All valid points and I can see what your saying but I guess it's...

All valid points and I can see what your saying but I guess it's a bit like 'low hanging fruit' vs 'greenfields'.

In your own statement lies the answer as to why.

To quote you, if you don't mind; "With a potential GFC2 on the way, funding will only get tighter".

So would any company right now rush and spend precious cash flow on developing a new asset miles away without existing infrastructure etc, that might not see a return for 3-5 years and why expose yourself to such risk with a poorer economic backdrop?

They did provide an update re: Admiral Bay that Rothschild was engaged as advisor for the project in June, 2011, but your right, nothing will happen with any time soon and probably not until mid to late 2012, as they focus on 'low hanging fruit'.

So what is 'low hanging fruit' for KZL right now? Well that is North Queensland...

From the quarterly report: Page 2

Kagara is now investing heavily in its future, both through new project development opportunities such as Baal Gammon and Einasleigh, as outlined in this Quarterly Report, and through a major ramp-up in exploration. A budget of $23M has been set for copper and zinc exploration in FY12, with the key objective of establishing an 8-12 year production outlook in each operating region.

See project pipeline below:

Further and expanisve exploration of these tenements in NQ will show (as we already know) how fruitful the geology is...

With 100m in relative cash flow at present, they have more than enough to meet their goals and execute their strategy for the next few years.

The real problem a few months ago when you look at KZL stratgically was the size of the balance sheet or asset base and depending on your point of view the cash flow rate as measured against this or the return on assets rate (ROA). What had happened under previous stewardship was that KZL had acquired a large, quality asset base but was not generating the level of cash and profit from existing assets that would be deemed suitable my most. What I thought was a nice touch by Geoff Day, was the rebalancing of the balance sheet a few months ago. KZL would have recorded a profit of 16-18 million but by devalueing the balance sheet by 50 million they recorded a paper loss of -32 mill, paid no tax and retained the cash in house. This was a tough but necessary call to make given KZLs history. Having a large number of assets and a low ROA also explains why they decided to try and sell non-core assets such as nickel at Lounge Lizard, when the future for KZL is clearly zinc.

If you take everything into account, lower AUD, lower operational coszs, average zinc prices, higher zinc production to offset lower copper, lower stockpile build ups etc, I would expect to see KZL book a 30-40 mill profit for 2012 and add 20-30 mill to cashflow. Their own guidance for EBIDTA is between 54-72 mill for FY12.

The real risk as always is Chinese off market stockpiling. This killed (as did debt) Pasminco and Zinifex and has impacted KZL since 2008 until mid this year. At least today we have some visibility into Chinese production and Shanghai and can see what's happening with inventory levels there. I also see uncertainty with KZL as a measure of uncertainty in Europe as opposed to something fundamental.

Here's a pic which might help you understand why KZL is focused on NQ at present and is compliment of the rather slow gov website: Australian Zinc Mine & Deposit List