Zinc is one of the most abundant elements on earth, not rare at all like gold, silver, molybdenum etc. Even copper is much rarer. There is 25X more zinc on earth than copper. When all these other metals are mined which they are all over the world now, a lot of extra zinc gets dumped on the market and it isn't used up that fast, prices get weaker, profit margins go down. This company will have mediocre if any profit growth next few years and that's why no one wants to pay much for the stock. It got pumped briefly by some hedge fund manager who didn't really understand it and now it's back to it's intrinsic stock value.
I am not sure how much further the price will fall before mines begin to close though. I think the zinc cycle getting pretty close to a bottom (I am guessing in the low 70s) Incidental costs to run a mine are much higher now than during the last floor price around (60 cents) which started to take mines out of production. In Shanghai zinc is still quoted around a $1/lb as there is a large number of marginal mines in operation over there.
I agree with the poster the reason why zinc prices are low now. Zinc is a byproduct in many mining operations and there is no one area of the world were the production is concentrated. However a large percentage of the metal is still derived from Zn/Pb galenas and the prices of that metals combination are in the dumps.
The metal that remains vulnerable is copper which has failed to correct in this environment. I believe the main reason why it hasn't is 35-40% of the world's production of the metal is sourced in one location (Chile) and most of their power is derived from hydro and they are undergoing a severe drought thus curtailing supply but that could change with the weather. New production from the DRC which is also significant has been very slow to progress.
I agree with your zinc economic's, but still think the commapy ZINC will be a very good investment. First ZINC in 2008 is hedged at $1. They can realize this profit and buy back shares.
Second is the future of zinc oxide. The demand for this will continue to increase. IMHO its the copper mining that is creating an increase in stockpile of zinc. If you look at a 5 year chart, the ZINC stockpile are still very low.