This is an updated version of an article originally published on Zinc Investing News on October 29, 2013.
Though many market watchers believe zinc’s long-term prospects are good, the base metal has so far fared poorly in 2015.
As the chart below from Kitco shows, the zinc price reached its 2015 peak back in May, hitting nearly $1.10 per pound; however, since then it has fallen fairly precipitously, and is now near the $0.70 level.
In terms of what’s been driving the zinc price down, it appears that high inventories and concerns about Chinese demand are largely to blame. A recent Financial Post article states that in particular, a build up at LME warehouses in New Orleans has been weighing on sentiment.
“The recent increase in LME inventory, particularly in New Orleans, appears to have drawn the market’s attention to just how much zinc is sloshing around,” Leon Westgate, an analyst at London’s ICBC Standard Bank, told the news outlet.
What about that deficit?
The idea that there’s a lot of zinc “sloshing around” is a novel one, at least in the current market. As mentioned, many are bullish on zinc long term, and have predicted a deficit this year. Indeed, INTL FCStone analyst Edward Meir told the Financial Times that his firm had previously “talk[ed] about deficits for the market this year.”
That bullish outlook on zinc is largely based on the fact that big zinc mines are set to close — or have already done so — and there are not enough new mines to replace their output. And that remains true — for instance, the Brunswick 12 mine, located in New Brunswick, Canada, closed in 2013, and mining concluded at MMG’s (HKEX:1208) Century mine at the beginning of October.
Nevertheless, Meir emphasized, “it’s shifting more to a balance or a surplus. The deficits keep getting pushed out.”
With those statistics in mind, it’s interesting to look at the world’s three top zinc mines in 2014. Century is one of them, though that may be its last year on the list; the other two are Hindustan Zinc’s (BSE:500188) Rampura Agucha and NANA Regional Corporation and Teck Resources’ (TSX:TCK.B,NYSE:TCK) Red Dog. Without further ado, here’s an overview of each of them.
1. Rampura Agucha mine, India
2015 fiscal year production: 640,845 MT contained zinc
The Rampura Agucha mine in Rajasthan, India is the world’s largest zinc mine. The open-cast/underground mine has an ore production capacity of 6.15 million MT per year, and in India’s 2015 fiscal year (April 1, 2014 to March 31, 2015) produced 698,232 MT of mined metal, including 640,845 MT of contained zinc and 57,387 MT of contained lead.
As of the end of March 2015, the mine’s total reserves and resources sat at 103 million MT. Rampura Agucha was first commissioned in 1991, and is currently undergoing an expansion. The expansion will see underground ore production capacity ramp up to 3.75 million MT per year.
2. Red Dog mine, Alaska
2014 production: 596,000 tonnes of zinc
Red Dog is a zinc-lead mine near Kotzebue, Alaska that was developed under a unique agreement between a US subsidiary of Canada’s Teck Resources and NANA, which is owned by the Iñupiat people of Northwest Alaska. The mine has a payroll of about $52 million, and provides 550 high-paying jobs in an area of the state where full-time work is difficult to secure.
In operation since 1989, Red Dog is now one of the world’s largest producers of zinc concentrate, accounting for 5 percent of global zinc mine production and 79 percent of US zinc production. It is an open-pit, truck-and-loader operation. The original ore zone, called the Main deposit, was exhausted several years ago, and mining is now taking place at the Aqqaluk deposit. Aqqaluk was discovered in the 1990s along with the Qanaiyaq deposit. Teck expects it to provide enough ore for operations to continue until 2031.
Teck reported record annual zinc production of 596,000 tonnes for Red Dog in 2014.
3. Century mine, Australia
2014 production: 465,696 tonnes of zinc in zinc concentrate
Owned by MMG, the Century mine is located in Northwest Queensland and is Australia’s largest open-cut mine. As mentioned, mining at Century concluded in October of this year. Century had operated for 16 years, beginning open-pit production in 1999. In 2014, it produced 465,696 tonnes of zinc in zinc concentrate in 2014, plus 64,426 tonnes of lead in lead concentrate.
There has been much speculation in the zinc market about whether MMG’s Dugald River project, also in Queensland, will be able to fill the void left by Century. However, the most recent update from MMG suggests that it will not. This past summer, the company released an updated development plan for Dugald River, and it points to yearly production of 160,000 tonnes of zinc in zinc concentrate, plus by-products. Even so, once in operation Dugald River is expected to be one of the world’s 10 top zinc mines.
2015 production from Century is expected to stand at 320,000 to 370,000 tonnes of zinc in concentrate.
Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
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