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30 is an Atomic Number for SMRS
With its acquisition of the zinc (atomic number: 30) mining operations in Balmat, St. Lawrence, New York, formerly owned by Hudbay Minerals (NYSE: HBM), Star Mountain Resources, Inc. (OTC: SMRS) is gearing up to take advantage of tightening supplies in the global zinc market. Since the Great Recession, zinc prices have been in the doldrums. In the U.S., they fell to a low of $0.78 per pound, according to Statista, and, of course, so did both supply and demand. With the global economy under stress, there was very little demand, and depressed prices gave no incentive to invest in new mines.
However, in a sign of things to come, the U.S. price rose, albeit unsteadily, by 38% to about $1.08 during 2015. It has since fallen again. It is now around $0.70 per pound. Yet the winds of change are blowing away output capacity, and so it’s very likely that prices will rise again.
Last year, the Australian-Chinese concern, MMG Limited, in a report on its website, announced it had shuttered its mining operations at Century in Australia. The Century mine was said to be the world’s third largest. In 2014, it produced 465,696 tonnes and accounted for around 3.5% of global zinc output in that year. In 2015, it was expected to yield about 350,000 tonnes. Also, The Economic Times of India reported that Vedanta Resources would close its Lisheen mine in October 2015. To date, it appears the mine is still in operation. Lisheen is Europe’s second-largest zinc mine with a capacity of around 175,000 tons, according to a HardAssetsInvestor story. Quoting Bloomberg Intelligence, the story said Lisheen’s closure will reduce global supplies by another 1.3%, and a Bloomberg Business report in October 2015 stated that Glencore plc would cut output from mines in Australia, Peru and Kazakhstan totalling around 500,000 metric tonnes. That’s an additional roughly 4% of production.
These are substantial falls in production if supply is considered over recent years. Statistics compiled by The International Lead and Zinc Study Group (ILZSG) show that mine production of zinc in 2010 was 12,360,000 tonnes. Mine production refers to volume of ores as opposed to actual refined zinc, referred to in the trade as metal production. In 2014, it was 13,512,000 tonnes. An estimate of 2015 output based on the average monthly output for the first ten months of 2015 comes up at 13,486,000 tonnes. So taken together, the Century and Lisheen mine closures and the Glencore actions would amount to a global supply cut of close to 8.5%.
The wild card on both the demand side and the supply side is China. China leads the world in mine production of zinc, in the production of refined zinc, and in usage of zinc. In 2014, ILZSG data showed that China accounted for 37.6% of global mine production. Mine production in China rose over the 5-year period from 2010 – 2014 by an astonishing 36%. In Australia, the comparable figure was 1.9%; in Europe, it was 2.2%; in the U.S., it was 9.3%; in Canada, output fell by 46%. What happens in China will not stay in China.
Star Mountain’s President, Mark Osterberg, is not fazed. In an interview with North Country Public Radio in December 2015, he said, “The mining cycle is down, which means that assets like Balmat are available at bargain prices. So we think we bought the property at a very good price and we believe the commodity prices are going to come back up.”
Star Mountain also has community backing. Patrick Kelly, CEO of the St. Lawrence County Industrial Development Agency has said the agency is “ready to offer assistance in whatever form and for however long it takes to get this business off the ground.”
Star Mountain Resources, Inc. is a junior exploration and mining company focused on acquiring and consolidating mining claims, mineral leases, producing mines, and historic mines with production and future growth potential. Its operations are currently focused on base metal and precious metal mining acquisitions in North America, and on re-commencing mining activities at the Balmat Zinc mine in upstate New York.
For more information, visit www.starmountainresources.com
