport,

My research is that the industrialisation of China will lead to a large net increase in zinc imports, despite any degree of self-sufficiency.

The recent pullback is due to China's power cut controls and they started clamping down around about the time zinc had peaked and risen about 30% for the QTR. This was back in September. So $zinc was due to consolidate anyway.

The warehousing of zinc in China peaked about midyear and has since been diminishing and will continue to, from everything i've read. In any case, if most of that inventory is allocated to LT contracts, then it is much less significant in terms placing downward pressure on price. On the other hand, production has been fairly leveled since late 2009, with only small decreases - even with the power controls.

Then you have - like many bulk commodities - pure financial investment, based on factors like a weak USD and contango (upsloping future curve for zinc), although this can be dangerous, like we saw with crude a couple of years back.

What's really got me sold is that as China moves towards a more US-style consumption pattern, infrastructure requiring raw steel will be replaced with higher quality products that require zinc. China still has a LONG WAY to go before catching up to historical first world consumption patterns.

The beauty of China's tightening policy is that it will hopefully provide greater stability in the commodity market and go some way to preventing unhealthy bubbles like we saw in crude.

In OVR's case, shaping-up to be a relatively low-cost producer means they really only need zinc to stay where it is for the project to be highly economical. Anything on top of that is a bonus. I guess we still need to see the DFS to confirm just how viable the project is. Maybe i'm assuming too much given all the variables that haven't been confirmed as yet...

Still looking healthy from a chart perspective too: