will zinc be in the pink.

Hi All.

Some news about zinc and how OZ Minerals will not hedge and why.

SYDNEY, Aug 4 (Reuters) - World zinc prices are likely to recover next year thanks to a looming supply shortfall, but a weak U.S. dollar threatens any recovery for producers, world No. 2 zinc miner Oz Minerals Ltd said on Monday.

Oz Minerals was formed this year after a A$4.2 billion ($3.9 billion) merger of Australian miners Oxiana Resources and Zinifex. Zinifex emerged earlier this decade from the now-defunct Pasminco, which was driven to bankruptcy after losing billions of dollars in currency trading.

Zinc prices measured on the London Metal Exchange have lost about a fifth of their value since January as a supply glut worsened and mills that use the metal to galvanise steel slowed their purchases.

"I think zinc is at a low point," Oz Minerals executive general manager Peter Lester said on the side of the Diggers and Dealers mining conference.

Credit Suisse has forecast an overall 23 percent decline in zinc this year.

But Lester said there were signs pointing to zinc prices as high as $1.40 a pound next year, citing a supply pinch due to stalled projects in South America and Indonesia and growth in steelmaking.

"I do think there is a strong case for zinc to go up," Lester said.

A weak U.S. dollar was more of a threat to profits than declining metals prices, Lester said.

"It's not the commodity price coming off, it's the currency going up. It doesn't matter what commodity you are in, if you are trading in U.S. dollars you are hurting," Lester said.

The strength of currencies in resource-rich countries was hurting producers who must still sell in U.S. dollars, he added. They then lose out when they convert their earnings back into local currency.

But after the debacle in currency hedging that brought Pasminco to its knees, Lester said Oz Minerals will simply attempt to ride out a weak dollar.

"There's no way on god's earth we are going to hedge," he said. "We will take it (unfavourable currency exchange rates) on the nose."

The Australian dollar has appreciated around 6.5 percent against the U.S. dollar since January as market turbulence eroded confidence in the world's biggest economy.


Now all we have to see is when and if the price of zinc rises.

Cheers.