Last quarter they got zinc costs down to 0.72c or 10% from 80c or so but I attribute the majority of these cost savings to a 10% fall in the AUD in addition to operational improvements.
That puts KZL at the medium to high end of the cost curve. I think Century in 2008 was churning out zinc at 62c a pound. Xstrata and BHP may have lower costs around 48c but I think the industry average is closer to 80c now. I am not sure what Perilya, Terramin or OZL can/could produce zinc but I guess they are in the 62-72 range.
I think we can already see the impact of low prices. I have seen about 3000t of inflow to the warehouses in the last 3 months. Supply has practically dried up but demand remains strong. Stocks down 120,000t in the last 3 mths with 72,000t or so on backorder - up 10,000t from last week.
Prices can't stay this low for long. The above just doesn't add up. Lower prices will just constrain supply even further.
KZL Price at posting:
39.5¢ Sentiment: Buy Disclosure: Held
