Producers Aim to Address Growing Global Zinc Deficit amid Price Surge, Rising Demand
NetworkNewsWire Editorial Coverage: Zinc is used for various applications in many industries, including construction, oil & gas, power generation, automotive and shipbuilding. It is also used to produce zinc oxide, a constituent of many diverse products including nuclear reactors, solar cells, sunscreen, multivitamins and fertilizer. Fully 50 percent of the world’s zinc is used in galvanizing steel to prevent corrosion, which makes it highly prized by countries engaged in infrastructure development. Amid heightened demand, Mining.com (http://nnw.fm/9jaWx) reports that zinc prices have surged by 78 percent since 2016, have increased 286 percent in the last two years, and currently stand at over $3,200. This remarkable surge has created a deficit in the zinc market, with producers like Canadian-based Zinc One Resources, Inc. (OTC: ZZZOF) (Z.CA) (Zinc One Profile) poised to capitalize on the increased demand for the base metal. Other established zinc producers preparing to take up the slack include Hudbay Minerals, Inc. (NYSE: HBM) (TSX: HBM), Ivanhoe Mines Ltd. (OTCQX: IVPAF) (TSX: IVN), Lundin Mining Corp. (OTC: LUNMF) (TSX: LUN) and Trevali Mining Corp. (OTCQX: TREVF) (TSX: TV).
China is foremost in the drive for improved infrastructure, and zinc demand is likely to continue in line with the demand for structural steel for construction projects. Furthermore, the Trump Administration has announced its intention to spend $1 trillion on upgrading infrastructure in America. As such, industry projections are that China and the United States will contribute significantly to an annual growth in zinc demand of 2.4 percent over the next few years. This growth will follow a decade-long lag in demand, which triggered a corresponding drop in the zinc price. As a result, many companies cut back on production, resulting in the current market deficit.
Investing News reports a prediction from analysts at Bloomberg Markets that supply will continue to trail demand over the coming years (http://nnw.fm/7F1wa), enabling companies like Vancouver-based Zinc One Resources (OTC: ZZZOF) (Z.CA) to capture their share of market opportunity. With a strong focus on the acquisition, exploration and development of advanced zinc assets, Zinc One’s primary projects are located in Peru, the country with the third-highest zinc reserves in the world. Peru has a mature and stable mining industry that provides half of the country’s GDP.
In June 2017, Zinc One acquired Forrester Metals, Inc., and through this the Bongara Mine zinc-oxide project and Charlotte-Bongara Projects. On par with broader industry trends, the Bongara Mine was in full production from 2007 through 2008, but was shut down when the zinc price collapsed in the wake of the global financial crisis. Historical resource data shows a measured indicated and inferred resource of over 1.2 million tons of high grade (20%+), near-surface zinc. With a history of mining on the concessions, Zinc One enjoys positive and productive community relations in the area, which is of significant value for any mining company.
The Bongara Mine’s high-grade zinc mineralization is a rare find, and Zinc One intends to leverage the zinc-rich soil to bring Bongara back into production.
Zinc One in August received approval from Peru’s Ministry of Energy and Mines to suspend the mine closure at the Bongara Mine location, which allows the company to utilize the current Environmental Impact Assessment attached to the project for current and future permitting (http://nnw.fm/mZa3r). This approval allows the company to take another vital step toward its plans to reopen production at the Bongara Mine. Notably, at Bongara, open pit mining can be used to extract the zinc, which can reduce the costs associated with underground mining.
On November 1 the company announced another advancement, publishing positive results from an ongoing surface-sampling program at the Bongarita and Mina Chica areas. The company reported highest grades that include a surface channel sample (#38) with 47.73% zinc over 8.1 meters from a dolomite, a surface channel sample (#72) that yielded 25.65% zinc over 19.7 meters from a dolomite breccia, and 32.50% zinc over a 3.8-metre depth from a dolomite breccia in an exploration pit (#425).
