NetworkNewsWire Editorial
Coverage: Zinc is in a bull market.
Over the past two years, global supplies of the metal have fallen
by 3-4% while demand has continued to rise. In recent months, the
resulting price increases have been accelerating. One-year spot
zinc trading at $1,000 per pound in June 2017 is now near $1,500
per pound, according to KITCO data (http://nnw.fm/53yPa). That 50-percent increase has led
to a market condition known as backwardation, when spot prices rise
above current futures prices. With backwardation signaling strong
demand and tightening supplies, proactive miners like Zinc
One Resources, Inc. (OTC: ZZZOF) (Z.CA) (Zinc One
Profile), Hecla Mining
Company (NYSE: HL), Southern Copper Corp. (NYSE: SCCO),
Teck Resources (NYSE: TECK) and Vedanta
Ltd (NYSE: VEDL) are taking steps to increase output and
take advantage of a favorable market.
The recent increases in the spot price of zinc will undoubtedly
make shuttered operations look more viable. Respected industry
consultants Wood Mackenzie believe the critical issue for the
market, in the near to medium term, is the response of the world’s
largest producer, Glencore. The world’s No. 1 zinc producer is
widely expected to return its major zinc mines to full production,
but the timing remains uncertain. For the medium to long term, Wood
Mackenzie questions ‘whether the zinc mining industry will be able
to develop sufficient new mine capacity to offset scheduled mine
closures and the incremental increase in global demand’ (http://nnw.fm/0YUHz). That disquiet is real. Nothing
has changed since the International Lead and Zinc Study Group
released its Spring 2017 report (http://nnw.fm/yl6VF), which forecast an increase in
global demand for refined zinc metal by 2.6% to 14.30 million tons
in 2017.
The present supply shortfall hasn’t gone unnoticed by Zinc One
Resources (OTC: ZZZOF) (Z.CA), which is focused on the
acquisition, exploration and development of prospective and
advanced zinc projects. The Vancouver-based company plans to revive
the past-producing Bongará Zinc Mine project, which was discovered
in 1973 and mined by a previous owner from 2007 to 2008 employing
open-pit methods, but it was subsequently shut down due to
declining zinc prices.
At that time, the zinc oxide rich mineralized soil was dug up
and dried on site and then shipped 540 kilometers (just over 335
miles) westward to the coast where it was processed through a Waelz
kiln using a process technology typically applied to recover zinc
from flue dust in steel mills. A greater than 60% zinc calcine was
captured and subsequently marketed to smelters and refineries in
Peru and the United States.
While in operation, Bongará showed its value, with high zinc
grades above 20 percent and recoveries from surface deposits
exceeding 90 percent. A neighboring asset is the icing on Zinc
One’s cake. Adjacent to the main Bongará site is the Charlotte
Bongará Zinc-Oxide Project, which has several at-surface high-grade
drill intercepts providing numerous drill targets (i.e. 29.5% zinc
across 15.5 meters, 26.1% zinc across 12.5 meters and 29.7% zinc
across 11.5 meters), many with blue-sky potential. This is the
first time that these two assets have been controlled by a single
operator, giving Zinc One a unique opportunity to delineate a
substantial high-grade, zinc-oxide resource along a
6-kilometer-long trend (3.7 miles), from which 55.1 million pounds
of zinc (358 tonnes per day) have been produced in the past. Zinc
One also has access to all data and technical work dating back to
the 1990s and controls a third zinc prospect located in British
Columbia, Canada as part of its portfolio.
Moreover, Peru’s Ministry of Energy and Mines has suspended the
closure of the Bongará Zinc Mine, which allows Zinc One to take
another important step forward in its plans to reopen production at
Bongará by utilizing the current Environmental Impact Assessment
attached to the project for current and future permitting (http://nnw.fm/O82uE).
The company recently reported promising results from an ongoing
surface sampling program at the Bongará Zinc Mine (http://nnw.fm/82oMy). The highest grades have included
a surface channel sample (#38) with 47.73% zinc over 8.1 meters
from a dolomite, a surface channel sample (#72) that yielded 25.65%
zinc over 19.7 meters from a dolomite breccia, and 32.50% zinc over
a 3.8-metre depth from a dolomite breccia in an exploration pit
(#425).
Meanwhile, Hecla Mining Company (NYSE: HL),
which produces gold, silver lead and zinc, has announced
‘substantial increases in production of all four metals’ in the
third quarter ending September 30, 2017 (http://nnw.fm/6iqBs). In particular, production of
zinc was 14,498 tons for the third quarter. Hecla, although
primarily focused on silver and gold, unearths substantial
quantities of zinc ore in its exploration activities. Its Greens
Creek and Lucky Friday mines have reported large proven and
probable zinc reserves. It is mainly known, however, as a leading,
low-cost silver producer with operating silver mines in Alaska
(Greens Creek), Idaho (Lucky Friday), and Mexico (San Sebastian)
and as a gold producer with an operating mine (Casa Berardi) in
Quebec, Canada.
Strangely zinc production was down (by 20%) at the
Southern Copper (NYSE: SCCO). As its name
indicates, this is a company focused mainly on copper, with
operations in Southern Peru and Northern Mexico. It is the world's
largest publicly traded copper mining company and the world's
seventh largest copper mining company. In addition, it produces
large quantities of zinc. Reporting for the third quarter 2017, the
company said it had produced 19,572 tons of zinc (http://nnw.fm/w6Dk8).
However, Teck (NYSE: TECK),
the world’s No. 3 zinc producer continues its reliance on the
silvery metal. It has reported that 26% of its gross profit in
2016, before depreciation and amortization, came from zinc. In
2016, Hecla produced 662,000 tons of zinc contained in concentrate
and expects to increase that in the near future. At its Red Dog
operation in Alaska, the largest zinc pit in the world, a vein of
hard-to-refine but zinc-rich rock with ore holding about 24 percent
zinc (compared to 14 percent in the pit as a whole) has been
discovered.
Vedanta (NYSE: VEDL) has already started to
increase output. The company announced (http://nnw.fm/e73IT) that ‘mined metal production at
its Indian zinc unit rose 42 percent in the first half, boosted by
higher ore production across all its mines.’ The company said its
open-pit operations at subsidiary Zinc India reached 452,000 tons
for the half-year ended September 30, 2017. This marks a 180 degree
turn for Vedanta. It was just two years ago that it closed its
Lisheen mine in Ireland. At the time, Lisheen was Europe’s
second-largest zinc mine with a capacity of around 175,000 tons.
Its closure reduced global supplies by around 1.3 percent.
With zinc prices at a 10-year high, investors are awakening to
the growth potential of key industry players. Backwardation in the
markets has reinforced that positive outlook, with refiners willing
to pay a premium (over future prices) in the spot market to secure
supplies. As demand continues to rise in a post-recession world,
zinc seems more than likely to maintain its luster.
For more information on Zinc One Resources,
visit Zinc One
Resources (OTC: ZZZOF) (Z.CA)
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