Zinc Boosted by Fed Stimulus

By Leia Michele Toovey-Exclusive to Zinc Investing News

Zinc prices traded marginally higher Thursday, as part of an overall optimism in the markets that the new Fed stimulus plan will stoke the U.S. economy’s recovery. Not only will this newly announced “QE 2” potentially boost the nation’s economy, it will provide a “double whammy” to commodities by weakening the dollar.

On Wednesday, before the Fed announcement, zinc for three-month delivery was up 0.7 percent to $2,470 per tonne. Inventories added 4,225 tonnes to close at 632,225 tonnes, touching 52-week highs. The metal faces support at $2,429 and resistance at $2,474. Thursday, Zinc in London rose as much as 2.9 percent to $2,638.75 a tonne, the highest since January, as investors bet supply may lag behind demand

China, the world’s largest zinc producer, will auction 50,000 metric tonnes of zinc from the state reserves as part of a measure to boost domestic supplies in the midst of the nation’s energy saving drive. For November, the country’s zinc production is expected between 30,000 and 40,000 tons due to limited power supply. This will be the first public auction of zinc, by the government. Last year, the country bought 235,000 tonnes of copper, 590,000 tonnes of aluminum, 159,000 tonnes of zinc, 30 tonnes of indium and 5,000 tonnes of titanium for reserves. Part of last year’s recovery in metals prices was attributed to China’s state reserve purchases.

China has started to control output at energy-intensive plants in provinces including Henan, Hebei, Zhejiang and Shandong to meet an energy-saving target. While the zinc industry will be affected, the biggest influence will be on aluminum. The Henan province, the country’s largest aluminum producing region, will cut aluminum production by up to nearly 20 percent in the third quarter.

International Zinc futures strolled into positive territory, at the at the Multi Commodity Exchange counter, zinc for delivery in the current-month November traded 1.80, or 1.68 percent higher to Rs 109.15 per kg, with a turnover of 4,336 lots. The metal for delivery in December traded higher by Rs 1.70, or 1.66 percent, to Rs 110.25 per kg, with a turnover of 126 lots. The reaction was also attributed to the Fed’s stimulus announcement.

Company News

HudBay Minerals Inc. (CSE: HBM) today released its third quarter and year-to-date 2010 financial results. Net earnings were $11.7 million or $0.08 per share in the third quarter of 2010, compared to $20.0 million, or $0.13 per share during the third quarter of 2009. Earnings were adversely affected in the third-quarter, due to a transportation problem. Hudbay’s rail service provider was unable to supply sufficient railcars to transport all of the company’s concentrate. As a result, the company had excess inventory of approximately 5,000 tonnes of copper and 7,800 ounces of gold contained in copper concentrate. The company could have easily sold this excess supply, which would have, in turn, impacted revenues. The earnings before tax and net earnings per share from the sale is estimated to be an additional approximately $50 million, $28 million and $0.11 per share, respectively, assuming a price of $3.60 per pound for copper, and a$1,283 per ounce for gold.

Trevali Resources Corp. (CSE:TV) is pleased to announce the results of its November 2010 mineral resource estimate update for the Santander zinc-lead-silver mine project in west-central Peru. The updated resource estimate is based on 171 diamond drill holes (with a combined length of approx. 33,240 meters). The resource estimate is as follows: Indicated Mineral Resource of 5.858 million tonnes with an average grade of 3.86 percent zinc, 1.35 percent lead, 44 g/t silver and 0.08 percent copper for an estimated in-situ metal inventory of 498 million lbs. zinc, 174 million lbs. lead, 8.25 million oz. silver and 9.7 million lbs. copper at 3 percent Zn cut-off. Inferred Mineral Resource of 4.806 million tonnes grading 5.08 percent zinc, 0.44 percent lead, 21 g/t silver and 0.07 percent copper for an estimated in-situ metal inventory of 538 million lbs. zinc, 46 million lbs. lead, 3.19 million oz. silver and 7.8 million lbs. copper at a 3 percent Zn cut-off. To date, the resource estimate claims that the mineralization remains open.