We're looking at up to 18 months before any serious recovery in price for zinc. If the world economy holds steady it might occur a little sooner the way that production is being curtailed at current levels. For the better part of a decade zinc, at much higher production levels, tracked along at 40-50 cents/lb. It's a telling story of the inflation of costs in recent years that many producers are struggling at around 80 cents/lb. I read one article that suggested the average cost of production across the globe is $1.04/lb!!
Personally I misjudged how much zinc would come off it's highs. I honestly thought it would settle in the $1.10-1.20 range. That it hasn't suggests there need to be a number of poor quality producers cleaned out of the market.
For now Mehdiabad is of virtually no value to UCL market cap - it wouldn't be much better if zinc was good whilst in this dispute. However if it does get resolved that will change as Mehdiabad is rated in the lowest quartile of costs of production due to poly metallic nature providing significant credits. This means it can be a profitable mine in pretty much any market a la TZN, general zinc sentiment won't change but those zinc stocks with good margin of safety will perform better than those without. TZN is a great example, whilst strongly off its highs it has suffered nothing like the punishment dished out to companies like CBH and Perilya.
After last year's AGM, for peace of mind, I mentally wrote Mehdiabad off as a lost cause - that way if anything happens from here it becomes a bonus. Rather than sell up though I chose to stick with UCL to give the management a chance to prove themselves. I think there are some excellent skill sets I am willing to allow time to perform.
Thus Sandpiper is now the focus in my mind. By the way when it rose to 4+ cents on the initial Sandpiper news I was one who stated it seemed overpriced for the nature of the news. I now think it is well underpriced. (Unfortunately I'm not a very good short term trader and didn't take the advantage of what was a correct opinion at the time).
UCL Price at posting:
1.1¢ Sentiment: Buy Disclosure: Held
