Australian Resources Update

Sharemarket analyst UBS has provided an Australian resources sector update. Zinc prices have increased 14% in the last month. Along with nickel, and copper, zinc prices have performed well in 2007. In the last month alone, LME zinc prices have increased 14% and are now 167USc/lb. In contrast, Australian zinc equities have underperformed largely due to concerns regarding increasing Chinese imports. Zinifex provided positive commentary on zinc this week: Zinifex management suggested that while zinc production in China is growing, exports over the last few months appear to have been driven by a price arbitrage that has now closed. Additionally, zinc demand remains strong, and zinc stocks are low so they expect prices to remain well above longterm average levels for some time. China may cancel tax rebates on zinc: China also indicated this week that it may bring forward a plan to cancel tax rebates on exports of super-high-grade refined zinc in early May, to help cool the economy, industry sources said on Tuesday. Beijing had planned the tax changes before July but was now thinking about next month, the sources said. The analyst believes a supply response will moderate market in 2007: They expect that about 15 new zinc projects will come on line in 2007, contributing to the nearly 1.2mt of new mine production. If experiences in other markets are considered, there will likely be delays, nevertheless, supply is responding and may help to balance the zinc market this year. A previous Australian Resources Update.