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Gold/Mining/Energy : ZINC The base metal. News and Views. Symbol Zn -- Ignore unavailable to you. Want to Upgrade?

To: Stephen O who wrote (34)	2/4/1999 1:46:00 PM
From: Ray Hughes	Respond to of 3270

Stephen: Been there so many times - miners saying that they can't raise financing and they aren't generating sufficient cash internally to fund expansion. This condition is part of the natural cycle and such statements usually mark the beginning of a bottom in the given commodity. Re zinc: it will be interesting to see if the present chart up-move will break out above the downtrend line as event suggest could be the case. With India taking up so much zinc scraps that European scrap processors are unable to locate sufficient scrap supply, premiums for SHG are bound to widen. SHG is the price generally quoted. As you are aware, Chinese exports have been below projections, further pinching availability to the Western world. Now, with Porto Vesme remaining off-line, a supply deficit for 1999 seems almost certain. A smelter capacity bottleneck is in the cards due to Mitsui backing out of the deal with Billiton in Africa. Therefore, modest consumption growth (below rates projected by the Zinc Association) will easily reduce global (users, producers, merchants and exchange) inventory to below 4 weeks of demand during year 2000. My extensive work as a Securities Analyst specializing in commodity analysis revealed that roughly 4.2 weeks inventory is the "pinch point" leading to sharply higher prices. This is expecially valid when smelters are operating at above 92% of capacity. The continuing strong growth in the USA should assure this prediction. Zinc is THE base metal to be in. I will not be surprised to see a short-squeeze push zinc's price up far quicker than Analysts are willing to predict today. Predictions for US$0.70 zinc may well be on-the-mark. Short gold at $300, pick up silver on a pull-back and go with zinc stocks NOW! RH