Following article would suggest unless Mumbwa comes up with something special or an announcement from left field, its back into the long haul again for AIM over the next couple of years at least. A zinc mine just aint gonna cut it.
Home News Today Archives Search About FAQ July 28, 2008
Zinc prices could slide to USD 1.05 per long ton in 2008 Purchasing.com reported that too many zinc mining and smelting operations worldwide have caused the supply pipeline for zinc to be more than plentiful.
The International Lead Zinc Study Group projects a zinc surplus this year of 215,000 tonne. Mr Gayle Berry analyst at Barclays Capital Research in London said that with June’s US zinc price at 90¢, the analysts see USD 1.05 as the probable full year average for 2008. The forecast average for 2009 also is USD 1.05 because analysts such as Bart Melek at BMO Capital Markets in Toronto sees no chance demand will outpace supply anytime soon.
Another Toronto based mining analyst, Mr Kerry Smith at Haywood Securities said that production is fragmented among a large number of companies, with the biggest, Xstrata at 800,000 ton per year, controlling only 7% of supply. Even this year’s merger of Zinifex with Oxiana that created OZ Minerals only gives the Melbourne firm control of 6% of world supply.
In a recent interview with Platts Metals Daily.com, Mr Smith said that “You never see much producer discipline in the zinc market. If prices come down and a mine starts losing money, you don’t often see it shutting down production because nobody else follows suit.” He said that what’s more, a company with a profit-draining mine still faces costs associated with a shutdown, such as holding costs, environmental expenses and worker severance pay. He added that “So even if the mine is losing a little money, it’s sometimes better to keep it operating than to shut down due to these costs.”
Recently, 29 small to medium size Chinese firms with total zinc smelting capacity of around 900,000 tonne per year accounting for 20% of total Chinese zinc smelting capacity met in Shanghai to discuss cutting production by 10% due to tight power supply in 2008. However, a Macquarie Research Commodities report said that the proposed production cut appears unlikely, since it lacks the support of bigger Chinese producers.
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