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Gold/Mining/Energy : Silver prices -- Ignore unavailable to you. Want to Upgrade?

To: Claude Cormier who wrote (1610)	1/28/1999 5:01:00 PM
From: Ray Hughes	Read Replies (1) \| Respond to of 8010

Claude: Are you aware that Billiton's new smelter has been canned? Agree with you over the question whether all new potential producers of zinc cons will be able to obtain smelting contracts. At the least the new producers will likely only get 6 months contracts, finding toll treatment charges rise sharply upon renewal as the zinc price heats up. Hence, the newcomer may not realize all, or even much, of the zinc price rise. Remember, Magma Copper was charging as much as US$0.40 per pound to toll treat copper cons during the big copper rally; the usual charge was $0.18 per pound against a cost of about $0.11 per pound. Then, the Magma smelter division was making as much money as was the mining division. At Auspex (remember I'm the Public Relations guy for Auspex) we're already discussing terms with European smelters. Our concentrates marketing consultant projects a US$0.15/lb. cost for smelting zinc concentrates. I would not be surprised to see this rise by US$0.05 as zinc's price advances. Good Analysts know that non-integrated producers don't realize the full advance in the price of metal during a bull market. So, for Auspex a US$0.20/lb. zinc price advance will likely give us only a US$0.15/lb. rise in Net Smelter revenue from zinc. However, producing about 163 mil. lbs. per year would yield a US$24.5 million gain in pre-tax net. After Portuguese income taxes at 37.6% the project would realize a US$15.3 mil. gain in net income. Our new merged company (merger plans announced Monday) will have an undivided 75% interest so we (Newco) would increase net by US$11.5 million or by US$0.23 per share on the pro-forma shares to be outstanding. At an 6X PER, the stock of the merged company (yet to be named)could advance by US$1.38 per share - not so shabby for stocks (Auspex and International Vestor Resources)selling around the C$0.30/share mark. RH