NetworkNewsWire Editorial Coverage: Increasing global demand countered by a worldwide shortage have made zinc a red-hot commodity, and mining companies are racing to cash-in on the shortage. Companies like Kootenay Zinc Corporation (CSE:ZNK) (OTCQB:KTNNF) (Kootenay Zinc Profile), Nevsun Resources Ltd. (NSU), Ivanhoe Mines LTD. (IVPAF), Teck Resources Limited (TECK) and Hudbay Minerals Inc. (HBM) are working to address the world’s current zinc shortage and take advantage of the subsequent rise in zinc prices.
The imbalanced market, in part, is fueled by the 2016 shutdown of various zinc mines in China (which is both the world’s biggest zinc producer and its biggest zinc consumer) and the dwindling ore supply of major zinc mines. While zinc prices sagged in 2015, the base metal was a top performer out of the 22 raw materials tracked by the Bloomberg Commodity Index. Goldman Sachs the following year called zinc “the bullish exception in the metals space,” and predicted that a deeper shortage would send zinc prices as high as $2,500 per metric ton in 2017. Zinc outpaced expectations, however, and as of May 2017, the price of the mineral reached $2,628 per metric ton. It’s obvious to see why Jeff Currie, head of Commodities Research at Goldman Sachs Global, in a Bloomberg interview (1) said zinc is his No. 1 commodities pick for 2017.
So, what does this mean for zinc mining companies throughout the world? It means an opportunity to profit in a huge way—particularly for companies that can find the best zinc deposits with the shortest ramp-up time, or those with the ability to expand their existing zinc reserves.
Among these frontrunners is Kootenay Zinc Corporation, a mineral exploration and development company based in Vancouver, BC. Kootenay Zinc is engaged in discovering large-scale sedimentary-exhalative (SEDEX) zinc deposits and is currently focused on its Sully Property, which is located just 18 miles from the historic Sullivan Mine. The Sullivan Mine was in operation for approximately 100 years and was one of the world’s biggest SEDEX silver, zinc and lead deposits, boasting production that, at today’s prices, would be valued at US $49 billion. An exciting factor for Kootenay Zinc is that its Sully Project could be, subject to positive drill data, of similar size to the Legendary Sullivan —an exciting prospect, indeed.
The Sully Project shares geologic features with the Sullivan Mine, and the sedimentary rocks hosting the Sullivan Mine are also present at Sully, representing different environments of the same basin. Geological data thus far suggests Kootenay Zinc’s Sully Project share the same stratigraphic level at which the Sullivan Mine was deposited and appears to coincide with the Sully Project’s East gravity anomaly. A subtle lead-zinc soil anomaly may reflect leakage up faults and dispersion through thick till and alluvium from a deposit that is entirely buried, and a Cominco airborne geophysical survey has shown two N-S trending magnetic anomalies underground that are up to nearly 2 miles long (1.86) and about 0.62 of a mile apart at the Sully Project. They are near-coincident with the gravity anomalies.
Drilling at the Sully Project, to date, has been a near miss—which means a strike could be close at hand. Initial surveying at Sully indicated a shallow mass was only narrowly missed by drilling in 2004, and work performed since that time indicated the target was deep. Downhole temperature and magnetic field readings in 2014 indicated the target may have been missed by as little as 100 meters. Geochemical data shows anomalous zinc and lead in the soil, which is possible leakage on structures related to the East mass. New gravity data have confirmed and better defined the mass. The next step for Kootenay Zinc is to target this East mass, and the company has commenced a drilling program.
Diverse activities being pursued by Nevsun Resources (NSU) also include zinc mining operations, with production coming from its Bisha copper-zinc mine in Eritrea. The Bisha Mine is a high-grade open pit mine with nine years of reserve life, and it generates revenues from both zinc and copper concentrates. In the middle portion of 2016, Nevsun Resources expanded its flotation capacity to produce zinc concentrates in addition to copper concentrates from primary ore.
Nevsun Resources earlier this week named Peter G. Kukielski as its new CEO, effective May 12, replacing the retiring Cliff Davis. According to the press release, Kukielski has more than 30 years of diverse international experience in the mining industry which will support the company’s strategies to advance its projects.
Ivanhoe Mines (IVPAF) is also chasing zinc and has been at work modernizing and upgrading its Kipushi Mine located in the Central African Copperbelt in preparation to restart commercial production there. Between 1924 and 1993, the Kipushi Project produced about 60 million tonnes grading 11 percent zinc and 7 percent copper. The company is in the midst of a projected two-year construction period with a relatively fast ramp-up to a projected steady-state production of 530,000 tonnes per year of zinc concentrate. A preliminary economic assessment was conducted in May 2016, and a pre-feasibility study is underway to refine the PEA’s findings and to optimize the redevelopment schedule of the mine. Both the PEA and PFS are focused on the mining of Kipushi’s Big Zinc Deposit, which has approximately 10.2 million tonnes of Measured and Indicated Mineral Resources grading 34.9 percent zinc—more than twice the Measured and Indicated Mineral Resources of the world’s next-highest-grade zinc project.
Another company positioned to capitalize on the current world zinc shortage is Teck Resources (TECK). Teck is the third-largest producer of mined zinc on earth and operates one of the largest fully integrated zinc and lead smelting and refining facilities in the world. The company produces zinc and zinc alloys in slab and jumbo form and is capable of producing about 295,000 tonnes of refined zinc annually. Teck also produces zinc concentrate from its Red Dog Operations, located in Alaska, and from its Pend Oreille Operations, located in Washington State, marketing its zinc concentrate throughout the world. Additionally, the company’s concentrate team buys concentrate from other mines, which are then processed at Teck’s Trail Operations metallurgical complex in British Columbia.
Hudbay Minerals (HBM) is also cashing in on the global zinc shortage with output from its 777 Mine and its Lalor Mine. The company operates a zinc plant, located in Flin Flon, Manitoba, which produces special high-grade metal from zinc concentrate in three cast shapes. This plant is one of six chief zinc producers in North America, and the plant’s capacity is expected to be fully utilized by domestic concentrates produced by the 777 and Lalor mines. In the first quarter of 2017, Hudbay said higher copper and zinc prices enabled the company to increase growth profit over the previous quarter. Its Manitoba operations produced 30,6000 tonnes of zinc as a result of higher zinc grades at 777 and Lalor, as well as higher zinc recoveries.
The broader portrait is that due to the closure of a number of big mines, zinc hit a record shortage in 2016, with inventories shrinking to 286,000 metric tons, according to the International Lead and Zinc Study Group (2). As the deficit continues to widen, zinc is trading at its highest level in more than eight years and is forecast to continue its climb. As the value of zinc continues to increase, investors should take a closer look at the companies racing to advance their projects to meet rising demand.
Editorial Sources:
(1) Bloomberg: http://nnw.fm/IYc53
(2) MetalMiner: http://nnw.fm/Ysa29
For more information on Kootenay Zinc visit: Kootenay Zinc (CSE:ZNK) (OTCQB:KTNNF)
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