I should also add that, while Zinc Metal Prices have been...

I should also add that, while Zinc Metal Prices have been decreasing, I wouldn't be surprised to see a relative quick turn around in the decline.

The industry is only slightly more consolidated than seven years ago. However, it has been much quicker to react by cutting supply compared with the last down turn in 2001. Furthermore, other resources like copper and coal are at record prices, which may give some of the existing miners some more room for cutting zinc supply.

Macquarie Equities did not provide a discussion with their latest metal price forecast for Zinc and Lead. However, in comments on their analysis of Perilya, they said:

"The outlook for the coming 12 months is uncertain. PEM is currently reviewing the mine plan in order to maintain profitability under current zinc and lead prices. The recent fall in zinc price has resulted in a number of mine closures and project mothballing. We remind investors that the zinc market remains relatively tight at around 2% of forecast consumption and PEM's Financial Year 2008 production represents 30% of our forecast calendar Year 2009 surplus (304 thousand tons)."

If all producers cut their supply by just 5% to 10%, you would probably see prices up again to where they were twelve months ago (i.e they would all probably generate more revenue by actually cutting their supply if they all did it). However, this is probably unlikely to happen. However, I wouldn't be surprised to see zinc prices quickly rebound above the US$1.00 per lb. (MAC have forecast US$0.90 per lb in 2009).

Already their is talk that the Reserve Bank may reduce the official interest rate this week which should help lower the Australian dollar if it happens. At a US$1.00 per lb Zinc price and A$/US$ rate of 0.90 you are looking at an Australian Dollar zinc price of A$1.11 and from the above July 2007 table an EBITDA for the HZCP of about A$11M.

Who knows what will actually happen.

Regards

SP