Zinc Rallies on Economic Optimism

By Leia Michele Toovey-Exclusive to Zinc Investing News

Strong evidence that the world’s economies will weather the current storm resulted in zinc having one of its most positive weeks, in terms of price gains. Zinc futures soared on the with positive bias on the Asian market, ending at $99.15 per kg. On the MCX, zinc for December delivery rose by 2.20 percent to a two-week high of $101.35 in early morning trading. Shanghai zinc futures jumped more than 4 percent, supported by speculative buying. Shanghai’s three-month zinc hit a high of 18,275 Yuan per tonne, near its upside limit of 18,465 Yuan. “There’s some speculative buying in Shanghai and zinc is the usual target because it’s cheaper than copper,” said a metals trader in Shanghai. Gains in Shanghai spilled over to three-month zinc on the London Metal Exchange which rose 3.1 percent to $2,227 a tonne, off a high of $2,235.

This is welcome news for a commodity that has witnessed a rollercoaster of a year. Over the passed year zinc has fallen 17 percent; whereas the other metals have enjoyed the rally, copper has climbed 12 percent, gold has ascended 25 percent, and silver has soared 63 percent. Wednesday was the first day that zinc witnessed a rally in a long time, last week; its price was hampered by concerns over political instability as North Korea attacked South Korea.

The zinc market is currently in a surplus and large build-up of stocks in 2010 will cap price gains for the remainder of this year and in 2011, as the market is likely to show another surplus in the year ahead. It will take some time to work off these accumulated stocks, however, the closure of many of the world’s largest zinc mines will start to influence fundamentals by about 2012.

Company News

Canada Zinc Metals Corp. (TSXV: CZX), is has received final approvals from the TSX Venture Exchange and the relevant Chinese authorities with respect to the closing of the non-brokered private placement subscribed to by Tongling Nonferrous Metals Group Holdings Co. Ltd.. Tongling has purchased 31,386,224 units of the Company at a price of $0.5735 per unit for gross proceeds of $18,000,000 and now holds a 36.5 percent equity position in Canada Zinc Metals. Each unit consists of one common share and one half of a common share purchase warrant. Each whole warrant entitles Tongling to purchase, at any time within 24 months from closing, one common share of the Company at a price of $0.675 during the first year and at a price of $0.775 during the second year. The proceeds of the private placement will be used primarily to fund further exploration and advancement of the Company’s Akie zinc-lead property.

Korea Zinc Co., the world’s biggest producer of refined zinc, agreed to buy stakes in Canada’s Woulfe Mining Corp. to take advantage of the miner’s exposure to minor metals, gold and silver. The Korean company signed an initial agreement to buy 33.3 million new shares, or a 13.46 percent stake, in Woulfe Mining for C$10 million ($9.8 million). Korea Zinc will also purchase new shares in the three units for a total C$40 million, Under the terms of the deal, Korea Zinc will buy 51 percent of Sangdong Mining Corp., which is leading a project to re-open a molybdenum and tungsten mine in Korea, and 51 percent of Muguk Gold Corp. and 40 percent of Yeonwha Mining Corp., it said.

The TSX Venture Exchange has approved the sale of Frontline Gold Corporation’s (TSXV: FGC) 50 percent interest in the Jubilee Zinc Lead Project. Frontline is selling their 50 percent interest in the Jubilee Zinc Lead Project to Merrex for $500,000 to be paid by the issuance of 1,000,000 common shares of Merrex at a deemed issue price of $0.50/share. Frontline is related to Merrex by way of common directors.