This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither MHI nor any other party guarantees its accuracy or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of MHI/Virtual Investing Club. Copyright(c) 2007. All rights reserved
This REPORT is brought to you by: The Virtual Investing Club www.virtualinvestingclub.com By Shane Rawlings 3/3/2008 Zinc is a based metal, and is the fourth most common metal in use, trailing only iron, aluminum, and copper in annual production. Nearly 75% of all zinc is used to galvanize steel to help prevent corrosion. Periods of massive economic expansion, like we have witnessed in China and other parts of the world in the last ten years, require a tremendous amount of steel to expand highways, build buildings, and lay miles of railway track. When steel is in high demand, so is zinc. In August of 2007, equity markets around the world began crashing in anticipation of a coming economic slowdown due to the bursting of the real estate and sub-prime bubbles. We believe there will be a mild slowdown but feel the sell off was overdone and has unduly punished several asset classes and created a tremendous buying opportunity. We don't believe emerging market growth has peaked yet, and in fact opine that it will continue at a blistering pace for several more years keeping most commodities in very tight supply and pushing prices higher. One commodity that we feel is going to really feel the “squeeze� is zinc. Beginning in late 2004 and early 2005 the price of zinc started a bullish run taking the spot price from $0.43 per pound ($860 per metric ton) to a high of $2.29 per pound ($4580 per metric ton). That's an increase of 443%.
This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither MHI nor any other party guarantees its accuracy or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of MHI/Virtual Investing Club. Copyright(c) 2007. All rights reserved
When this latest “burst” of growth in China occurred, beginning in late 2003, zinc reserves at the LME (London Metals Exchange) were sitting around 750,000 tonnes. Over the next two years inventories were ravaged with reckless abandon and dropped all the way down to about 60,000 tonnes which is less than a 2 day supply. It was during this period that the market began to sense the coming crises and started bidding prices higher in an attempt to slow down consumption. Prices ended up rising 443% in just over two years.
As with all commodity markets, speculators tend to push prices beyond what normal supply/demand fundamentals would otherwise dictate, which can cause extreme volatility. We believe the excessive speculation in the zinc market is responsible for the blow-off top that occurred in late 2006 as fears of depletion reached a “climax”. From that high around $2.29 per lb, zinc lost about 56% dropping all the way back down to $1.00 per lb or $2,000 per metric ton. We feel this is a significant level that will support price as it builds a base from which it can launch the next bullish run. The reason for such a deep pull-back in the price of zinc is two-fold. First, the need to work off excessive speculation that occurred in late 2006, and second, overly pessimistic views about world economic growth going forward.
This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither MHI nor any other party guarantees its accuracy or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of MHI/Virtual Investing Club. Copyright(c) 2007. All rights reserved
The continued Boom in China, Russia, and other emerging economies around the world The current growth in China is the greatest economic expansion since the Industrial Revolution. Despite what many Wall Street pundits are saying about the end of this growth, this “movement” still has serious “legs”. The next phase, which could last another 5 to 10 years, could be even more spectacular than what we've already seen. Yes the Chinese & Russian stock markets experienced volatile corrections as the US markets turned down. However, these are normal corrections that must occur during strong bull market advances and are not the beginning of a new bear market. When credit markets in the US blew up bank lending came to a screeching halt. That is not the case with bank lending in China which recently grew by 22%. More than half of that went to small business owners and consumers indicating a very robust economy that is still expanding. Roughly 40 million residents, living in rural parts of China, migrate to the east coast every year. It is here that the majority of the growth has occurred over the last several years. But 57% of the Chinese population (800 million people) still lives in rural areas that are largely undeveloped. The next leg of the Chinese “super boom” will take place as these underdeveloped areas move through their build out phase. Plans are already in place to spend some $400 billion on railways, regional airports, and a subway systems in 15 cities, all in an effort to “connect” the rural west with the booming east coast. China is already the worlds largest consumer of zinc, accounting for 3 million tonnes or 30% of total worldwide consumption. By 2010 that figure is expected to jump to nearly 5 million tonnes, an increase of 56%. But it's not just China who will be spending vast sums of money on infrastructure. Russia plans to spend 1 trillion over the next 12 years upgrading its entire infrastructure. As the rest of the world continues a massive “build-out”program zinc prices should once again be bid sky high. During the 2003-2007 expansion, zinc inventories started at a 750,000 tonnes and dropped all the way down to about 60,000 tonnes pushing prices up 443%. Today LME reserves are still sitting at a very dangerous level of 120,000 tonnes, or just four days of consumption. Unfortunately, the only way to increase zinc reserves is by pulling more of it out of the ground. What most people don't realize is how slow, arduous, and expensive this process is. It can take 5 to 10 years to bring new mines to production. The market process has started to respond to dwindling reserves, but reaping the fruit of those labors is still years down the road. In the meantime severely depressed reserves will continue to feel the squeeze and prices will skyrocket in an attempt to slow down worldwide demand. We are recommending an entry into two companies whose share price should increase significantly as zinc prices move higher.
