John Gunn

Horsehead Holding: Compelling Idea with Large Potential

No debt, very substantial earnings, dominant position with considerable barrier to entry make ZINC a must own value play. What has not been discussed is the demand side of the business, which I believe is compelling. Nutritional and cosmetic use of zinc has grown an average of 12% annualy over the past 7 years. Infrastucture demand- roads, bridges, railings, will increase from present historically low levels as jobs growth and a pent up demand caused by age and neglect in developed countries as well as build outs in developing countries continue robust. There is also a growing belief in the science and technology community that zinc will supplant lithium as the cathode material of choice for hybrid and plug in hybrid car batteries. Virtually every PHEV car design presently advancing to production including the Prius and the Volt use lithium. There is not enough lithium on the planet to power 1.0% of the automobiles presently in use, and then there is the issue of replacement cycles. Big and small battery companies are now developing advanced zinc titanates. There are also companies that are nearing production with zinc fueled generators. Unlike the Hondas, Coleman's etc that burn gasoline or propane and are noisy and air fouling, the zinc powered fuel cell generator is quiet and has no emissions. As this technology gets exposure- and I believe it's nearer term than most people realize, this company and it's stock enter a whole new valuation paradigm. There is a huge upside. If there is a downside from these levels, I certainly cannot find it.