Many analysts predicted 12 months ago that zinc was set to shine in 2017, and the base metal has lived up to expectations.
Zinc prices rallied in Q3, breaking the $3,000-per-tonne mark, and have held above that level since then. With that in mind, the Investing News Network reached out to a number of companies in the zinc sector to get their thoughts on what’s ahead for the base metal in 2018.
John Mirko, president and CEO of Rokmaster Resources (TSXV:RKR); Bruce Durham, president and CEO of Nevada Zinc (TSXV:NZN); Steve Dawson, CEO of Canadian Zinc (TSX:CZN); Wayne Taylor, managing director and CEO at Heron Resources (ASX:HRR); and Peeyush Varshney, CEO, chairman and president of Canada Zinc Metals (TSXV:CZX), were able to provide insight.
Zinc trends 2017: Supply constraints hit the market
Zinc was the best-performing LME metal in 2016 after surging almost 65 percent that year. At the beginning of 2017, many market participants were expecting the base metal to continue to shine on the back of supply constraints.
“I expected the metal markets to continue to tighten as the world economy continued to grow, [with] mineral supply [shrinking] due to several closures and few new discoveries coming onstream,” Rokmaster’s Mirko said. Meanwhile, Nevada Zinc’s Durham said he expected tighter inventories and higher prices for commodities, but in particular for zinc.
Canada Zinc Metals’ Varshney also said he expected “LME zinc inventories to continue to decline and the price of zinc to continue its upward trajectory in response to the demand/supply imbalance.”
For his part, Canadian Zinc’s Dawson was hoping that the junior mineral exploration and development market would improve. Heron’s Taylor was also expecting an improved investment market for commodities with strong fundamentals such as zinc.
But not everything was bright for zinc in 2017, with the market facing some challenges on the investment side. Heron’s Taylor said investment in zinc projects remained “erratic,” adding, “the equity financing markets have continued to be volatile, and it proved challenging to get the timing right.”
He continued, “commodity markets have generally been good; however, the investment market has been patchy — good interest from private equity groups, tempered interest from institutional funds and retail has piled into all things battery related.”
Nevada Zinc’s Durham mentioned that one of the most challenging aspects of the market was to get investors interested in the zinc story. Canadian Zinc’s Dawson agreed, saying that “trying to explain why even though commodity prices were up, equities [were lagging]” was challenging this year.
Mirko of Rokmaster also noted that the zinc market was challenged by difficulties in determining stocks and supply from China, the world’s top zinc-producing country.
Zinc forecast 2018: Supply tightness to continue
As the start of 2018 approaches, CEOs remain positive about the future of zinc fundamentals and prices.
“[Next year,] the zinc market is expected to continue to tighten and sustain the price as the global economy continues to strengthen,” Rokmaster’s Mirko said.
Another important factor investors should keep an eye on next year are declining stockpiles, as they show how much zinc is readily available to end users. “Stock trends for zinc continue to strongly point to a tighter market, which should support the price,” Heron’s Taylor said.
Similarly, Canada Zinc’s Varshney expects zinc supply to continue to decrease in 2018. “I remain very bullish on zinc and expect it will continue to be one of the leaders in the base metals sector,” he added.
For investors new to the zinc space, Rokmaster’s Mirko suggested focusing on investing in companies with 100-percent ownership of solid properties in good locations, and with experienced management.
Meanwhile, Canadian Zinc’s Dawson suggested investors look at companies that are either developing assets or in production. “Zinc exploration projects, while interesting, will not be able to catch the cycle and profit from peak metal prices,” he added.
For his part, Heron’s Taylor said investors should do their homework on the commodity fundamentals, which include basic supply/demand dynamics and stocks. “I think objectively you still come out with zinc being the best placed for the near term,” he commented.
Zinc forecast 2018: What’s ahead for companies
As 2017 comes to an end, the CEOs shared some of their companies’ main highlights this past year and commented on what zinc-focused investors should expect from them moving forward.
Mirko said Rokmaster hit several milestones in 2017, including obtaining full ownership of the Duncan Lake zinc project, adding new new management and finding historic drill core that was long thought to be lost. The company is expecting “world-class drill results” in 2018.
Meanwhile, Taylor said that the critical milestone for Heron was attaining full development financing for its Woodlawn zinc-copper project. “We have traded above the raising price, and with development progress along with exploration results we would like to see this trend higher as we approach first production at the end of 2018,” he added.
For his part, Durham said Nevada Zinc made progress at its Lone Mountain project, completing a 13-core-hole drill program. “We expect to have our maiden resource estimate out in Q1 next year, so we see that as a very important [upcoming milestone],” he said.
In 2017, Canadian Zinc received a recommendation for the approval of an all-season-road from the Mackenzie Valley review board; the company also delivered a positive feasibility study. According to Dawson, investors should keep an eye out for details regarding the financing of the company’s Prairie Creek mine, positive exploration results and the potential for new business combinations.
Lastly, Varshney said Canada Zinc Metals “will consider putting out an updated resource calculation to include this season’s drill results and [will commence] a preliminary economic assessment on the Cardiac Creek deposit on the flagship Akie Property.”
Want more information on zinc? Check out our overview of key 2017 zinc trends here.
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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: Rokmaster Resources is a client of the Investing News Network. This article is not paid-for content.
The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.