SOURCE: Gold World

November 08, 2006 08:00 ET

Zinc May Increase to $5 per Pound: Analyst

BALTIMORE, MD -- (MARKET WIRE) -- November 8, 2006 -- Zinc prices have increased 187.6% in the past twelve months. But because of severe supply constraints and skyrocketing demand, one analyst is still calling zinc "The Most Undervalued Metal on the Market Today."

Zinc prices hit an all-time high today of $2.0713 per pound, representing an impressive 292.1% increase since mid July 2005. Luke Burgess, managing editor of, compares zinc's remarkable 16-month move to the price changes of other major metals over the same time period:

--  Aluminum, +54.9%
--  Copper, +102.3%
--  Gold, +49.4%
--  Lead, +104.5%
--  Molybdenum, -23.1%
--  Nickel, +130.6%
--  Palladium, +77.4%
--  Platinum, +37.9%
--  Silver, +81.0%
There's simply no comparison. But the obvious question is, have investors missed the big moves?

According to Burgess, "No way. The strong fundamentals that have driven zinc this far are still in place."

Burgess recently published a report on the galvanizing metal titled "The Most Undervalued Metal on the Market Today". In it he claims, "I expect zinc to be selling over $2.50 a pound in 2007. After that, sky's the limit. With the right conditions I believe we could be looking at $5 or $6 zinc within a few short years."

What would account for such a move?

Burgess claims it's a simple matter of supply and demand. He says, "Production and warehouse stock levels are plummeting while demand is relentlessly marching higher."

Between 1960 and 1990, global zinc consumption grew at an average annual rate of about 2%. But since 1993, annual worldwide demand has been growing by roughly 3.2%. And by all accounts this is just the beginning. The International Lead and Zinc Study Group (ILZSG) says global demand for refined zinc will increase 3.9% over last year's demand to 11.06 million tons in 2006.

And what about production?

"Because of decades of low prices, there's has been little serious investment in zinc mining," Burgess says in his report. "This has led to a peak in zinc's global production."

Current global zinc demand is outstripping mine production. We've been able to make do with warehouse supplies and recycled material. But that's a problem, too.

"In April 2004, London Metal Exchange zinc warehouse stocks topped off at about 784,000 tons," Burgess says in his report. "Today, only two and a half years later, these stocks have plummeted a whopping 86.5% to about 105,000 tons. In the past 12 months alone these warehouse stocks have fallen 78.1%."

In fact, the LME supplies have gotten so low now that there's only enough stockpiled to satisfy the world's total demand for four days!

So what does that mean for investors?

Simple: There's a boatload of money to be made by investing in zinc exploration and production companies.

Burgess says he personally likes "the upside of junior explorers right now, especially those trading on the TSX Venture Exchange." He recommends "looking for junior mining firms with savvy management, a proven track record and a decent land package in a geopolitically safe country." He continues in his latest report, "These firms should also have mid- to advanced-stage properties. Historic production and drill results are always a plus."

In "The Most Undervalued Metal on the Market Today," Burgess explains in detail why he believes we'll see such a climb in zinc prices and gives advice on how to look for potential investments.

You can access this report totally free by clicking here:

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