Thursday, September 25, 2008

Zinc up, copper down


Dr. Copper couldn't hold its $3.30 level and dropped back yesterday, with the move being confirmed this morning and Cu sitting at $3.16. However, Otto's beady little eye is on zinc. Spot Zn has been the whipping boy of the BM complex for a while, but the clear indications of a bottom in prices just keep on geting confirmation added. The upmoves of yesterday and today have "healthy" stamped all over them.
In the last few weeks we've seen plenty of news about lower production forecasts for this year, and the Ausie metals people calling a 10% drop to already reduced numbers last week was just another example. It really does come down to good ol' fashioned Adam Smith supply & demand stuff; while the market surplus continues so do the low prices, but there is always a limit to this price drop, as miners stop producing so supply dries up, and I'm confident about saying that it's here (or already passed, really).
Keep thinking zinc, folks. It's that "buy while they sell, and sell while they buy" thing. Here's a re-run of Zn plays to consider.

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BWR.to Breakwater: High beta zinc miner in the Americas that's been pummeled to merry hell this last year. This one is playing the metal, but on steroids. A nice ST trading vehicle for the metal. Check the 1 year chart and 3 month chart to get a feel, and note the volume spikes.
BN.to Blue Note: Very cheap and very diluted. High cash costs at its Caribou mine. This is speculative, but risk/reward means you could try a few shekels (I have to say i prefer BWR)..

VEM.to Vena Resources: Just waiting on its enviro permit (any day now, sez the Peru gov't) and this thing will be the owner of a Zn mine making a profit,and that's even if Zn drops to $0.75, according to my casio. Stupidly cheap here. Remember that Vena is a site sponsor here. Also remember I don't reco dross.
LMC Lundin: Has other worries right now (example govt of DR Congo), but it's a traditional Zn go-to play.
VOLCABC1 Volcan: If you have access to trading the Peru stock market, look no further for your Zn exposure. This very large Zn producer is due a good relief rally. Plenty of Pb and Ag exposure too (as you'd imagine).