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

To: Claude Cormier who wrote (140)	3/5/1999 12:51:00 PM
From: jack hampton	Read Replies (1) \| Respond to of 3270

PALM SPRINGS, March 3 (Reuters) - Supplies of zinc concentrate are relatively tight and there is little benefit for miners or smelters to pursue significant changes in treatment charges (TCs), according to a Brook Hunt executive. ''However, smelters have every reason to push hard for an improvement in terms. Last year the combination of a relatively low base TC and the operation of the price de-escalator saw realized TCs fall to their lowest ever in real terms,'' said Huw Roberts, Brook Hunt managing director, speaking at the annual American Zinc Association meeting here. In 1998, TCs were settled at around $185-187 per tonne basis an LME cash price of $1,100 ($170-172 per tonne, basis $1,000). In 1998, the concentrate market was in a 17,000-tonne deficit and 1999 could see a 5,000 tonne surplus. ''From an economic point of view, the mining industry is in very much the same position as smelters,'' said Roberts. ''With zinc prices at around 48 cents a lb ($1,050 a tonne) and assuming a TC of $165 basis $1,000, about five percent of mine production today is being produced at a loss at the level of direct cash costs, this increasing to perhaps seven or eight percent when looking at total cash costs,'' he added. The market appears balanced for miners and smelters so little would be gained by either side pursuing any significant change in TCs for 1999. ''In fact, looking at the long-run relationship of the TC to the zinc price, the distribution of the price between miner and smelter at around current TC levels does seem to look very equitable and very much in line with historical precedent,'' said Roberts, adding, ''the true villain is not the TC, it's actually the price itself.'' The focus on the zinc price comes from currently having a balanced concentrate market as well as future mine closures due to depletion of reserves. ''Today many more mines are operating with a significantly lower reserve cover than before,'' said Roberts. In 1992, 25 percent of mine output had a 22-year reserve ratio and 50 percent of production had reserves equal to 12 years or more compared with the current 18 years and 10 years, respectively. Between 1999-2005, close to one million tonnes of annual mine capacity could be lost as a result of reserve depletion forcing mine closures. However, new mines should bring western world mine production to nominally increase to 5.9 million tonnes in 2003 from the current 5.7 million tonnes. ''Over the same period there will be an increase in annual demand for zinc concentrates which could be as high as an additional one million tonnes. If this happens, there will be an apparent global shortfall of around 800,000 tonnes in zinc concentrate supplies just four years away,'' said Roberts. ______________________________________________________________________ This has always been my angle.... forget about the smelters, the mines will not be able to feed them. Zinc mining is predominantly conducted underground unlike most metals. This means a 5-10 year pipeline is needed for studies, securing financing, mine development and start of production. Financing unfortunately is largely a function of current prices, not projected prices. There is insufficient projects in the pipeline right now and many that are, are projected to be 3rd and 4th quartile cost producers. This will ultimately fuel a new round of exploration also. So the existing low cost producer with plenty of reserves will be in for the windfall while the industry scurries to replace lost production. This is what makes the expanded Red Dog the empire builder it is.

To: Claude Cormier who wrote (140)	3/5/1999 2:25:00 PM
From: Ray Hughes	Read Replies (1) \| Respond to of 3270

Claude: Completing the Aljustrel feasibility study could fully absorb the $US5 million that can be raised under the facility with Rothschilds. Hence, additional capital was required to general corporate overhead. The feasibility study will require considerable travel on the part of our technical staff. Such spending is known as "owners' costs." Further consideration has to be given to the potential lags between completing the feasibility study and confirmation of the final financing which we believe can be done with a combination of grants, European Investment Bank, and the Rothschild debt finance interests. Grant money is paid in arrears, i.e. after one spends the money on the project. Raising money through European Investment Bank will probably require many, many meetings, etc. So Auspex has to assure sufficient working capital to take it through until the project is fully financed and generating cash flow. RH