H.M.
Visagie (416-805-4166)
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Base Metal Prices Mixed and Precious Metal Prices Up
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Mantle Resources Inc. (MTS) � Initial Inferred Resource Estimate for Cardiac
Creek.
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BRIC Countries Will Drive
Growth in Zinc Consumption
�Mantle
Resources Inc. (MTS) � Initial Inferred Resource Estimate for Cardiac Creek.
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Mantle reported the initial resource estimate for the Cardiac Creek SEDEX
zinc-lead deposit on its 100%-owned Akie property in northeastern B.C., Canada.
This resource estimate follows diamond drill programs carried out by the
Company from September 2005 to November 2007, and establishes the Cardiac Creek
deposit as one of the premier base metal projects in Canada.
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The 23.595-million-tonne Inferred mineral resource, at a zinc cut-off grade of
5%, contains 3.95 billion lbs of zinc, 0.78 billion lbs of lead, and 8.95
million oz of silver. The average grade of the deposit is 7.6% Zn, 1.5%
Pb, and 13g/t Ag. The significant tonnage and contained metal within this
estimate is very encouraging in light of the expansive geological setting that
not only occurs at the Akie property itself, but throughout the 180 km stretch of geology
that Mantle largely controls.�
�Analysis
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Yesterday, we commented on the recent presentation by Xstrata (XSRAF-PK), where
Xstrata projected that copper demand growth by BRIC countries (Brazil, Russia,
India, and China) would require an increase of global copper supplies of 62%
over 2006 global copper supply or 10,705,000 tonnes, by 2015. The growth
projection was based on the notion that copper consumption increases as the GDP
per capita in the BRIC countries grows.
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In the same presentation, Xstrata reported that growth in BRIC zinc demand
requires the global zinc supply, by 2015, to increase by 79% over 2006 zinc
supply of 10,674,000 tonnes. This implies that another 8,411,000 tonnes
of annual zinc production is needed to meet the increased BRIC demand.
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If non-BRIC demand (6,969,000 tonnes in 2006), grew at an average annual rate
of 2%, the increased supply required to meet this growth would be 1,360,000
tonnes. Therefore, assuming 2% growth in world demand for non-BRIC
countries, the implied zinc demand in 2015 requires zinc supply to increase by
a total of 9,771,000 tonnes (91%).
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In the short term, the doubling of zinc prices has led to the reopening of many
mines that were shut down for economic reasons, expansion of existing
operations, and commissioning of mines that were already in the pipeline.
We believe that going forward, it will be difficult to meet Xstrata�s demand
estimate. By 2015, many of the very large zinc mines � including Brunswick,
Cerro de Pasco, Guemassa, Century, and Perseverance- will have depleted their
resources. In addition, although Antamina may have expanded its ore
throughput, we expect overall zinc production to decline.
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While there may be no shortage of zinc deposits in a global sense (there are
many large zinc deposits in Western and Northern Canada and parts of Russia),
many of them require large commitments to infrastructure to be developed.
Other deposits, such as those located in Iran,
Pakistan, and Central
Asia, are situated in areas where politics will make them difficult
to finance.
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Over the last few years, Chinese zinc production has expanded rapidly to meet
increased zinc demand. However, we believe that it will be difficult for China
to maintain this growth rate due to internal constraints on power, water, and
environmental requirements.
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In light of the Xstrata forecast, we believe the current price of zinc
($1.00/lb) is inadequate to ensure that mine supply will develop to the
forecast demand rate. We therefore believe that the average price of zinc
will be greater than $1.00/lb for the foreseeable future, with the average
price being $1.48/lb over the next five years.