How to Take Advantage of a Zinc Supply Crunch

Zinc prices are up over 25 percent year-to-date, and with falling LME zinc stocks and closures at some of the world’s largest zinc mines, some analysts and investors are seeing a zinc supply crunch on the horizon.
No doubt, some market watchers are starting to think that it could be time for zinc prices to finally begin their bull run.
Stefan Ioannou of Haywood Securities recently told the Investing News Network (INN) that he expects zinc’s positive price trend to continue, with signals such as lower treatment charges, steady demand and a growing zinc deficit driving that prediction.
For investors looking to get into the zinc space, it might be worth taking a look at zinc companies with projects set to come online in the medium term. Many of the world’s larger zinc mines have coming offline as of late with few projects set to come online to replace them.

Trevali Mining (TSX:TV)

Trevali currently operates the Santander zinc-lead–silver mine in Peru, which commenced commercial production in early 2014. Now, the company is in the process of commissioning its second zinc mine, the Caribou mine in New Brunswick, Canada.
Last month, Trevali released its first quarter results for 2016, reporting that Caribou had produced more zinc concentrate for the quarter than the Santander mine. Analysts are expecting Trevali to declare commercial production at Santander in June 2016.
“With zinc production from two mines anticipated to ramp-up to +170 million pounds per annum by ~2019, we believe that Trevali is poised to become the marquee mid-tier pure-play zinc producer in a market facing a significant medium-term supply issue,” stated Haywood Securities in an April note to clients.

Nevsun Resources (TSX:NSU)

Nevsun operates the copper-zinc Bisha mine in Eritrea, which it owns in partnership with the country’s government. The company is also advancing a number of exploration properties in the surrounding area.
Bisha is a high-grade VMS deposit with distinct layers of gold-silver, copper, and zinc mineralization. The gold-silver oxide zone was mined out in mid 2013, and Nevsun is now transitioning from copper to predominantly zinc mining.
“We still have not committed any of our zinc off-take so as to take advantage of the expected tightening zinc concentrate supply,” said Nevsun CEO Cliff Davis in the company’s Q1 results release.

Margaux Resources (TSXV:MRL)

Margaux holds an option on the Jersey Emerald tungsten-zinc property in British Columbia, which company CEO Tyler Rice notes could be roughly two years out from production.
“We’re very bullish on zinc primarily because of the lower stock levels that we’re seeing for the LME, coupled with the supply that’s coming offline,” Rice told INN recently. “We’ve got a brownfield project with lots of historical infrastructure, and we’re proximal to a lead and zinc smelter, which provides enhanced economic benefits to us.”

Pasinex Resources (CSE:PSE,FSE:PNX)

Pasinex holds a 50 percent interest in the Horsum zinc project in southeast Turkey. This includes the Pinargozu mine, which is currently in the early stages of production. Pasinex owns the project in partnership with Turkish mining company Akmetal AS.
In early April, the company reported two lot sales of high-grade, direct shipping zinc mineral material from Pinargozu, including sulphide mineralization with a greater concentration of zinc. Pasinex has also focused on further exploration work at Pinargozu and at the nearby Akkaya zinc project, with the aim of becoming a mid-tier zinc company based on its projects in Turkey.

Zazu Metals (TSX:ZAZ)

Zazu Metals owns a 50 percent operating interest in the Lik zinc-lead-silver property in Alaska, adjacent to Teck’s (TSX:TCK.B) Red Dog mine. As per a 2014 PEA, Lik holds 17.29 Mt in indicated resources grading 8.09 percent zinc, 2.7 percent lead and 50.3 grams per tonne of silver, and 2.87 Mt in inferred resources grading 8.59 percent zinc, 2.68 percent lead and 37.5 percent silver.
Zazu has the exclusive right to acquire 80 percent of the project by meeting expenditure commitments by 2018. The most recent news from Zazu came on May 8 2015, when the company closed a non-brokered private placement for proceeds of US$692,800.

Noranda Income Fund (TSX:NIF.UN)

Noranda is an income trust whose units trade on the TSX. It owns an electrolytic zinc processing facility  in Salaberry-de-Valleyfield, Québec, the second largest zinc processing facility in North America. Zinc is supplied to the facility by Glencore Canada, and Noranda is paid a processing fee.
The firm states that it’s primary objective is “to provide stable, monthly distributions.”

Silvermet (TSXV:SYI)

Like Pasinex, Silvermet is a zinc recycling company based in Turkey. It owns 49 percent of a joint venture that operates the Waelz kiln in the country, which recycles electric arc furnace dust from steel producers to recover zinc. The company is working on a $25 million expansion at its  Iskenderun facility, expected to double the plant’s treatment capacity to 110,000 tons per year.
The company secured a US$20 million loan for the project from the European Bank for Reconstruction and Development in December 2015.
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Securities Disclosure: I, Teresa Matich, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: Trevali Mining and Pasinex Resources are clients of the Investing News Network. This article is not paid for content.