re: half year report/zinc hey mate,Re: the result, it was good...

re: half year report/zinc hey mate,

Re: the result, it was good but the real money is coming in the second half, when the debottlenecking issues will be cleared up and some of the current higher zinc prices are realised. It actually beat Macquarie's (revised) forecasts, they are supposed/expected to make $13M in the second half. KZL has said on the outlook that: "Kagara is well placed to take advantage of current high spot zinc, lead and copper prices and is set for a very strong second half."

A Reseach note to Macquarie Research Equities Clients reads:

Kagara Zinc (KZL)
Big year ahead

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Stock: KZL AU
Current Valuation: $0.90
12-Month Target Value: $1.30
Volatility Index: High
Recommendation: Outperform


Event:

· KZL announced 1H05 earnings of $4m (Macquarie $3m).

Impact:

· Solid result. EBITDA of $9.4m was in-line with our $9.8m forecast and the final result was fairly clean.

· Zinc price kicker. Importantly, this result was generated in a period of ongoing ramp-up and plant debottlenecking, and on an average realised zinc price of US45c/lb. The current spot zinc price is comfortably above US60c/lb, and Macquarie is forecasting an average zinc price of US60c/lb for 2005. KZL is forecast to generate earnings of $13m in 2H05.

Action and Recommendation:

· Maintain outperform.

· The real upside for KZL remains the potential for a 2mtpa mini-Ridgeway style gold-copper operation (with zinc flotation) in the Chillagoe region. The recent placement to fast track a development in the Chillagoe region should enable an accelerated drilling program for the highly prospective Mungana gold-copper porphyries.