This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither MHI nor any other party guarantees its accuracy or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of MHI/Virtual Investing Club. Copyright(c) 2007. All rights reserved
ZINC
HORSEHEAD HOLDING CORP Sector: Basic Materials Sub-Industry: Industrials Metals & Minerals
Business Description Horsehead Holding Corp. and its subsidiaries produce specialty zinc and zinc-based products in the United States. Its products include zinc metal, which is produced as PW zinc to coat or galvanize steel; and zinc oxide with various purities, particle sizes, and customer-specific formulations, as well as an array of post-production treatments. The company also receives and recycles EAF dust generated by steel mini-mill operators. In addition, Horsehead Holding Corp. also offers zinc and copper-based powders primarily for general chemical and metallurgical applications; zinc dust for corrosion-resistant coatings and other chemical applications; and iron-rich material, a co-product of the EAF dust recycling process that is used primarily in construction materials and water treatment. Its products are used in various applications, including in the galvanizing of fabricated steel products and as components in rubber tires, alkaline batteries, paint, chemicals, and pharmaceuticals. The company was founded in 1848 and is based in Monaca, Pennsylvania.
Rating-
BUY
Daily Chart
Chart reprinted permission Qcharts www.quote.com
Chart and Trend Analysis We feel the low in January of 2008 at $11.20 per share was a significant low that should not be violated. From here the stock price should start a new bullish trend that ultimately takes out the old high of $26.14 and eventually moves much higher.
Fundamentals
Horesehead Holding Corp. has a 3 year revenue growth of 46% and a 3 year earnings per share growth rate of 548%. A trailing P/E of 5.40, 77 million in cash and virtually no debt.
Entry Price Initial Stop Price Initial Price Target Hold Time
Current market price 40% Trailing Stop $26.00 6-18 Months Allocate up to 4% of capital
This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither MHI nor any other party guarantees its accuracy or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of MHI/Virtual Investing Club. Copyright(c) 2007. All rights reserved
MMG
METALLINE MINING INC Sector: Basic Materials Sub-Industry: Industrial Metals & Minerals
Business Description
Rating-
BUY
Weekly Chart
Metalline Mining Company, through its subsidiaries, Minera Metalin S.A. de C.V. and Contratistas de Sierra Mojada S.A. de C.V., engages in the exploration and development of mineral properties in Mexico. It primarily explores for silver, copper, zinc, and lead deposits. As of October 31, 2007, the company owned 100% interest in Sierra Mojada property comprising 16 concessions covering approximately 19,408.41 hectares located in the municipality of Sierra Mojada, Coahuila, Mexico. Metalline Mining was founded in 1993 and is based in Coeur d'Alene, Idaho.
Chart reprinted permission Qcharts www.quote.com
Chart and Trend Analysis Fundamentals
This is a much more speculative play, the company has a very small market cap of 100 million, with 9 million in cash and no debt.
We feel the low in January 2008 at $1.77 per share was a significant low that should not be violated. From here the stock should start a new bull market trend that ultimately takes out the high of $5.67 and could move much higher.
Entry Price Initial Stop Price Initial Price Target Hold Time
Current market price 30% Trailing Stop $5.00 6-18 Months Allocate up to 4% of capital
This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither MHI nor any other party guarantees its accuracy or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of MHI/Virtual Investing Club. Copyright(c) 2007. All rights reserved