Zinc

[Lone Clone]

March quarter zinc price slip no concern for Zinifex

http://www.mineweb.net/mineweb/view/mineweb/en/page36?oid=20127&sn=Detail

Zinifex, one of the world’s largest integrated zinc and lead companies, is not worried about the recent fall in zinc prices, pointing out they are still 113 percent higher than a year ago.
Author: Ross Louthean
Posted: Thursday , 26 Apr 2007

PERTH -

Outgoing chief executive of Zinifex Ltd (ASX: ZFX), Greg Gailey, said the March quarter zinc fall from an exceptional price run was not a ominous sign and that the metal should have support well above long-term average levels "for some time to come."

Gailey, who earlier this week surprised the market by announcing he would be leaving the company, said that despite the correction zinc prices have averaged $US3,673/tonne so far this fiscal year, 113% higher than the comparative 2006 period.

In Zinifex's March quarter report released today Gailey said that in January concerns arose that Chinese production had increased to the point where it exceeded domestic demand. This was supported by an increase in zinc exports from China from November through to February.

"However, while zinc production in China is growing, the exports over this period appear to have primarily been driven by a price arbitrage that opened up between domestic and LME zinc prices. This arbitrage has now closed," Gailey said.

He also said lead prices corrected in January but supply disruptions and falling LME stocks pushed lead prices to new record levels, approaching $US2,000/t. So far this year lead prices have averaged $US1,533/t, a rise of 45% on last year.

Gailey said the company's plan to separate its mining and smelting businesses and to merge its smelters with Umicore's zinc smelting operations - to create Nyrstar -- were well on track. This week a binding agreement was signed and Zinifex anticipated Nyrstar will be formed in September, with an initial public offering of shares to follow "as soon as market conditions permit."

Gailey reminded shareholders that to grow its mining business Zinifex had decided to acquire Canadian exploration and development company Wolfden Resources Inc. The offer of $C3.81/share had been issued to Wolfden's shareholders and their response will be known when the offer closes on May 8.

Australian Business journalists consider Gailey has done a remarkable job in taking over Zinifex from the funeral pyre of the poorly-run Pasminco Ltd which crashed to earth about six years ago with debts and toxic hedges that, in the reconstruction, left its shareholders with empty pockets.

When Pasminco hit a fiscal iceberg the administrators were forced into asset sales, particularly as zinc-silver-lead prices then were pretty flat. Among the assets sold were the Broken Hill mines to Perilya Ltd and the Elura mine (renamed Endeavour) to CBH Resources and, as a result, both these companies have reaped enormous operating profits and stepping stones for growth.

Despite their size Zinifex's Century mine in Queensland and Rosebery in Tasmania are maturing and that is why Australian analysts warmed to the takeover bid for Wolfden.

In the March quarter Century produced 122,602 of zinc in concentrates and 9,777t lead in concentrates with zinc 1% below December quarter and lead up 12% on December quarter. Silver by product from both concentrate streams totalled about 32,000 kilograms.

Rosebery produced 19,923t zinc in concentrates, 5,293t lead in concentrates and 389t copper in concentrates and included in these three production streams were 26,058 kg silver and 156 kg gold, while gold dore of 105 kg included 60 kg gold and 23 kg silver.

Zinifex continued to expand its global exploration and developed a new alliance to explore in China and took up additional ground in Tunisia and Mexico. The company had two licence applications granted in the historic Falun mine district of Sweden's Bergslagen region. This area had been controlled by Sweden's military and was only recently opened up for exploration.

In Australia, Zinifex plans too drill test some IP anomalies at the Menninnie Dam prospect in South Australia in May. This will test the extent of potential resources adjacent to the known Menninnie lodes. The company has also struck an agreement with junior company Trafford Resources to earn 75% by exploring its Witcherry Hill zinc-lead-silver prospect adjacent to Menninnie Dam.