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SRZ.TO - Bullish Article from Mineweb (http://www.mineweb.net/mineweb/view/mineweb/en/page66?oid=26675&sn=Detail)

Haywood forecasts great returns on Tennessee zinc mine restart project
It may be love, or it could be deep infatuation. Nevertheless, Haywood Securities is positively giddy over the prospects for the restart of Middle Tennessee Mines by Strategic Resource Acquisition.

Author: Dorothy Kosich
Posted: Thursday , 06 Sep 2007

RENO, NV -

Haywood Securities asserted Wednesday that Strategic Resource Acquisition Corporation's restart of Pasminco's former Middle Tennessee Mines zinc operations is akin to "waking a sleeping giant," that Haywood forecasts will generate a 85% return on shares.

In a more than simply bullish report, Haywood metals analyst Stefan Ioannou initiated coverage on Strategic (TSX: SRZ) with a SECTOR OUTPERFORM rating and a target price of Cdn$9.00 per share. "In a sea of zinc ‘development' stories, Strategic is posed to make the transition to producer ahead of many peers with near-term exposure to currently buoyant zinc prices and associated strong cash flows," Ioannou declared.

The Middle Tennessee Mines project is expected to begin zinc concentrate production late this year, ramping up to 130 million pounds of payable zinc production through 2008. "Once in production, Middle Tennessee Mines will likely be the largest zinc producer and domestic source of gallium and germanium in the continental United States," according to Haywood.

"Demand for zinc, used largely to galvanize steel, has doubled in recent years and the metal is becoming increasingly in short supply," Ioannou said. Gallium is used in specialized electrical applications while germanium is an important semiconductor material used in transistors.

Haywood estimated that the present zinc market is about 11.4 million tonnes of demand, increasing at 12% annually in China and 5% elsewhere. "The concentrate market is very tight, zinc premium remains high, and smelter treatment charges are low. ...We anticipate that the zinc market will remain essentially in balance over the next two to three years, barring any supply disruption. Further demand growth in China and India remains the ‘wild card' that could drive a future supply deficit-especially given the fact that historically lowered zinc prices have led to a chronically underfunded industry, with only a handful of new zinc development projects to potentially replace older mines," Ioannou suggested.

With Middle Tennessee Mines, Haywood asserts that any project risk is mitigated by froth flotation technology, coupled with a strong management team with a track record of successful U.S. project development. While Middle Tennessee Mines has a 10 year projected mine life, based on indicated and inferred resources, Ioannou said that "27 years of historical production in this world-class district demonstrate consistent ‘reserve' replacement, and we anticipate that the scope of work at Middle Tennessee Mines will move towards higher throughput and/or long life as surface and underground exploration ensues."

Strategic purchased the property for the bargain, bankruptcy sale price of $16.3 million in December 2006. The assets include five Tennessee zinc mines that form one mining complex and a mill formerly operated by the now defunct Australian zinc miner Pasminco. Haywood's formal valuation of Strategic includes US$85 million in free cash flow from the project through 2009, "which will position the company for further ‘acquisition' growth."