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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