KZLs future as always will be tied to the underlying success of and demand for its key metal derivatives; zinc, copper and nickel. Fortunately, KZL no longer relies on gold because in the short to medium term gold is going to take a tumble to $1200 as the USD strengthens and increasingly looks like the most crowded trade in history.

So we will probably see big outflows from the likes of copper/gold stocks like PNA and OZL to copper/zinc stocks like KZL in 2012.

KZLs C1 zinc costs at 72c are not much higher than Century's at 55c. Most blackmarket zinc mines in China cost 90c-100c, so the lower zinc price starves additional production. Physical markets for zinc metal are relatively tight as much of the metal is held under longer term storage agreements with warehouses.

Copper cash costs of $1.55 also have plenty of room to move with copped envisaged to return to the $4 in 2012 due to global production shortages.

But if you want to make the headlines look good and you do what OZL does, which is to combine both gold and copper C1 costs together to get 0.70c then KZL would be at $1.07 apple for apple comparison.

But if zinc bounces and gold falls, then the situation changes very quickly in KZLs favour. Probably why Horsetrader has such a strong interest in KZL :)

KZLs share price has suffered because of extreme risk off pessimism in the Australian market as opposed to impacts from fundamental performance.

I can illustrate that in 2 charts.

Below is an interesting comparison of the All Ords index performance vs the Dow Jones. See below. Of note is the divergence between the All Ords and the DJIA. Typically in bullish markets the divergence is about 1500 points. This can narrow to 750 points during big DJIA selloffs but the DJIA has been moving up strongly since 2009 and has diverged 4000 points from the All ords. This indicates a big move up in the ASX in the next 6-12 months or conversely that the US market is ahead of itself and should move down. However...

...this second chart is a chart of the Dow itself and the bullish case going forward. The 50 Day Moving Average has crossed over the longer-term 200 Day Moving Average. This is significant because it indicates a solid move north at the start of January. Europe will be unable to slow down US momentum but we might see things sell off around March/April or certainly by May. Uncertainty in Europe will be offset by ECB moves in Feb and a relaxation of reserve requirements by China during Q1. That's not to dimish the risk from Italy or Greece but trade with caution not with fear! The second half of 2012 is looking very promising.

...by the way...

HAPPY NEW YEAR