Zinc prices may be set to rise soon as supplies remain low even in the face of high demand
Stocks Mentioned: (TSXV: Z.V) (OTC Pink: ZZZOF), (TSX: TECK.A and TECK.B), (NYSE: TECK) (NYSE: HL), (TSX: HBM) (NYSE: HBM)
June 28, 2017 (Investorideas.com Newswire) Investorideas.com, a global news source covering leading sectors including mining stocks issues a sector close up on zinc stocks and the global outlook including commentary from analysts and publicly traded companies in the sector.
According to a recent report by CRU Senior Consultant Helen O'Cleary on the zinc market outlook, there are many factors that indicate higher zinc prices in the near future. Some of these factors include: slowdowns in Chinese production of zinc, global supply being lower than demand resulting in a market deficit for four of the last five quarters and projections that the world metal market will remain in deficit through 2017-2018.
This affirms the thoughts of Zinc One Resources Inc.'s (TSXV: Z) (OTC Pink: ZZZOF) CEO, President and Director Jim Walchuk, who recently told Investorideas.com that he came to similar conclusions when deciding to form his company.
"I started doing my own analysis of it and realized just where the zinc price was going and where the stockpiles of zinc were going," he said. "The stockpiles were going down rapidly and the price is probably going to head up."
Walchuk said that the relatively lower stockpiles of zinc paired with the ongoing development seen in countries like China suggest that prices are more likely to get higher.
"I think for the next few years, I cannot see the zinc price dipping. To me it doesn't make any sense," he said. "If you go on Kitco and take a look at the price right now, you can see that the stockpiles of zinc at the London Metal Exchange are down below 330,000 tons. Five years ago they were at 1.2 million tons. China hasn't stopped developing. They used to be an exporter of zinc, they're now an importer."
If higher zinc prices come to fruition, companies that already have proven zinc output could be in the best position to benefit.
Teck Resources Limited (TSX:TECK.A and TECK.B, NYSE: TECK) President and Chief Executive Officer, Don Lindsay presented at the Bank of America Merrill Lynch Global Metals, Mining & Steel Conference on May 16, 2017. In his presentation he discussed the ‘Multiple signs of Tightness in the Zinc Market.'
Teck Resources is a mining company whose activities include exploration, development, processing, smelting, refining and reclamation. It has operations in Canada, United States, Chile and Peru.
Hecla Mining Company (NYSE: HL), a company with significant zinc exposure, is currently the #1 silver and #3 lead and zinc producer in the U.S. according to its most current investor presentation. The Company just reported a strong first quarter in May based on metal prices, reporting average realized silver prices in the first quarter of 2017 were $17.90 per ounce, 20% higher than the $14.93 price realized in the first quarter of 2016. Realized gold, lead and zinc prices also increased 3%, 36%, and 59%, respectively.
Hudbay Minerals Inc., (TSX: HBM) (NYSE: HBM) is preparing for the upbeat forecast saying earlier this year, "Production of zinc in concentrate in 2017 is forecast to increase by approximately 25% compared to 2016 production, primarily due to the ongoing ramp-up of the Lalor mine and the re-sequencing of the mine plan at 777 to mine stopes containing higher zinc grades and take advantage of favourable expected zinc prices."
Zinc One (TSXV: Z) (OTC Pink: ZZZOF) is also positioned to benefit from a rise in zinc prices. The company plans to begin drilling in the third quarter this year on the past-producing Bongará Zinc-Oxide Project in Peru. Walchuk said that apart from this property, the company is optimistic about adjacent projects and the zinc market in general.
"The high-grade Bongará Zinc-Oxide Project will be our major focus in the near term. We also firmly believe that there is substantial upside for additional high-grade, zinc-oxide mineralization along the six-kilometre long trend of the known mineralization from Mina Grande in the southeast to Charlotte Bongará to the northwest. Zinc One continues to focus on the Bongará property and will use all of the management's collective skill sets to advance the project. We believe this is the perfect time to be advancing a zinc project and remain bullish on the zinc commodity pricing."
Zinc One is focused on the acquisition, exploration and development of prospective and advanced zinc projects in mining friendly jurisdictions. Zinc One's key assets are the past producing Bongará Zinc-Oxide Project and Charlotte Bongará Zinc-Oxide Project in Peru. The Bongará Zinc-Oxide Project was in production from 2007 to 2008, but shut down due to the global financial crisis and concurrent decrease in the zinc price. Past production show greater than 20% zinc grades and recoveries over 90%; all from at or near the surface. The neighboring Charlotte Bongará Zinc-Oxide Project has multiple near-surface, high-grade zinc-oxide drill intercepts providing numerous drill targets and exploration potential. Zinc One's objective is to restart production at the Bongará Zinc-Oxide Project with exploration of targets along a six-kilometre trend, which includes the Charlotte Bongará Zinc-Oxide Project. Zinc One is managed by a proven team of exploration geologists and engineers having previously constructed and operated successful mining operations.
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