ZINC stocks have been beaten up as the price of the galvanising metal slumps to levels at which a big chunk of the world's industry cannot make a dollar.

The response has been swift on the production front, with an estimated 5% of global production either shut in or about to be. More cuts would not surprise, particularly if energy costs remain where they are.

Thoughts are now turning to the prospect that, at a little more than US80¢ a pound, zinc is about as low as it can go, remembering that it is already down 43% from its level of a year ago.

That was partly reflected in the sharp bounce in the share price of Kim Robinson's Kagara on Friday, when it announced an initial resource estimate for its Admiral Bay zinc/lead/silver/barium deposit in Western Australia.

The resource estimate (72 million tonnes of 3.1% zinc, 2.9% lead, 18 grams a tonne silver and 11% barium) confirmed what was already suspected - Admiral Bay is potentially world class.

But it's deep and remote and will not be developed for years. Even so, the market had to acknowledge that Admiral Bay would now have to be a key part of Kagara's valuation.

That's why that after being savaged in recent months (its share price is down 50% in the past three months) Kagara popped 39¢ or 13.5% higher to $3.27 on Friday.

The gain represented a value lift for the company of about $85 million, carrying its total to $707.63 million.

Having said all that, it could be argued that there is still nothing yet for Admiral Bay in Kagara's share price.

While it has been punished for being a zinc producer, Kagara's growing importance as a copper producer means that its market value is more or less covered by its existing operations and the new developments it has on the go in Queensland.

Its recently reported full-year profit of $66 million was down for sure but given Kagara's tight capital base (216.4 million shares), it still represented earnings a share of 30¢ on a share price that up until Friday was less than $3 a share.

And after plugging in changed commodity price forecasts, most of the brokers expect that profit will grow strongly in the next couple of years. UBS is forecasting a $73 million profit (32¢ a share) this year, rising to $153 million (68¢ a share) in 2009-10.

Goldman Sachs JBWere is forecasting $75.8 million (35.1¢ a share) this year and $117 million million (54.2¢ a share) in 2009-10. Both forecasts are based on current production and the coming production boost from new developments.

That sort of profit outlook makes the group's market cap unchallenging and raises the question about what value should be ascribed to Admiral Bay and another asset that Kagara's market price does not seem to give any value to - its 61,600-tonne Lounge Lizard nickel resource next to Western Areas' Flying Fox mine in WA.

Ian Preston at Goldman Sachs gives a clue. In a note on Friday in which Kagara was left on a "hold" recommendation, Preston said he had Admiral Bay worth $1.87 a share in "our upside value of $6.25 a share" for Kagara. Yep that's right, an upside value of $6.25 a share.

Preston's note did not touch on Lounge Lizard, which we know Kagara originally acquired as a juicy bit of exploration ground for $25 million.

It is worth more to Western Areas than anyone else, which leads to the question of what it would be worth to one of the nickel majors, such as BHP Billiton, Xstrata or Norilsk, should they pounce on Western Areas. Something well north of $25 million is a sure bet.

Golden drill results for market darling

THOSE who attended the recent Diggers & Dealers bash reckon that there was only one junior gold stock worth bothering with - Rohan Williams' Avoca Resources.

A market darling thanks to its Higginsville/Trident gold project in WA, Avoca's share price has nevertheless being doing it tough because of the retreating US-dollar gold price.

Back in May, Avoca commanded as much as $2.86 a share. By last Thursday it was back at $1.62 - a 43% drop.

But Avoca turned the tide on Friday with a 23.5¢ share-price bounce to $1.85 on the strength of drilling results which confirmed its Musket grass roots gold discovery as a shallow, high grade find that remains to be fully outlined.

It has been defined from the surface to depths of more than 120 metres and over a strike length of more than 300 metres.

New (and best) results included 10 metres grading 5 grams of gold a tonne from 54 metres and 8 metres at 5.5 g/tonne from 50 metres.

Musket is a truckable 40 kilometres south-east of the Trident treatment plant and lends weight to the idea that Avoca will, over time, find plenty of life-extending resources for the Higginsville project.