Breakwater Rescources-bwlrf-Follow up on Bobwins excellent DD post.
I agree that bwlrf, a major zinc mining company,looks like a strong buy here. In their last reported qrtr, they earned 1c, when inc averaged 46c/lb. Since then, prices have been on a steady rise, now at 62c/lb. With overhead, BWR's cost to get zinc out of the ground is 42c. Each 1c rise in the avg. price of Zinc, is worth about 1c in annual earnings. At today's price, BWR should be earning about 20c annually. Let's be conservative and reduce that by 25% (currency fluctuations, shipping cost increases etc, BWR is still at a PE of 4. Big money question is where do prices go from here? Price is a function of supply and demand. Until the last year there was a glut of Zinc and prices were low so no new mines were started. It takes about 2 years to get a new mine going. The next big new mine won't start until 2007. Also remember that existing mines are using up their reserves. 1/2 of the current zinc mines, will be exhausted within 10 years.
On the demand side, the world economy is growing so usage will only increase. China has changed from an exporter to an importer. 50% of zinc output is used for galvanizing steel for corrosion protection. 50% of all zinc is used in the construction industry. I'm a homebuilder, and recent new rules require a change in the production process of treated lumber. Most mills use copper sulfate to treat lumber, which requires galvanizing of all metal in contact with it to prevent corrosion. Bottom line is that demand for zinc in the construction trades isincreasing substantially. Also everytime there is a hurricane in FL, they tighten up the codes and require more metal straps, holddowns, and fasteners, not only in FL but throughout the country. FL had 4 hurricanes last summer. Usage will only increase.
Prices have been on a steady increase for the last 6 months. I see higher prices going forward. I would not be surprised to see an 80c/ib zinc price by the end of summer. Conservatively, BWRLF could be earning 30c/share in that scenario. Current price is 60c. all IMo of course and do your own DD.
Great board and thanks to Bobwins for pointing this one out.
