Upside In Zinc Developers
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Upside in zinc developers - even if metal’s price falls from 10-year highs
New Century Zinc and Venturex among those in the cold, with share prices lagging analysts’ forecasts The 10-year high in zinc prices has not amounted to much in the local market for the near-term developers.
While the established and new producers have been rewarded with strong share price gains in response to their higher earnings, the developers have been left out in the cold.
Because they are not yet in production, the argument goes that a 10-year-high metal price of $US1.55 a pound – it compares with the 2016 average of US95c and the 2017 average of $US1.29 – means nothing for them.
What’s more, analysts en masse are forecasting that zinc will begin a retreat later this year towards a long-run price of about $US1.10/lb. It is something that could come to pass.
But it can be argued that the developers – again, because they are not in production - are not being priced properly in the market for a $US1.10/lb zinc world anyway, let alone a $US1.55/lb world. It is a sentiment-driven distortion that reflects the en masse call that zinc is headed to $US1.10/lb. It will be resolved as the individual developers de-risk their projects, the ultimate de-risking event being to achieve first production without any nasty surprises.
So there is upside to be had in the developers in a $US1.10/lb zinc market, and something more again should zinc show up the commodity forecasters by sticking close to these higher levels for longer than they suspect. Read more +
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