“As expected, the high-grade zinc grades from this current sampling program are very encouraging and augments our opinion that the Bongarita and Mina Chica areas hold significant potential. In particular, these areas have not been drilled and that the base (footwall), outlining the depth extent of mineralization, is not well defined. The upcoming drill program should help to better define the footwall of mineralization as well as better determine the magnitude of mineralization left behind by past mining in the Mina Grande area. Overall, we anticipate that the drill program will better delineate and expand the known mineralization at the Bongara Zinc Mine Project,” Zinc One president and CEO Jim Walchuck stated in the press release announcing the results (http://nnw.fm/lY23V).
Zinc One’s neighboring Charlotte-Bongara Zinc-Oxide Project also shows potential, with multiple at-surface, high-grade drill intercepts providing numerous drill targets.
The Bongara Mine Project mineralization lies on surface with simple metallurgy and greater than 90 percent recovery, as demonstrated in past production. The Charlotte-Bongara Project will require exploration to determine the extent of the mineralization; near-surface drill intercepts conducted over a stretch of 8 kilometers (4.9 miles) at this location by Rio Cristal Zinc in 2008 showed extremely high-grades of 29.5 percent zinc at 15.5 meters, 26.1 percent at 12.5 meters, and 29.7 percent zinc at 11.5 meters.
As it stands, Zinc One is one of the few new zinc focused companies with near-term production potential, allowing the company to occupy a position alongside its large-cap, older peers like Hudbay Minerals (NYSE: HBM) (TSX: HBM). With interests principally in mining operations and exploration, Hudbay focuses on reserves of base and precious metals including copper, zinc, gold and silver. The company operates three mines in the Flin Flon Greenstone Belt in Manitoba, another in southern Peru and is busy with a development project in Arizona. The company has just released its third quarter results for 2017, which show operating cash flow of USD$154 million, an increase of 24 percent over the previous quarter. Copper production for the quarter was over 40,000 tons, with zinc production of almost 37,000 tons.
Ivanhoe Mines (OTCQX: IVPAF) (TSX: IVN) is a mining company that has been operating in sub-Saharan Africa for more than 24 years. Its Kipushi mine, located in the Democratic Republic of Congo (DRC), produces silver, germanium, copper and zinc. The company also has the Kamoa-Kakula copper mine located in Congo’s copper belt. A new exploration project in Kakula West returned Ivanhoe operates the Platreef mine in South Africa that produces both base and precious metals, including copper, nickel, gold and platinum group metals.
Another larger and older peer, Trevali Mining (OTCQX: TREVF) (TSX: TV) has mining interests in the Americas and Africa. Its presence in New Brunswick, Canada extends to the 100 percent owned Caribou Mine in the north of the province, while it also owns the Halfmile and Stratmat concessions of base metal deposits that are under review for potential development. The company also has controlling interests in three other mines; the wholly-owned Santander mine in Peru, a 90 percent share in the Perkoa mine in Burkina Faso and 80 percent ownership of the Rosh Pinah mine in Namibia.
Also enjoying uptrends in zinc is Lundin Mining (OTC: LUNMF) (TSX: LUN), a diversified Canadian-based metals mining company with operations in the United States, Chile, Portugal and Sweden. In addition to its production of zinc, copper and nickel, the company has a 24 percent stake in a cobalt refinery, Freeport Cobalt Coy, located in Kokkola, Finland. For 2019, Lundin provides outlook for zinc production between 152,000-162,000, its same forecast for 2017 (http://nnw.fm/ioaR1).
Zinc is an invaluable base metal and a strategic priority for many industries, and all indications are that the price of zinc will continue to increase over the next few years while producers scale-up their operations in an effort to meet market demands. The sudden surge in the demand for zinc has caught some producers unprepared, but with three c-level managers totaling 100 years of combined mining experience putting projects into production, Zinc One has the resources and expertise to meet demand.
For more information on Zinc One Resources, visit Zinc One Resources (OTC: ZZZOF) (Z.CA)
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