Saturday, July 09, 2016 10:30:11 PM
Zinc Fundamentals are amazing.
This is one of my most important posts in last couple months.
Besides TV.TO Trevali and GPM.V Guyana Precious Metals - please reply with any zinc names you have been looking at.
I got to look at the zinc market this last couple weeks in decent detail for work and had access to some valuable research. Fundamentals are amazing. Two of the largest open pit zinc mines in the world - Century (was world's largest too!) and Lisheen were exhausted and closed in the last two years and there have been no major discoveries to replace them. The most respected global metals coverage firm Wood Mackenzie is forecasting a price peak of US$3875/T in 2018 vs. current pricing of around $2134/T ($.97/lb with 2200 lbs in a T). That's almost a double in pricing.
The Zinc market is going into deficit and most materials I have seen are forecasting this to finally materialize in H2-2016.
This Kitco link is a good source to follow zinc market at high level. There is 5 year downtrend in LME zinc warehouse stocks that has not been broken even though stocks have been rising since June 9th. Despite the rising stocks (warehouse stocks and spot zinc should move inversly), the Zinc price has moved from $.90 to $.97 over the same period. Zinc's centre-of-gravity in the last 5 years is $.85 - .95. Price is already through that so this could be more than a mean-reversion rally and maybe the current rally is akin to the current gold rally?
The low of $0.70 corresponds with the commodities market low and according to some sources, investors were throwing in the towel as unexpected zinc stockpiles were put onto the market throughout 2015. That bottom is not too far in to the past. In context the zinc price has held up amazing compared to other base metals.
http://www.kitcometals.com/charts/zinc_historical_large.html
Trevali - TV.TO is one way to play this. Has been a frustrating ride for any investors in last couple years with some high interest debt financing and a 15% dilutive financing in March 2016 in what I understand was a frustrating commissioning process for their second mine Caribou in New Brunswick, Canada. Trevali is now a two-mine company and will be the go-to name on the TSX as the only pure-play zinc producer.
http://www.trevali.com/i/pdf/TV-NR-july-7-2016.pdf
They just have to deliver going forward now. Biggest risk here is principal repayments. Many analysts have Trevali's break-even price at $.80/lb. They have a lot of copper, silver and lead by-products of course and another analysts has their cost of production at $.60 in 2018 at the supposed Zinc market peak which is the middle of the cost curve.
GPM.V is drilling the Walker Gossan in Northern Australia. This was identified as one of the best district lead-zinc prospects back in the 1970's but has never been drilled due to aboriginal issues. Some of the biggest lead-zinc mines in the world (including Macarthur River and Century- mentioned above) are in the vicinity. I have followed this all year but kicking myself as it is already rallying. This is going to the hottest zinc exploration play in the world in H2-16 so still worth buying here IMO. Here is the background you need to read:
http://www.mining.com/web/hedge-fund-chief-warren-irwins-blockbuster-uranium-call-and-his-best-metal-and-oil-plays/
http://www.gpmmetals.ca/sites/default/files/GPM_JUNE_2016_02.pdf
I'll post more when I dig further into both tomorrow.
This is one of my most important posts in last couple months.
Besides TV.TO Trevali and GPM.V Guyana Precious Metals - please reply with any zinc names you have been looking at.
I got to look at the zinc market this last couple weeks in decent detail for work and had access to some valuable research. Fundamentals are amazing. Two of the largest open pit zinc mines in the world - Century (was world's largest too!) and Lisheen were exhausted and closed in the last two years and there have been no major discoveries to replace them. The most respected global metals coverage firm Wood Mackenzie is forecasting a price peak of US$3875/T in 2018 vs. current pricing of around $2134/T ($.97/lb with 2200 lbs in a T). That's almost a double in pricing.
The Zinc market is going into deficit and most materials I have seen are forecasting this to finally materialize in H2-2016.
This Kitco link is a good source to follow zinc market at high level. There is 5 year downtrend in LME zinc warehouse stocks that has not been broken even though stocks have been rising since June 9th. Despite the rising stocks (warehouse stocks and spot zinc should move inversly), the Zinc price has moved from $.90 to $.97 over the same period. Zinc's centre-of-gravity in the last 5 years is $.85 - .95. Price is already through that so this could be more than a mean-reversion rally and maybe the current rally is akin to the current gold rally?
The low of $0.70 corresponds with the commodities market low and according to some sources, investors were throwing in the towel as unexpected zinc stockpiles were put onto the market throughout 2015. That bottom is not too far in to the past. In context the zinc price has held up amazing compared to other base metals.
http://www.kitcometals.com/charts/zinc_historical_large.html
Trevali - TV.TO is one way to play this. Has been a frustrating ride for any investors in last couple years with some high interest debt financing and a 15% dilutive financing in March 2016 in what I understand was a frustrating commissioning process for their second mine Caribou in New Brunswick, Canada. Trevali is now a two-mine company and will be the go-to name on the TSX as the only pure-play zinc producer.
http://www.trevali.com/i/pdf/TV-NR-july-7-2016.pdf
They just have to deliver going forward now. Biggest risk here is principal repayments. Many analysts have Trevali's break-even price at $.80/lb. They have a lot of copper, silver and lead by-products of course and another analysts has their cost of production at $.60 in 2018 at the supposed Zinc market peak which is the middle of the cost curve.
GPM.V is drilling the Walker Gossan in Northern Australia. This was identified as one of the best district lead-zinc prospects back in the 1970's but has never been drilled due to aboriginal issues. Some of the biggest lead-zinc mines in the world (including Macarthur River and Century- mentioned above) are in the vicinity. I have followed this all year but kicking myself as it is already rallying. This is going to the hottest zinc exploration play in the world in H2-16 so still worth buying here IMO. Here is the background you need to read:
http://www.mining.com/web/hedge-fund-chief-warren-irwins-blockbuster-uranium-call-and-his-best-metal-and-oil-plays/
http://www.gpmmetals.ca/sites/default/files/GPM_JUNE_2016_02.pdf
I'll post more when I dig further into both tomorrow.
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