Zinc Producers End Q1 2013 on a Positive Note

- April 25th, 2013

Some Peruvian projects have been affected by local troubles, but zinc miners on the whole look strong.

Zinc Producers End Q1 2013 on a Positive Note

Leading global zinc producer Peru is going to keep growing its production. But not as fast as some might expect, according to Business Monitor International.

Peruvian zinc output is forecast to grow 2.5 percent annually between 2013 and 2017, according to a report released by the group last month. The bulk of the gains are expected to come from a $1.3-billion expansion of the Antamina mine.

Business Monitor notes, however, that growing local opposition to mining will be a significant hindrance to Peruvian production growth. The group said it expects mining protests to delay the start up of the Antamina expansion beyond the forecast 2015 initiation.

Elsewhere in the world, analysts think the past quarter may have been surprisingly good for zinc producers, with a number of companies showing unexpected strength.

Major global producer Hindustan Zinc (BSE:500188) is expected by financial pundits to increase its after-tax profits by 26.7 percent year-on-year, according to CNBC.

The company’s net sales are thought to have grown by 13.4 percent, while EBITDA is believed to have jumped 10.5 percent.

The gains would come even as London Metal Exchange zinc prices fell during the quarter: zinc neared $1 per pound in early February, but then declined steadily to below $0.85 per pound in early April. Prices currently sit near $0.86 per pound.

Analysts are cautioning, however, that silver volumes — particularly from the company’s SK mine — may show a sizeable decrease. Hindustan has been lowering guidance on its silver production during the last few quarters.

Indian zinc production as a whole fell 7.3 percent in February, according to numbers released this month by the government.

Mexican zinc producer Industrias Peñoles (OTC Pink:IPOAF) is also showing signs of growth. The company reportedly signed a deal with Finnish mining supplier Outotec (HEL:OTE1V) for the delivery of grinding mills for three new ore concentrators set to be built in Mexico over the next few years.

The order is worth approximately 30 million euros.

There was also bullish news on Chinese production, with major producer China Polymetallic Mining (HKEX:2133) stating that it expects to double its production of zinc and lead concentrates this year.

The company forecasts output for the coming year at 730,000 metric tons (MT). Polymetallic’s production in 2012 totaled 344,000 MT.

Growth is mainly coming from the company’s Shizishan mine in Yunnan. The mine reached full capacity of 2,000 MT per day at the end of 2012.

News from Kazakhstan was less bullish this month. Major producer Kazakhmys (LSE:KAZ,HKEX:0847) reported that zinc mine production declined 15 percent during the company’s first quarter of 2013.

Zinc in concentrate output fell 18 percent compared with the previous quarter. The fall came as ore grades declined at the company’s Artemyevsky mine. Output was also affected by stripping work at the Abyz mine, which disrupted regular mining operations.

Company news

Lundin Mining (TSX:LUN) said this month that it expects to produce 118,000 to 128,000 MT of contained zinc metal in concentrate during 2013.

Zinc and lead production from the company’s Zinkgruvan mine came in lower than expected for the past quarter. Cash costs for the quarter were also higher than forecast, at $0.42 per pound due to lower production volumes and fewer by-product metal credits.

Lundin said, however, that it should make up the production shortfall during the coming quarters and finish 2013 within previous guidance.

Up-and-coming producer Trevali Mining (TSX:TV,OTCQX:TREVF) announced that it is ever closer to flipping the switch at its Santander zinc-lead-silver project in Peru.

The company said this month that all major civil construction at the project has been completed. Plant circuits have been installed and are currently undergoing dry commissioning.

Trevali is preparing for production by stockpiling mineralized material from the mine stopes. Santander is expected to process 2,000 MT per day.

Production hopeful Berkeley Mineral Resources (LSE:BMR) said this month that test work is proceeding toward optimizing recoveries from its Kabwe zinc-lead project in Zambia.

Ore samples have been sent to company consultants to verify recovery methods. Berkeley expects to release a prefeasibility study and scoping study based on this work.

The company also noted that it has been granted a processing license from the Zambian Ministry of Mines.

On the exploration front, Avrupa Minerals (TSXV:AVU) reported an intriguing twist at its Alvito silver-lead-zinc project in Portugal.

Widespread chip sampling across the project has revealed significant potential for associated gold and copper mineralization. A total of 14 samples collected returned gold values ranging from 0.4 ppm up to 3.95 ppm gold. Nearly a third of all samples show copper values greater than 0.25 percent.

The company also notes in its press release that the program identified a previously unknown epithermal silver-lead-zinc vein system. The Alvito license covers 988 square kilometers in the storied Iberian Pyrite Belt.

Fellow zinc explorer Prominex Resource (TSXV:PXR) put some juice into company coffers this month, closing a $320,000 financing.

The company will use the proceeds to explore its Tulks Hill and Lake Bond base metal properties, located in Central Newfoundland, where polymetallic resources of gold, silver, zinc, lead and copper have been identified.

Insiders of the company subscribed for 16.5 percent of the raise.

 

Securities Disclosure: I, Dave Forest, hold no investment interest in any company mentioned in this article.

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