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Zimtu Capital’s first ever Vancouver Commodities Forum on June 14 at the Hyatt Regency Hotel in Vancouver played host to over 20 exhibited companies and industry leaders giving presentations.
Zimtu Capital’s (TSXV:ZC) first ever Vancouver Commodities Forum on June 14 at the Hyatt Regency Hotel in Vancouver played host to over 20 exhibited companies and industry leaders giving presentations.
John Kaiser of Kaiser Research was one of them. He gave a presentation called “Criticality of the Supply in the Age of Trump,” speaking in particular about critical metals and security of supply.
Later in the day, he joined the Investing News Network (INN) to talk about the zinc market. During the interview, he said that one important thing about zinc to keep in mind is the treatment charges and retention levels for the metal.
“Concentrates at the smelters have kept up 15 to 20 percent of the metal and they have very high treatment charges, and that’s because there’s always been a scarcity of smelters to handle zinc,” he said.
Watch the video below to see more of what Kaiser had to say about zinc:
INN: Zinc is currently posting its longest streak of gains in two years. Why do you think this is the case?
JK: Well it’s a bit incorrect to say that its posted its longest streak of gains. The sad thing is zinc sank down to about $0.74 cents after bumping at a $1.10 about a year ago when it looked like it was ready for a break out. I think at this point the shut downs of the western mines like Lisheen and Century it’s all starting to add up and in China itself they have a concentrate problem. China used to be the big supplier of concentrate the refineries are now short, so the price of zinc has started to rise and the expectation is that China can simply ramp up supply once the price is a little better. But I am of the view that China’s own environmental awakening is going to limit its ability to expand zinc beyond its current level which has flat lined for the last couple of years. The big break out is still to go to $1.20. $1.20 is still what the market wants to see.
INN: On the other hand zinc supply is reportedly the lowest it’s been in ten years. Do you see the zinc supply picking back up at all?
JK: There are very few mines in the development pipeline. The earliest ones are three to five years down the road. Now our Chinese productions come from many small mines and it is very poorly understood where exactly it all comes from, what the dynamics are that slow down output, and what can ramp up output. But in terms of western mine supply, there is nothing on the immediate horizon that could turn around the supply, demand imbalance. That is likely to develop over the next few years.
INN: What is important for investors to keep in mind who are looking to invest in zinc?
JK: Well with zinc one of the important things is the treatment charges and the retention level for zinc concentrates. The smelters have kept up to 15-20 percent of the metal and they have very high treatment charges. And that’s because there’s always been a scarcity of smelters to handle zinc so the poor producers got it in the chops. So when you do your calculations, your discounted cash flow models, you need to be aware that there are these high treatment charges and retention rates. The important thing is these treatment charges are coming down and the retention rates are decreasing because the refiners compete for scares concentrate.
INN: And lastly with prices on the rise what companies stand out the most to you?
JK: Well in my recommended group my Spec Value Hunter Group. I have two companies; one Arizona Mining (TSX:AZ) has a Hermosa/Taylor project in southern Arizona. This is a brand new discovery made next door to an open-pitable project which they spent $40 million with them when prices ended up that was essentially worthless. But they found a new world class zinc-lead–silver deposit probably a 200 million tonne footprint and they only need 60 million tonnes. So now they got nine drill rigs on the project, delineating the whole system and then in filling where they want the highest grade portion to be for the initial 10,000 tonnes per day underground mining scenario.
The other one is still cheap: InZinc Mining (TSXV:IZN). It has the West Desert project in Utah and it’s also a skarn-based system and they probably need $1.10 price to be worth developing. So they are still in a holding pattern waiting for the big break out. However, this project is very similar in a sense to the Hermosa/Taylor in that the skarn sits there all by itself not really related to the system that drove it. So it’s a perfect project for an exploration campaign to the amount of say $3 million just to find out how does this whole thing hang together. It’s never been done on a serious basis in the past, so this company could go through the same sort of explosion as Arizona Mining where as they put some deep strategically placed holes and they all of a sudden they’ve discovered a previously unrecognized dimension to this play, and scale it much bigger and even more interesting. So, it becomes more than just an optionality play on zinc ending up a $1.20 or higher.
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Securities Disclosure: I, Jocelyn Aspa, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: 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.