We believe that the company's failure to hedge an appropriate proportion of its zinc products in an environment where zinc prices are falling is one of the main reasons for the loss of main business in the fourth quarter. In the absence of hedging, zinc smelters need to bear the risk of fluctuations in zinc prices during the period from purchasing zinc concentrate to selling zinc products. The decline in zinc prices in the fourth quarter of 2007 was as high as 8,500 yuan (tax included), from 27,500 yuan/ton at the end of the third quarter to about 19,000 yuan/ton at the end of the year. The company's zinc smelting production cycle was about 1 month. Based on the decline in zinc prices in the fourth quarter, the average zinc price fell by about 2,830 yuan in one production cycle, so the gross profit per unit of zinc decreased by about 2,830 yuan; on the other hand, due to rising prices of raw materials such as energy, zinc smelting costs have risen to a certain extent. We judge that the company's zinc smelting was in a state of loss in the fourth quarter. The estimated gross profit per ton is about -1,000 yuan. Based on the production of 100,000 tons, the gross profit of the main business is about -90 million yuan (excluding tax). The company's ISP production line is expected to produce 70,000 tons of lead, and lead prices also fell by about 35% in the fourth quarter. We forecast the gross profit of the lead smelting business to -20 million. We forecast that the company's expenses for the fourth quarter will be about 200 million yuan, so we calculate that the company's operating losses in the fourth quarter will be about -310 million yuan. Furthermore, in addition to losses on the operating side, due to falling zinc prices, the company withdrew a certain amount of zinc concentrate and semi-finished products from inventory, which also increased the company's losses due to falling inventory prices. According to the announcement, the annual loss was 270 million yuan, and the company achieved a net profit of 162 million yuan in the 1st to 3rd quarter of 2007, and a loss of about 432 million yuan in the fourth quarter of 2007. Considering income tax refunds, the loss amount is even greater. Therefore, we predict that this amount will be greater than 120 million yuan. We judge that although it is difficult for zinc prices to strengthen in the short term, it is unlikely that zinc prices will drop sharply at present. Zinc smelters can still guarantee a certain degree of profit even if zinc prices do not fall, but we believe that it is very necessary for zinc smelters to hedge an appropriate ratio in an environment where zinc price trends are uncertain. We believe that China Metallurgical Group's positioning of zinc shares and whether the company's unsuccessful non-public offering can be restarted are the main factors that determine the company's future fundamentals, but there is still uncertainty.