The galvanizing agent has been out of favour with the spot price falling 17% this year. But there's been resurgent interest in the past month as buyers realize the supposedly mountainous stockpile is more like a hillock because half of the 620,000 tonne horde is reserved for financing.

Zinc bulls argue there's also a pending supply crunch as ageing mines notably our own century shut their shafts. There's also not likely to be much major new sources if only because miners have preferred to look for sexier copper or iron ore deposits.

Against this backdrop, Terramin advised it would book H1 loss, the result of USD 8.5 million depreciation and amortization charge on its mainstay Angas mine in South Australia and USD 3 million loss from mark to market US dollar denominated convertible notes and others.

These non cash items sullied the better news that Angas should improve its EBITDA to USD 9.5 million from USD 1 million previously, despite a June quarter production slump on lower grades. Still, that takes half yearly output to 23,340 tonnes of zinc concentrate not far off the forecast full year output of 48,000 tonnes to 50,000 tonnes. With the company locked into favourable pricing that makes for reasonable full year moolah.

Given Angas is a short life project, Terramin's company making project is its 65% owned Tala Hamza projects in Algeria which is in definitive feasibility study stage. If it goes ahead the 68 million tonne project would be one of the few new sources of these metals

Criterion hasn't had the best tipping record with Terramin, last rating the stock as a speculative buy at $1.65 in September 2008 when commodities were in a funk. Oddly, the company is better placed now, so we'll retain the call. Investec Securities values the stock at USD 1.54 including USD 1.05 for the unfunded Algerian foray.

(Sourced from Theaustralian.com)