How Long Will Zinc Prices Rise?

Cash prices for London Metal Exchange zinc closed at $2,059/tonne on Wednesday, up 7.7 percent over last month and 13.7 percent higher compared to the end of October.

Recent developments in China, including an apparent return in manufacturing activity and a rise in cancelled warrants, have helped boost zinc prices in China and internationally.

Metal Bulletin noted that zinc output in China also rose, gaining 453,000 tonnes in November, a 7.3-percent improvement from September, according to data released by China’s National Bureau of Statistics.

Recent short-term improvements have been a welcome development in light of this year’s general trend.

The international Lead and Zinc Study Group released zinc demand numbers for the 10-month period of January to October this year; they show that there has been a 2.8-percent fall in demand over the same period last year.

Zinc metal surpluses have fallen to 157,000 tonnes from 304,000 tonnes in 2011. Over the same period, overall mine output increased by 789,000 tonnes.

Demand for zinc will be highly contingent on a number of major centers, including the emerging BRIC countries, where much infrastructure building will occur.

A report from research and consulting firm Wood Mackenzie states that 2013 will be an “inflection point” for Chinese metal demand, meaning that it will become clear as to whether or not the country’s recent economic slowdown is a successfully managed transition into a new phase of economic development.

Over the long run, zinc is still expected to outperform most metals. Resources analyst Allan Trench of CRU recently classified the three-year mining outlook as “UPTZ” due to expected rises in prices for uranium, palladium, tin and zinc.

Company news

London-listed Vedanta Resources (LSE:VED) said it will pay a “fair” price for the remaining stake in Hindustan Zinc (BSE:500188), which is currently partially owned by the Indian government. The Indian government currently holds a 29.5-percent stake in Hindustan Zinc and 49-percent stake in Balco, but is looking at selling those interests. Vedanta bought majority stakes in the two companies from 2001 to 2003.

After completing a $20-million working capital facility from Glencore International (LSE:GLEN) for its Santander zinc-lead–silver mine in Peru, Trevali Mining (TSX:TV,OTCQX:TREVF) announced that the project has entered the final stages of development, noting that initial mining and milling operations are slated to begin in the first quarter of 2013.

Currently more than 100,000 tonnes of mineralized material averaging 5.6 percent zinc, 0.65 percent lead and 1.65 oz/t silver await the opening of a 2,000-tonne-per-day processing plant.

Based on a NI 43-101 compliant mineral resource estimate of 6,264,000 indicated tonnes grading 3.62 percent zinc, 1.3 percent lead and 43 g/t of silver and containing roughly 500 million pounds zinc, the Santander project will mine up to 4,000 to 5,000 tonnes per day of material.

Canada Zinc Metals (TSXV:CZX) announced the approval of its $3-million non-brokered private placement. The company issued 7,500,000 units at a price of $0.40 per unit, with each unit consisting of one flow-through common share and one-half share purchase warrant of the company.

The company’s news release notes that the proceeds will further exploration at the Akie SEDEX zinc-lead property and at the Kechika regional project.

Securities Disclosure: I, James Wellstead, hold no direct investment interest in any company mentioned in this article.